Bush administration officials expressed support Wednesday for expanded oil and natural gas leasing in the federal Outer Continental Shelf (OCS), as well as the sharing of royalties from “new leases in new areas” with coastal states.
The Department of Interior has collected more than $110 billion in royalties from OCS oil and gas production since 1982, and last year alone received more than $6.3 billion in revenues from the offshore — money that is used to maintain public lands and fund other federal government activities, Interior Secretary Dirk Kempthorne said during a day-long national energy policy summit hosted by the U.S. Chamber of Commerce in Washington, DC.
“So when people ask — ‘do you favor opening more of the offshore for oil and gas?’ — my answer is ‘yes,'” Kempthorne said. “We’re in the middle of legislative debate in Congress over whether we’ll be able to tap into more of the vast oil and gas reserves off the coast in the eastern Gulf of Mexico. President Bush has made it clear that he will not support lifting the moratoria on oil and gas production off the coast of any state unless the state supports such a move,” he told federal energy policymakers, regulators and business executives.
“But what about states that do support oil and gas exploration off their coasts? Shouldn’t they receive some of the revenue from new leases in new areas to help pay the onshore infrastructure costs being incurred in providing this energy to the nation? Yes,” Kempthorne noted.
He said he looked forward to working with members of Congress on “thoughtful and fiscally responsible legislation that addresses this issue.” Currently there are two bills in the House and Senate that would open more of the OCS to oil and gas drilling, and would give states a greater share of the royalties from offshore production.
An OCS bill is “critical” for the nation, said Deputy Energy Secretary Clay Sell. “I think [Congress] can get it done this year.” He believes the natural gas price and supply situation has improved considerably over a year ago, and that an OCS bill will lead to further gains.
“I think that substantial progress has been made since the devastation of Hurricane Katrina last year, not just in restoring production, which was a substantial effort. But those efforts combined with energy efficiency efforts and what was a blessedly mild winter have really helped stabilize prices somewhat,” Sell said.
“Now with the very real prospect of getting an OCS bill out of Congress and with the strengthened LNG [liquefied natural gas] siting authority in the Energy Policy Act, we are in an improved condition position on natural gas. And I am as optimistic on our prospects today as I’ve been in a long time,” he noted.
“The dominant question from a natural gas standpoint is really whether the Alaska legislature will take advantage of the generous Energy Policy Act provisions to support the construction of the Alaska gas pipeline before capital and investment interests move away to other projects,” Sell said. “I think we [have] passed everything legislatively that we need to pass” with respect to the Alaska gas pipeline, he noted, adding that it was now up to the Alaska legislature to act.
“You’ll see the administration being supportive of these [OCS] bills” that are in the House and Senate, although it does have some concerns about the costs of the measures, said Lisa Epifani, special assistant to the president for economic policy.
Meanwhile, Interior’s Kempthorne said the agency is moving forward with its 2007-2012 leasing plan for the OCS. The department’s draft proposal includes 21 lease sales in 26 OCS areas over the upcoming five-year period. He noted that Interior will issue the proposed leasing program and draft environmental impact statement for comment later this summer.
In addition to expanded OCS development, Kempthorne said he supports drilling in the coastal area of the Arctic National Wildlife Refuge (ANWR). Last year, “the administration came within three votes [in the Senate] of opening ANWR for development. ANWR should remain a policy option because we can develop this resource in ways that can protect the environment.”
Sell believes that ANWR should be the No.2 energy priority of Congress. He said he “still [has] some hopes” that Capitol Hill lawmakers will vote to allow drilling in ANWR in the near term.
On the issue of LNG, Sell conceded that there was “less receptivity” by East Coast states to build import terminals. But hopefully, he said energy prices will soften these positions in the future.
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