Maureen Lorenzetti
Washington Editor
WASHINGTON, DC, May 29 -- The White House said May 29 the US government will buy back most of the offshore oil and natural gas development rights in the eastern Gulf of Mexico's Destin Dome Unit, as well as the rights to future oil and gas development in a portion of the Florida Everglades.
"Today's agreement responds to state and local requests to prohibit oil and gas drilling off Florida's Gulf Coast," a White House statement said.
The US departments of Justice and Interior will spend $115 million to buy back seven long-disputed oil and gas leases in the Destin Dome area about 25 miles south of Pensacola, Fla. Three companies who held those leases—ChevronTexaco Corp., Murphy Oil Co., and Conoco Inc.—agreed to relinquish the leases and will drop a pending lawsuit filed in July 2000.
"We believe the safe development of America's oil and gas resources is vital to a sound national energy strategy," said a ChevronTexaco spokesman. "The development of the Destin Dome Resource could have been accomplished with the utmost sensitivity to the environment while providing American consumers with a large and stable supply of clean natural gas.
"While we are very disappointed that we will not be able to develop Destin Dome resource, this settlement addresses concerns of parties involved and reimburses us for the investment we have made to date."
Environmental groups, meanwhile, praised President George W. Bush's action: "This agreement is a huge step forward in protecting one of America's most unique and special wild places," said Don Barry, executive vice-president of the Wilderness Society. "Sec. Norton and the Bush administration should be commended for achieving something that other administrations tried but were unable to bring to fruition."
The Department of Energy estimates that the Destin Dome field may have potential natural gas reserves of 2.6 tcf. Chevron's share of the settlement is $46 million, to compensate the company for a series of lease purchases it made during 1984-1989.
The Natural Gas Supply Association was critical of the US' action, saying,"the natural gas fields taken off the table today represent enough natural gas to supply a million U.S. families for over 30 years," said NGSA president R. Skip Horvath. "The Destin Dome was one of the largest fields in the Gulf of Mexico. We cannot continue to chisel away at America's own resources and expect to continue to be self-sufficient in filling future demand. National energy supply has certainly been handed a setback today."
In February 1998, Florida objected to a development and production plan submitted by the lessees to the US government, saying that the proposal would not be consistent with the state's Coastal Zone Management Program. The lessees appealed to the US Secretary of Commerce, asking that Florida's objections by overruled. That appeal was still pending when in July 2000 the lessees sued the US to recover the cost of the leases, taking into account "improper delays" and other regulatory actions.
Chevron officials said the settlement means the company will drop its lawsuit and related regulatory appeals.
Two other leases, held by Murphy, will be suspended until at least 2012. But Florida and the federal government will each have the ability to object to future development, the White House said.
Two other Destin leases, held by ExxonMobil Corp. and Samedan Oil Corp. (a unit of Houston-based Noble Energy Inc.), were not part of the litigation. Under the agreement, Chevron, Conoco, and Murphy agreed to seek to compensate ExxonMobil and Samedan in exchange for relinquishing the last 2 leases.
Everglades deal
A related agreement announced by the president concerns the Everglades ecosystem in Florida. Big Cypress National Preserve (consisting of 729,000 acres next to the Everglades National Park), Florida Panther National Wildlife Refuge (26,400 acres in Collier County) and Ten Thousand Islands National Wildlife Refuge (35,000 acres in Collier County) were established partially on land donated by the Collier family. However, the Collier family retained its rights to oil and gas exploration and currently owns about 72% of the oil and gas rights in those areas.
Under the White House agreement, Interior will buy out the Colliers' substantial oil and gas rights in Big Cypress National Preserve, Florida Panther NWR and Ten Thousand Islands NWR.
Once the Colliers' rights are acquired and retired, further development within these areas will essentially be precluded. The Colliers will receive $120 million for the leases (either in cash or in credits that could be used toward other federal oil and gas leases), subject to congressional approval.
No comparisons
President Bush's action was reminiscent of a decision he made last fall to dramatically pare back Lease Sale 181 in the eastern Gulf of Mexico. At that time his administration also cited concerns by Florida, a state whose Republican Gov. Jeb Bush, is running for reelection; Jeb Bush is also the president's brother.
Mindful of those criticisms, Interior said that its decision to stop development in Florida and encourage production in Alaska was not inconsistent with the White House's energy policy to encourage domestic production.
"When it comes to energy development on federal lands, each case must be evaluated individually in cooperation with the people who live in the area," said Sec. of Interior Gale Norton. "In this case, the amount of oil available was relatively small compared to the nation's overall energy needs, the impact of development could be significant, and the government and people of Florida supported this action."
Interior said the three Everglades areas may hold 40 million bbl of oil, about equal to two days of US oil consumption. "By comparison, the 10.6 billion bbl available in the 1002 area of the Arctic National Wildlife Refuge would provide enough oil to run Florida every day for 30 years," Norton said.