The oil and gas producing industry of the US Gulf of Mexico limped into 2006 battered by hurricanes but braced for politics. The conditions are related.
As reported elsewhere in this supplement, the gulf’s producing infrastructure took a twin hammering from Hurricanes Katrina and Rita in August and September of 2005. In a Jan. 19 report, the US Minerals Management Service estimated that 3,050 of the gulf’s 4,000 platforms and 22,000 of its 33,000 miles of pipelines lay in the direct path of at least one of the storms.
Katrina destroyed 46 platforms and damaged 20 others, according to MMS. At the time of its report, MMS had learned of damage to 100 pipelines in federal waters. Rita destroyed 69 platforms and damaged 32 others along with 83 pipelines. Production of 362,800 b/d of oil (24% of normal output) and 1.5 bcfd of natural gas (15% of normal) remained shut in.
In comparison with the damage to equipment and disruption to production, however, the environmental effects were minor. As of mid-January, MMS had received reports of 211 “minor pollution incidents” from Katrina and 207 from Rita. Those are releases of less than 500 bbl of oil, with none reaching shore. Whatever other messes resulted from the storms-and there were plenty of them-there was no major oil spill.
Dominating politics
Yet the mere potential for a cataclysmic oil spill dominates the politics of Outer Continental Shelf leasing. The imagined if unsubstantiated threat has for 2 decades prevented leasing of federal waters off the East and West Coasts and in much of the eastern Gulf of Mexico. Congressional moratoriums and presidential withdrawals preclude leasing of 611 million acres on the OCS. Of federal acreage off the Lower 48 states, 85% is unavailable for oil and gas leasing. In the eastern gulf, the off-limits OCS covers nearly 70 million acres.
During debate of the Energy Policy Act of 2005 coastal-state opposition to OCS leasing showed signs of weakening. Stung by expensive natural gas, industries other than oil and gas and states other than Texas, Louisiana, Mississippi, and Alabama began to recognize increased supply as an antidote for high prices and leasing as a precursor to increased supply.
In mid-2005, Sen. Lamar Alexander (R-Tenn.), with support from Sen. John Warner (R-Va.), introduced an energy-bill amendment that would have allowed coastal states to opt out of moratoriums on leasing of the OCS off their shores. Warner withdrew the amendment, which also included an expansion of state revenue-sharing, when it became obvious the initiative lacked support needed to close a filibuster. Earlier, Rep. John E. Peterson (R-Pa.) had made an unsuccessful bid to amend the Department of Interior appropriations bill to lift moratoriums on the OCS to allow gas-only leasing.
Although they failed, the measures revealed new recognition from outside producing states of the links among gas prices, domestic production, and producers’ need for access to hydrocarbon resources. Efforts continue in 2006 for state-option leasing oriented to gas and tied to greater state revenue-sharing.
The concern for gas supply that motivates this effort also focused attention on the swath of the eastern gulf now precluded from leasing. Floridian lawmakers insist their constituents see oil and gas drilling as a direct threat to tourism and want no part of it. And they are not swayed by arguments about the low likelihood of oil spills from a geologic province considered gas-prone.
Political showdown
The draft 2007-12 OCS leasing plan MMS released Feb. 8 includes sector adjustments that would open up inaccessible parts of the so-called Sale 181 area. OCS Sale 181 in 2001 offered leases in the eastern gulf but excluded the large area off Florida now under presidential withdrawal.
On Feb. 7, Sens. Pete V. Domenici (R-NM), Jeff Bingaman (D-NM), James M. Talent (R-Mo.), and Byron L. Dorgan (D-ND) introduced S. 2253 requiring the Secretary of the Interior to offer much of the Sale 181 area for oil and gas leasing with 1 year. The Senate bill would open more acreage than the MMS plan and, like the MMS plan, would exclude military areas and acreage within 100 miles of the Floridian coast.
Although Florida’s US senators, Republican Mel Martinez and Democrat Bill Nelson, support the 100-mile exclusion, they want more. On Feb. 1, they introduced a bill to permanently ban leasing in the Sale 181 area and prevent offshore exploration within 260 miles of Tampa Bay.
At this writing in early March, the future of leasing in the eastern gulf is anyone’s guess. But the stakes are clear. With its draft 5-year lease sale plan, MMS also released an inventory, required by the 2005 energy act, of oil and gas potential of OCS areas precluded from leasing. Its mean estimates of undiscovered, technically recoverable resources for unleased areas of the eastern gulf-the exploratory potential the US forswears with its leasing ban-are 3.98 billion bbl of oil and 22.16 tcf of natural gas.
The hurricanes of 2005 made something else clear. If a major oil spill ever hits Florida’s coast, the source will almost certainly not be offshore drilling or production.
