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Promises on new OCS leasing tend to be backwards

Bob Tippee
Editor

Listening to the Obama administration discuss expanded Outer Continental Shelf leasing is like looking through the wrong end of a telescope. Everything seems backwards.

The administration on Mar. 31 announced plans to proceed with leasing of federal acreage off Virginia and later to consider leasing elsewhere off the middle and southern Atlantic states. It also will include new acreage in the Eastern Gulf of Mexico in lease sales after 2012.

“Today we’re announcing the expansion of offshore oil and gas exploration, but in ways that balance the need to harness domestic energy resources and the need to protect America’s natural resources,” Obama said.

Interior Sec. Ken Salazar was more specific.

“We are moving forward with significant new oil and gas exploration in frontier areas…where we must find the oil and gas reserves and determine if we can develop them appropriately,” he said.

The next day, Salazar stretched his promise, saying, “Our efforts to strategically open new areas in the Eastern Gulf would represent the largest expansion of our nation’s available offshore oil and gas supplies in three decades.”

Well, not exactly. There can be no expansion of oil and gas supply prior to exploration and development. And government officials don’t perform exploration and development and therefore can’t logically announce them.

What officials can do is lease federal land on terms attractive enough to encourage activity. That Obama and Salazar have indicated willingness to expand leasing is commendable. Whether they intend to lease on attractive terms remains to be seen.

The National Ocean Industries Association points out that the Mar. 31 announcement, like the administration’s proposed budget, contains no request for funding of preleasing essentials. And it says nothing about revenue-sharing by coastal states.

Other questions loom. Will Interior include the new areas in its campaign to shorten lease terms, raise royalty rates, and impose fees on nonproducing leases? What environmental stipulations will apply?

Until questions like these have answers so operators risking capital can know what leases might be worth, exploration and development remain uncertain. Until then, therefore, new energy supply loiters at the telescope’s far, narrow end.

(Online Apr. 9, 2010; author’s e-mail: bobt@ogjonline.com)


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