FEDERAL LAND ACCESS ISSUES THREATEN ACTIVITY
Patrick Crow
Washington Editor
The federal government, largest landowner in the U.S., in the past decade has been increasingly unwilling to lease its lands for oil and gas exploration.
Congress has restricted the acreage available for onshore exploration by identifying thousands of acres in the West for possible designation as wilderness.
And on the Outer Continental Shelf, for the past 9 years legislators have denied the Interior Department funds to plan lease sales in certain areas.
The Minerals Management Service, responding to political pressures, has removed 655 million acres from lease sale consideration and delayed many of the sales in the current 5 year leasing program (see table, OGJ, Jan. 8, p. 14).
MMS officials are working on the next 5 year plan, which they warn will offer fewer offshore lease sales and less acreage per sale.
Meanwhile, some congressmen are pushing bills that would give coastal states some control over OCS leasing and that would ban drilling in areas off all but five of the coastal states.
INDUSTRY'S LAMENT
Oil companies note the OCS supplies the nation with 10% of its domestic crude oil and 24% of its natural gas.
Geologists estimate half of the nation's future oil and a third of its natural gas could be found on the OCS.
"U.S. dependence on foreign oil is increasing rapidly and dangerously as a result of decreasing domestic production," says Stephen Chamberlain, American Petroleum Institute's exploration director.
"But current government policy is making the problem worse. Although federal lands offer some of the best prospects for major new petroleum discoveries, those prospects are off-limits to exploration and production."
He cites Department of Energy estimates that federal lands might contain as much as 85% of the country's remaining oil and 40% of its natural gas. Yet only about 13% of the federal land onshore and 2% of federal acreage offshore are under lease for petroleum operations.
"Moratoriums or deferrals of leasing have already placed off-limits almost half of all federal offshore lands and 40% of those onshore," Chamberlain says. "And proposals currently before Congress would further reduce the acreage available for leasing, either temporarily or permanently."
The wilderness system now contains more than 10 times the 9 million acres with which it was created in 1964. And bills before Congress would create "millions of additional acres" of nonleasable wilderness in Alaska, Arizona, California, Colorado, Florida, Idaho, Kentucky, Michigan, Montana, Nebraska, Nevada, New Jersey, New Mexico, Oregon, Texas, Utah, and West Virginia,
Chamberlain points out that much of that government land, whether under the jurisdiction of the Forest Service or the Bureau of Land Management, has "promising" petroleum potential. "But in the rush to designate new wilderness, that potential has not been adequately assessed, even though such assessment was mandated by the Federal Land Policy and Management Act of 1976."
Chamberlain says the coastal plain of Alaska's Arctic National Wildlife Refuge may contain "vast petroleum resources" that might replace declining flow from Prudhoe Bay oil field. But Congress has not approved exploration there.
"if the U.S. is to regain control over its energy security, a sensible, balanced government lands policy is essential," Chamberlain says. "That policy must encourage environmentally responsible development of America's still plentiful energy resources."
MORATORIUMS
Of the different ways government has blocked exploration, industry probably has been most frustrated by OCS leasing moratoriums because they have been imposed by a minority in Congress.
Lacking the votes to block offshore leasing through legislation, coastal state lawmakers have used their power in the House appropriations committee to deny funding for offshore sales.
It is difficult to amend legislation on the House floor, and the appropriations committee's moratoriums, as a small part of an overall spending bill, have been accepted by the full House.
In House-Senate conferences, senators at times have won modifications of the moratoriums. Usually they have not.
Because the spending bills are in effect only 1 year at a time, the moratoriums expire unless Congress renews them yearly.
The Interior Department steadfastly has argued against moratoriums. Interior Sec. Manuel Lujan says the department should be free to make leasing decisions, and congressional fiat "is just not a good way to manage our resources."
Moratoriums have grown since their inception in fiscal 1982. This summer Congress is likely to approve them again.
1990 BILL
Last year, some of the moratoriums were expanded from a simple denial of funds for specific offshore lease sales to moratoriums against even planning for them.
The fiscal 1990 bill banned leasing in the Georges Bank North Atlantic planning area out to the 400 m water depth line offshore.
