The U.S. Minerals Management Service may feel sort of like a push-me pull-you animal in the next few months as state and federal officials argue about December’s proposed Eastern Gulf of Mexico federal lease Sale 181. The proposed leases provide a 15-mile buffer zone off Baldwin County, AL, but most are more than 100 miles from Florida — a region where drilling is opposed by Gov. Jeb Bush.

The proposed sale, which is in the public comment stage now, would be the first in the eastern Gulf since 1988. For more than five years (and interestingly, during President Clinton’s tenure), the U.S. Department of Interior has been studying options in the region. Interest is high for good reason: the offshore property is estimated to contain about 7.8 Tcf of recoverable gas reserves and 1.9 MMbbl or oil.

Now that President George W. Bush’s energy policy agenda is being finalized, his advisers have made several things clear to the press: there are no sacred areas in the United States if there are possible energy reserves. However, Gov. Bush, who is up for re-election this year, is more sensitive to the strong environmental and tourism voices in his state.

Even though governors of other states affected by Gulf E&P — including Texas, Louisiana, Mississippi and Alabama — all support MMS lease sales, Gov. Bush has opposed the lease sale, or at least the part that affects his state. So far, he’s not had to worry. A moratorium was put in place by the first President Bush, and then extended by Clinton through 2012, which basically has restricted E&P in the Eastern Gulf, but allows it in the Western and Central Gulf.

This week, industry forces came together at the Offshore Technology Conference in Houston and urged one point again and again: to get more oil and gas, more federal lands have to be opened.

“The tightness of the current energy markets and the distinct possibility of grave shortages in the near future dictate that the MMS should leave open the possibility that the moratoria may be reconsidered,” said Michael Talbert, chair of the National Ocean Industries Association.

Talbert, CEO of Transocean Sedco Forex Inc., which operates offshore drilling rigs, said it was necessary for MMS to include all off-limits regions to E&P — especially as it prepares its 2002-2007 leasing plan.

“If we close the door on re-examining our offshore moratoria now, we are opening a Pandora’s box of energy unreliability and uncertainty in the future,” Talbert said.

Stedman Garber, vice chairman of the International Association of Drilling Contractors and CEO of Santa Fe International Inc., also implored MMS to allow more drilling.

“If promising areas like those included in Lease Sale 181 are off limits to exploration, how will we satisfy soaring energy demand?” Garber asked. If the eastern lease sale proceeds as MMS has envisioned, Garber said the region could contain enough natural gas to meet the needs of Florida’s six million households for the next 16 years. It is more logical, he said, for Florida to use its own backyard for gas supplies than to compete for supplies from other parts of the Gulf.

“To the public, no news is good news when it comes to energy as long as prices are low,” Garber said, adding that that sort of complacency had hindered the development of new sources of energy “vital” to the U.S. economy.

In a study by the MMS this year, “The Promise of Deep Gas in the Gulf of Mexico” (OCS Report MMS 2001-037), government analysts reported that deep gas may be found “across all areas of the Gulf of Mexico, including the Western, Central and Eastern Gulf.” Directed at finding ways to offer royalty relief to producers, the report said that because the volume of gas production from the Outer Continental Shelf has been declining since 1997, the “main goal” is to “increase the volume of gas production from the OCS during the period 2001 through 2006.”

Interior Secretary Gale Norton, who oversees MMS, has notified Gov. Bush that for the time being, the lease sale remains on track.

“I must consider our nation’s energy needs and appropriate management of the American public’s natural resources,” Norton wrote to Gov. Bush in March. “Because the energy resource potential of Sale 181 is estimated to be 396 million barrels of oil and 2.9 trillion cubic feet of natural gas, it can play an important role in our national energy strategy.”

Worried about the pending sale, Gov. Bush and a bipartisan group of Florida lawmakers in April introduced a bill to bar drilling off of Florida’s coasts. The ban would include the upcoming Sale 181 and any drilling proposed for the Straits of Florida, which are located near the Florida Keys.

“Sound energy policy does not come at the expense of the environment or the economies of Florida’s coastal communities,” Sen. Bob Graham (D-FL) said. Sen. Bill Nelson (D-FL), and Reps. Joe Scarborough (R-FL) and Jim Davis (D-FL) also announced support of the bill.

To assuage any bad feelings, Norton suggested in late April that the White House could ban drilling in the Straits of Florida. “One option would be to use the president’s authority…to withdraw the area from futures leasing,” Norton wrote Gov. Bush.

President Bush, meanwhile, has remained mum about his feelings, although during the presidential campaign, he advocated drilling off of Florida. The president is expected to offer a comprehensive energy plan for the country in the next few weeks.

MMS now is nearing the final stages in re-engineering its royalty financial system for offshore drilling, which takes effect Oct. 1. That is, coincidentally, when the final decision on the lease sales in the Eastern Gulf is expected. A final environmental impact review on the region will be completed this summer, and Norton has indicated that the number of leases could be reduced — or the location changed.

In any case, the states involved in the lease sale will be wealthier. This week, MMS disbursed $65 million to Alabama, Alaska, California, Louisiana, Mississippi and Texas as the last of 15 annual payments based on settlement legislation regarding the allocation of royalties, rents and bonuses from certain federal offshore oil and gas leases.

The final installment to individual states was California, $28.9 million; Alaska, $13.4 million; Texas, $13.4 million; Louisiana, $8.4 million; Alabama, $700,000 and Mississippi, $200,000. Including this year’s payment, the coastal states received a combined total of $650 million.

©Copyright 2001 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.