The $19.1 billion spending bill for the Interior Department and related agencies that was signed by President Bush last week has left some offshore industry officials optimistic that the administration may consider expanded leasing in the eastern Gulf of Mexico (GOM) in the future.

Had the bill limited the size of the upcoming Lease Sale 181 in the eastern GOM, it “would have paved the way for smaller sales” to be proposed by Interior’s Minerals Management Service (MMS) in the oil and natural gas offshore leasing program for 2002-2007, said Thomas Fry, president of the National Ocean Industries Association (NOIA). But Capitol Hill lawmakers didn’t do this in their final bill, he noted.

In fact, the legislation signed by Bush restores the size of Lease Sale 181, which is scheduled for Dec. 5, to the larger configuration that was originally proposed by MMS in its leasing program for 1997-2002. While the bill won’t have any practical effect on the downsized 181 sale at this late stage, it “opens the door for more expansive [lease] sales” over the next five-year period, Fry told NGI. “I’m very hopeful the administration will take a hard look at [the eastern GOM] over the next five years and not limit their options.”

Fry has no illusions about the upcoming Lease Sale 181. There’s “no possibility” that the Bush administration will give the go-ahead for a larger lease sale this year, he said.

Interior Secretary Gale Norton announced last July that Lease Sale 181 would be downsized by three-fourths to 1.5 million acres from 5.9 million acres, which was a major win for the Florida delegation in Congress and the president’s own brother, Florida Gov. Jeb Bush. When the issue of leasing in the eastern GOM surfaces again in Congress, the same forces likely will be there to try to either forestall it or to scale back the size of the lease sale significantly.

For the 2002-2007 leasing period, MMS has proposed two lease sales in the eastern Gulf of Mexico. NOIA has called on the Interior agency to increase the number to three, and to restore the size of the future lease sales to the original 5.9 million acres.

The spending legislation also extended the congressional offshore moratorium for another year, banning oil and gas drilling off the West Coast, East Coast and in the eastern GOM outside of the designated Lease Sale 181 area.

Moreover, the spending bill appropriated $101 million for the Department of Energy’s (DOE) petroleum and gas research and development programs for fiscal year 2002. The amount is about twice what the White House had sought for the programs.

In other spending measures, Congress barred drilling on national monument lands and seeks to prevent states from issuing leases or permits for oil and gas drilling in and under the Great Lakes. It was unclear how much real impact the former measure would have on producers, given that Interior already has the authority to prohibit drilling in national monument areas.

States see the initiative that would bar them from issuing future leases for directional drilling in the lakes as a federal intrusion of their rights. Michigan, for example, owns all of the oil and gas rights under Lake Huron and Lake Michigan, as well as the land from which directional drilling would be conducted, according to the Michigan Oil and Gas Association (MOGA).

“This is clearly a case of the federal government overstepping its bounds and taking away our rights as Michigan citizens to manage one of our most important resources,” said MOGA President Frank Mortl.

©Copyright 2001 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.