US Senate offshore leasing foes reaffirm opposition

Nick Snow
Washington Correspondent

WASHINGTON, DC, Apr. 20 -- US Senate Energy and Natural Resources Committee members from California, Florida, and North Carolina reiterated their strong opposition Apr. 19 to authorization of additional oil and gas leasing of the Outer Continental Shelf or related offshore activity.

But senators from other coastal states, including one who is not on the committee, expressed support for legislation authorizing a state to request a federal inventory of potential resources off its coast.

The exchanges came during a committee hearing on potential offshore resources that included discussions of wind, wave, and tidal technology. But oil and gas dominated the proceedings.

"We recognize there's a need to address energy production. But we're adamantly opposed to oil and gas drilling off our coast," said Sen. Mel Martinez (R-Fla.). "It is a fairly strong consensus among leaders from both parties. I realize that as technologies change, there's a temptation to view things differently. The people of Florida don't."

Sens. Diane Feinstein (D-Calif.) and Richard Burr (R-NC) said opposition to offshore oil and gas activity in their states is as strong as ever.

"But I do not want my opposition to preclude other states from reviewing their participation in moratoriums or withdrawals," Burr said. "They should have that opportunity."

Senators' comments
Sen. Lamar Alexander (R-Tenn.) said a bill he has cosponsored with Sen. Tim Johnson (D-SD) includes a provision under which a coastal state could request a federal offshore inventory (OGJ Online, Apr. 11, 2005). The measure also would instruct the Interior secretary to extend a state's boundary farther into the ocean and permit the US Minerals Management Service to issue leases for natural gas only.

"Federal law treats states differently in terms of onshore and offshore production. In Wyoming, if there is drilling on federal lands, the state gets 50% of the revenues. Offshore, if drilling is beyond 9 miles, the states get nothing. Our proposal would give states 9% of the revenues and another 12.5% as a conservation royalty," Alexander said. An adjacent state also could veto leasing if it could demonstrate that a rig or drillship could be seen from the state's coastline.

Sen. George Allen (R-Va.) said, "There's a lot of emotion on this issue." He is not on the committee but attended the hearing to support one of the witnesses, Virginia state Sen. Frank W. Wagner. A Republican from Virginia Beach, Wagner sponsored a bill that would have given state support to federal efforts to ease OCS leasing moratoriums. The bill was vetoed.

Other senators emphasized the importance of sending more offshore oil and gas revenues directly to coastal states, counties, and communities.

"We need to come up with a way that each state can produce what it can and what it wants and get a share equal to its contribution and not see it go into general federal revenues for every state," said Sen. Mary L. Landrieu (D-La.).

Sen. Lisa Murkowski (R-Alas.) echoed Landrieu's revenue-sharing concerns. "If we were to have offshore drilling off Alaska's coast, we would not enjoy the same share we have from our onshore production," she said.

Another witness, Louisiana Natural Resources Sec. Scott A. Angele, suggested that sharing more than 1% of federal offshore revenues with coastal states would encourage those states to pursue oil and gas development more aggressively.

"The federal government has proven that it has the ability to steer investment, as evidenced by deepwater drilling in the gulf and coalbed methane gas onshore," he said.

Sen. Pete V. Domenici (R-NM), the committee's chairman, said: "One of the principal objectives heretofore has been revenues to the federal treasury. I think the time is changing, and the concern should be how we better distribute the money to mitigate impacts, encourage conservation, and provide better assurances of safety and welfare. Simply put, I think we should decide where the money goes."

Referring to the Union Oil Co. spill in the Santa Barbara Channel off California, Feinstein said, "We are all too familiar with the consequences of what happened in 1969. . . Sen. Landrieu and I are poles apart on this, and Louisiana may have different needs than my state. But the [Gulf of Mexico Outer Continental Shelf] is a unique area, and we need to be careful."

Technological advances
Other senators and witnesses said it is time to recognize recent technological advances.

"When we began placing coastal areas off limits to energy development in 1981, many of the technologies we use today were not available, and perhaps not even imagined," noted Noble Energy Inc. Chairman and CEO Charles D. Davidson said in written testimony on behalf of the Domestic Petroleum Council and the Independent Petroleum Association of America.

James V. Watkins, a former energy secretary who currently chairs the US Commission on Ocean Policy, agreed.

"I believe that since the technology advances that have been made since the Santa Barbara blowout, we need to review our attitudes," he said. "Offshore production employees care about the environment, too."

Watkins said: "It's not just the risk. To stay on the same old issues, whether it's the spill off Santa Barbara or the Exxon Valdez or a tanker off the coast of France, is a mistake. We haven't had an energy policy since 1992. I think the actual [situation] changes over time, and the perception doesn't."

MMS Director Johnnie Burton called the OCS environmental record "exemplary and improving," noting that there hasn't been a significant OCS platform spill in 35 years.

"The MMS has worked diligently the past 20 years to create a framework for science-based decisions," she said. "It also has increased its inspection activities over 60% since 1999."

Burton said the OCS holds an estimated 60% of the country's oil reserves and 40% of its gas reserves. "However, there is concern that the last assessments occurred more than 25 years ago," she said.

Burton also said oil and gas producers are most qualified to determine if it's feasible to issue leases limited to gas.

"There are areas that are considered gas-prone," she said. "We are not currently authorized to issue gas-only leases. Gas and oil are statutorily tied under MMS authorization. The industry needs to let you know if it can produce only gas, and what would happen if oil was discovered. Would you ask them, for example, to reinject the oil?"

Feinstein and Martinez separately asked the MMS director if the federal government could buy back leases issued but not developed because of subsequent moratoriums. Burton responded that White House action would be needed to address leases off Florida but added that the administration has agreed to buy back 36 leases off California.

"We have been in negotiations the past 3 years to do so," she said. "The Justice Department is the lead negotiator. The problem is that its assessment and the companies' appraisals of what the leases are worth is so far apart that an agreement has not been reached."

Contact Nick Snow at nsnow@cox.net.

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