Bowing to pressure from the state of Florida, Interior Secretary Gale Norton announced yesterday the department has significantly scaled back the amount of offshore acreage that will be available for the controversial Lease Sale 181 off the coast of Florida later this year.

The producing community took the latest defeat in their campaign to expand drilling to add to the nation’s resource base hard. “It’s like waiting for Christmas all year and being told by the U.S. House of Representatives that Christmas is canceled,” R. Skip Horvath, president of the Natural Gas Supply Assoc., said. Norton had said a House vote last month on the lease sale was a factor in her decision. “What Interior Secretary Norton has done is said that 1 million U.S. families can have natural gas for 15 years. We hope that some day an additional 1.5 million families, or the total 2.5 million families originally expected to be served with natural gas from this area, will enjoy Christmas too.”

The available acreage for oil and natural gas production has been has been cut by three-fourths — to 1.5 million from 5.9 million acres, putting the proposed 181 sale area at least 100 miles from any portion of the Florida coast. The northern boundary of the modified lease site would be more than 100 miles from Pensacola, FL, while the eastern edge would be 285 miles from the shores of Tampa Bay.

Norton also vowed that the department would not propose any new oil and gas leases for offshore Florida — beyond the area set aside for the modified Lease Sale 181 — when the Minerals Management Service compiles its next five-year plan (2002-2007) for offshore development.

“We have listened and worked carefully with officials and affected citizens around the 181 area” in reaching this compromise, said Norton. She noted she conferred with President Bush, and the governors of Florida, Alabama, Mississippi and Louisiana, but in the end the final decision was Interior’s.

“The president has heard the voices of many people in Florida. He is concerned about…their reactions to the development of resources off of their shore,” said White House spokesman Ari Fleischer. “We have a program that is balanced, that allows [the] beaches to be protected” and paves the way for “the development of energy in a way that is environmentally sensitive.”

Norton said the House vote last month to suspend Lease Sale 181, which is scheduled for December of this year, until April 2002 also factored into her decision. The vote touched off a feud between the Florida delegation and other lawmakers from Gulf Coast states over the issue of offshore Florida drilling. Rep. Sonny Callahan of Alabama last week proposed a measure to hold up the Alabama-to-Florida Gulfstream Pipeline project in retaliation, which the full House approved (see Daily GPI, June 29).

Interior’s action will reduce the amount of natural gas available to producers in Lease Sale 181 to about 1.25 Tcf. Prior to Monday’s announcement, the MMS had estimated that the gas potential of the lease sale was 2.9 Tcf, while the National Petroleum Council put it at 7.8 Tcf. The oil potential of the lease area was cut to 185 billion barrels from 396 billion barrels.

“We’re very disappointed by Interior’s action,” said Tom Fry, president of the National Ocean Industries Association (NOIA) and former director of MMS. He estimated producers will be forced to “walk away” from as much as 80% of the gas and 90% of the oil that were to have been available under the lease sale.

Interior has eliminated from Lease Sale 181 the offshore region closest to Alabama — known as the “stovepipe” area — that butts up to a lot of dry gas development, Fry noted, and it lopped off considerable oil and gas development to the west of the Florida coasts. The only remaining area is deep-water production located at least 100 miles offshore Alabama, he said.

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