Interior Secretary Ken Salazar’s decision earlier this month to delay completion of a review of the new five-year (2010-2015) leasing program (see Daily GPI, Feb. 11) had the same effect as reinstating the moratorium on oil and natural gas drilling in the federal Outer Continental Shelf (OCS), a high-ranking Republican told a House panel Wednesday.

“The true effect of Secretary Salazar’s six-month delay is a reinstatement of a ban on drilling. Make no mistake: this action has precisely the same result as a moratorium. So let us call it what it truly is, a moratorium, not a delay,” said Rep. Doc Hastings of Washington, the ranking minority member on the House Natural Resources Committee, during the panel’s third and final hearing on offshore drilling. The committee heard from environmentalists and coastal states, most of which are opposed to expanded OCS drilling, in the two previous hearings (see Daily GPI, Feb. 25).

While Congress allowed the moratorium on oil and gas development in much of the OCS to expire last October (see Daily GPI, Sept. 30, 2008), none of the resources in the previously banned offshore areas can be produced until the Interior Department gives the go-ahead, Hastings said.

Major producers — Shell Oil, BP America, Devon Energy Corp., ExxonMobil Exploration Co. and Chevron North America Exploration and Production Co. — appeared before the House committee and urged it to permanently remove the moratorium on drilling off the East and West coasts and in the eastern Gulf of Mexico. The top executives said increased access to the OCS would pump money into a sluggish economy, create jobs and pour billions of much-needed dollars into federal and state coffers.

The “nation should not return to a blanket moratorium” on offshore drilling, said Shell Oil President Marvin Odum. In addition to the OCS, he said that “despite several years of effort,” Shell has been unable to drill a single exploratory well on its leases in Alaska. Odum said he is concerned that the nation has been “lulled into complacency” by the steep drop in oil prices. He noted that the price volatility has “not vanished,” but rather is “hidden” by the economic slowdown, and he believes higher prices will “return with a vengeance.”

Likewise, Chevron North America President Gary Luquette urged Congress to “sustain the 2008 decision to open up the OCS” to producers. “America needs the energy, America needs the jobs and America needs the economic boost,” he said.

If given the go-ahead to explore the once-banned areas in the OCS, Devon Energy CEO Larry Nichols believes his company would first want to pursue leases in the eastern Gulf of Mexico because that’s where they have seismic data and infrastructure. Other producers said they would have to obtain seismic data and do other work before even looking to the East and West coasts.

Interior estimates that the OCS contains as much as 86 billion bbl of crude oil and 420 Tcf of natural gas, said Karen A. Harbert, president of the Institute for 21st Century Energy, an affiliate of the U.S. Chamber of Commerce.

The producers said all energy resources will be needed to meet future demand. “We’re not in an either-or situation…We need all forms of energy,” Luquette said. But oil and gas “will make up the dominant share” of the energy mix through 2030 as the country seeks to transition to green energy fuels. BP America President Lamar McKay agreed, saying that the company supported an “all-of-the-above” energy strategy.

ExxonMobil Exploration President Tim Cejka estimated that greater access to the OCS could translate into an additional $1.3 trillion in royalties, bonus bids and other revenues for the federal government. It would “ease the pressure on federal and state budgets,” he said.

ExxonMobil estimated it paid $16 billion in 2008 to the federal government in taxes, royalties and bonuses, while McKay pegged BP’s payout at $5.3 billion and Odum estimated that Shell paid a total of $2.6 billion.

“I am not opposed to new drilling” in the OCS, said Committee Chairman Rep. Nick Rahall (D-WV). Fossil fuels and coal will continue to be “major assets,” and will provide “clear benefits” in terms of revenues and jobs. But the oil and gas resources from previously banned areas in the OCS will satisfy only a “drop in the bucket” of the nation’s energy needs, he noted.

All of the producers said they supported royalty sharing with the states as an incentive to open their coastal areas to drilling. And they called on Congress to reject the proposed “use-it-or-lose-it” strategy for leases.

The House last June voted against a “use-it-or-lose-it” bill, sponsored by Rahall, which would have barred the Interior secretary from issuing new federal oil and natural gas leases to holders of existing leases who do not “diligently” develop them (see Daily GPI, June 27, 2008). Producers would have to give up their nonproducing leases and “allow another company to [have] a go at that land.” There have been reports that Democrats may try to resurrect the bill this year.

©Copyright 2009Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.