Interior Secretary Ken Salazar said the first step toward allowing seismic studies of the oil and natural gas resource potential in federal waters off the Atlantic Seaboard — a move long awaited by producers — will begin Wednesday.

The Interior Department will request comments on the environmental impact of conducting seismic studies of exploring the Atlantic Outer Continental Shelf (OCS) this week, which will then be followed by 45 days of comment, Salazar told reporters Monday at Platts Energy Podium in Washington, DC.

He said Interior’s next step would be to develop an environmental impact statement (EIS) based on the comments. The EIS would determine where seismic studies should be conducted and start the process of awarding contracts.

Salazar said nine companies currently are interested in conducting seismic studies to determine the extent of oil and gas resources off the East Coast. He noted that the last time seismic studies of the energy potential off the East Coast were done was 30 years ago.

The dearth of seismic data is only one of the barriers to drilling off the East Coast. Another major hurdle is the lack of infrastructure — such as pipelines and processing facilities — to prepare and deliver oil and gas to market.

Virginia is particularly eager to allow drilling to begin off its coastline. Gov.-elect Bob McDonnell has urged Salazar not to delay further the Virginia offshore lease sale scheduled for 2011 (Lease Sale 220). The planned lease sale, if it occurs, would be the first off the Atlantic Seaboard in nearly 30 years. Interior estimates that offshore Virginia may hold 130 million bbl of oil and 1.14 Tcf of gas.

Salazar further said the department plans to release a plan for exploration and production in the federal OCS in the coming weeks that will address the existing five-year leasing plan, which expires in 2012, and propose a new five-year leasing plan. “We will make the decision regarding the [existing] 2007-2012; at the same time we look forward.”

Last April the U.S. Court of Appeals for the District of Columbia Circuit vacated and remanded the existing five-year leasing plan, a decision that sent shock waves through the industry (see Daily GPI, April 20, 2009). The court later clarified that its decision only applied to lease sales offshore Alaska. The court put its vacate/remand order on hold while Interior reassessed its environmental sensitivity ranks and the leasing schedule for Alaska.

Last fall Salazar said the department’s “first job is to stand up a viable 2007-2012 plan.” At the same time he said Interior was trying to “synthesize” the nearly 500,000 comments that it has received on the draft leasing plan (see Daily GPI, Oct. 1, 2009).

Salazar declined to comment on any plans for oil and gas tax breaks that may be contained in the Obama administration’s budget to be released on Feb. 1. President Obama last year proposed rolling back $32.6 billion in direct tax breaks for oil and gas producers over a 10-year period, as well as seeking other tax hikes that could raise the burden on oil and gas industry to more than $80 billion (see Daily GPI, April 2, 2009).

Salazar did indicate that he is considering raising the royalty rate for oil and gas production on public lands, which has stood at 12.5% for years. He compared the U.S. rate with the 20-30% being charged by the state of Texas.

“Are we getting a fair return for the American taxpayer by having a royalty rate that is 12.5% that has been in place for a very long time?” he asked. “That’s a big question. That is part of what we will be answering with respect to our reforms.”

Last September the General Accountability Office reported that the U.S. federal government receives one of the lowest shares of revenue from oil and gas production when compared to foreign countries (see Daily GPI, Sept. 18, 2009).

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