Industry skeptical about House Republicans state gas drilling draft

Maureen Lorenzetti
Washington Editor

WASHINGTON, DC, Oct. 15 -- A US House Republican plan giving states more authority over some offshore oil and natural gas drilling while lifting existing federal moratoriums faces an uphill political battle, an industry group said Wednesday.

The National Ocean Industries Association called the draft to encourage drilling in gas-prone areas "an interesting idea." But the group added that there are "numerous obstacles before such a dramatic proposal could materialize. Nobody seems to be championing the initiative at the moment, it's just floating around." And while NOIA said it supports any efforts to change the polarized debate that surrounds offshore energy, "It's very unclear as to whether a proposal of this nature could ever get off the ground.

Draft encourages gas leasing
Proponents of the State Enhanced Authority for Coastal and Offshore Resources Act of 2003 say the idea is to encourage exploration in gas-prone offshore areas on the Outer Continental Shelf, such as Alabama and North Carolina that currently are off-limits because of existing federal moratoriums.

Even Congress's staunchest proindustry members privately acknowledge the proposal faces tough opposition from a number of sources—environmentalists, Republican and Democratic lawmakers from nonproducing coastal states, state governments, and even the White House.

President George W. Bush has said he supports continuing existing bans on most of the OCS (excluding parts of Alaska and the western and central Gulf of Mexico).

But in what drilling proponents view as an encouraging development, the White House does support a controversial portion of a pending energy bill that calls for an inventory of resources lying under all federal lands and waters, including those under moratoria.

An administrative ban expires in 2012; the current president's father, former President George H.W. Bush, first enacted a ban in 1990, and President Bill Clinton renewed it.

Congress, meanwhile. has blocked drilling through the appropriations process since 1982.

The draft
Under a Sept. 29 proposal circulated by the House Resources Committee, state water boundaries would be extended to the existing Florida and Texas distances of 3 marine leagues (some 10 statute miles) in which states would control all activity. Additionally, 27% of revenues from existing leases within 3 marine leagues would be shared with the state. The proposal also states that up to 50 miles from shore, states could veto part or all of any OCS oil and gas leasing proposed by the secretary of the Interior.

The SEACOR draft states that beyond 50 miles (in 25 mile increments up to 100 miles) the states could veto oil and gas leasing, but the secretary of the Interior would be required to offer "natural gas leases" (including gas and condensate) in those areas.

Revenues from coastal impact sharing for each coastal state would be allocated on a formula reflecting the extent to which it permits OCS activity, including the distance that the activity must be located from the coast; all 50 states would receive some revenue sharing money.

The draft also provides a royalty production incentive for offshore and Alaska North Slope production of natural gas from gas hydrate resources. Proponents of the measure also want to allow lessees to convert existing leases in state-veto areas as far out as 50 miles to natural gas leases with the approval of the governor. A lessee could go beyond 50 miles without approval, or have the leases bought back by the federal government through royalty credits.

Most importantly, the measure would revoke existing presidential leasing moratoriums.

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