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Governors asked to help revive offshore leasing at energy summit

US Sen. Mark R. Warner (D-Va.) urged participants at the Southern States Energy Board’s Governors Energy Summit to build support for federal legislation aimed at reviving offshore oil and gas projects that the Obama administration shelved following the Macondo deepwater well accident and crude oil spill. “I don’t believe offshore energy exploration can provide the whole solution to our nation’s economic problems,” Warner said at the Oct. 4 meeting, adding, “But it certainly would help.”

Warner noted that the bill introduced by himself and Virginia’s other US senator, Democrat James A. Webb, would move the Virginia federal Outer Continental Shelf lease sale back into the next 5-year OCS program, reversing Sec. of the Interior Ken Salazar’s decision to omit it from the 2012-17 round. The sale was canceled following the Macondo accident and spill. “The notion that we delay it another 5 years seemed too long,” he said.

The bill also would return 50% of future federal revenue from leases off Virginia to the state, including 12.5% for conservation and alternative energy uses, and correct offshore mapping anomalies with Maryland and North Carolina that were part of the originally scheduled lease sale, according to Warner. “Our legislation would only start a program of extensive hearings and consultations with other parts of the federal government, including the Department of Defense and the US Navy,” he said. “But my sense is that a Virginia-only bill would be an uphill slog. Other states will need to be involved. I think it’s going to need much broader support.”

He said he had consulted with US Sens. Lindsey O. Graham (R-SC) and Mary L. Landrieu (D-La.) about attracting support from other states’ congressional delegations. When Mississippi Gov. Haley Barbour (R) asked him whether he would offer to raise the future offshore federal revenue share Texas, Louisiana, Alabama, and Mississippi are due to receive under the 2007 Gulf of Mexico Energy Security Act from 37.5% to 50%, Warner replied: “It’s all in the mix.”

‘Will require more’

Graham, who addressed the meeting following Warner’s departure, said he agreed with statements by the Virginian and others at the conference that every potential domestic energy resource and technology should be developed to reduce US dependence on foreign oil. “But it will require more,” he continued. “All of America will need to participate, including environmental interests. I’ve noticed that the low-carbon crowd sounds more rational these days, except for a few hard-core outliers.

“It’s well and good that technology could keep a bunch of production platforms from being visible off Myrtle Beach,” Graham said. “But if you do not put a coalition together without someone from the environmental community in the room, you’re going to see drilling off Virginia’s coast because New Jersey’s delegation will say currents will carry any spills to that state’s beaches.”

He said coalitions still may be possible in Congress because most Republicans and Democrats have more in common than differences on energy issues. “But Congress is in lock-down, and it may need a push from governors telling it to stop arguing and go back to work,” Graham said.

US Sen. Joe Manchin (D-W.Va.), who was the state’s governor before his 2010 election to the Senate, said he plans take the Declaration of Energy Independence that the SSEB began to develop in 2007 and use it as a model for federal legislation which would require states to evaluate their dependence on imported oil. “Congress can’t even agree that this reliance is our greatest national risk,” he said. “The governors are going to have to show the way.”

Consider every cost

He said he introduced a bill that would require a federal agency proposing a regulation to determine the rule’s potential impact on jobs and costs to the consumer, but the measure has not been able to get out of committee. Manchin said West Virginia and several other states have rule-making review provisions to assure that an agency is following the law’s intent, and giving lawmakers a chance to respond if it isn’t. “Every cost should be considered,” he maintained. “It’s the only we’ll get consumers involved.”

Manchin said that in building congressional coalitions to produce more domestic energy, every producing state should become involved. “Montana has two Democrats in the Senate—Max Baucus and Jon Tester—who are good people and ready to listen,” he said. “Jeff Bingaman and Tom Udall from New Mexico also have good ideas.”

Virginia Petroleum Council Pres. Mike Ward said a legislative solution will be needed since Salazar’s overly deliberated approach precludes an administrative change for now. “When he bumped the Virginia OCS sale from the 2012-17 schedule, that meant it would not take place for another seven years or more. That’s simply too long to wait,” he said.

He said that the Warner-Webb bill would expand the lease area beyond the original sale’s configuration and more actively involve military needs in its planning. “Revenue from lease payments and bonus bids could start to flow before drilling begins,” he said. “Drilling offshore Virginia would be in a new frontier, just like the Gulf of Mexico, Alaska, and in onshore shales. Any East Coast activity would need state-of-the-art technology. There already are more than 250 industry standards and practices developed through the American Petroleum Institute, 85 of which are referenced in federal regulations.”

Virginia Gov. Robert F. McDonnell (R), who hosted the summit, said SSEB would consider adopting three proposed policy statements at its annual meeting Oct. 15-17 in Richmond, including one urging the Obama administration and Congress to return the Atlantic and other promising regions to DOI’s planning process immediately. The proposed resolution also calls for implementing a regulatory structure that supports safe production of domestic oil and gas while enforcing stringent safety requirements and environmental protections.

Contact Nick Snow at nicks@pennwell.com.


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