Legislators noted Georges Bank generates a fifth of the dollar value of all fish caught in the U.S.
The bill prohibited leasing and wildcat permitting in the eastern Gulf of Mexico south of 26 N. Lat. and east of 86 W. Long. That area off the Everglades includes the planned Sale 116 and existing leases from sales 79 and 94.
The 1990 bill also blocked leasing in southern and northern California-Interior had deferred action there anyway-and a proposed 1991 central California sale, No. 119.
"It is subject to many of the same concerns associated with the neighboring sales," the bill said.
It blocked leasing in Alaska's Bristol Bay, which produces $1 billion/year in fish. "The committee believes that Bristol Bay should not be exposed to OCS development absent more detailed information on the impact of the Exxon Valdez oil spill and the capability of government and industry to respond to any future spills in Alaskan waters," the bill said.
The bill blocked leasing in the Sale 121 areas of the Mid-Atlantic due to concerns of state officials.
NOIA RESPONDS
The National Ocean Industries Association opposes provisions in the California moratorium that banned MMS from conducting any prelease activities-in effect, a multiyear moratorium.
Most prelease activities involve environmental studies and public comments, NOIA notes. They also assess interest of potential bidders.
"This is the best way for Interior to judge the geological attractiveness of the area," the association says. Prelease activities also consider impacts on biological resources, the economy of the area, social systems, land use, and coastal zone management.
So the moratorium blocks the gathering and analysis of information vital to an understanding of the OCS and of the effects of exploration and development.
NOIA also opposes congressional moratoriums on activities on existing leases.
"Such moratoriums increasingly call into question the reliability of the federal government as a contracting party and are grossly unfair to lease holders. The use of this type of moratorium will cast a pall over the entire OCS program if potential investors in OCS leases become convinced that the federal government may in a future time deny them the potential benefits of purchasing leases in the federal OCS.
"Drilling moratoriums may be the first step leading to federal condemnation of existing leases, which, in turn, would extinguish lease sales previously held. This would reverse the process mandated by Congress in the OCS Lands Act."
NOIA says the added leasing ban in the North Aleutian basin further undermines the stability of the OCS program. It represents a last ditch effort to stop drilling in the area despite numerous compromises and court decisions.
Before the sale, MMS at the request of fishermen and the state deleted 83% of the basin from leasing. It leased only 23 tracts.
NEW 5 YEAR PLAN
Whatever Congress does on moratoriums, the Interior Department plans to scale back its offshore leasing program.
Lujan has said the next 5 year leasing plan will have fewer sales, offer less acreage per sale, and avoid confrontations with environmentalists (OGJ, Apr. 30, p. 38).
Also, Interior is considering giving coastal towns a share of the federal government's offshore oil and gas revenues. And it may help states buy back leases that oil companies hold in areas where environmental objections have been raised to drilling.
An initial draft of the 5 year leasing plan was to have been issued Mar. 1 but has been delayed until President George Bush decides on the fate of three controversial sales originally scheduled for 1990 off California and Florida.
In his budget message last year, Bush put the sales on hold (OGJ, Feb. 20, 1989, p. 24).
He ordered an interagency task force to review the environmental concerns behind Sale 91 off northern California, Sale 95 off southern California, and Sale 116 "in the environmentally sensitive areas off southern Florida near Everglades National Park" south of 26 N. Lat.
Despite that action, Bush maintained he remains committed to continued offshore oil and gas development in an environmentally sound manner.
The task force reported to Bush in January, but he has asked Interior for even more information.
Whatever Bush decides will set the tone for OCS leasing for the rest of his administration, in particular the 1992-97 schedule of sales.
FLAWS SEEN
Bush's decision may be influenced by a study the National Academy of Sciences prepared for the task force (OGJ, Nov. 20, 1989, p. 23).
NAS reported that Interior lacks the environmental and socioeconomic data to justify offshore oil and gas leasing and development in the three sale areas.
It said there is not enough scientific and technical information available about potential environmental impacts for the government to make sound decisions about development and production.
And it said there is not enough data regarding either physical oceanographic, ecological, or socioeconomic effects to warrant the sales.
The NAS report did not offer an opinion on whether the sales should be held.
The report also said there appears to be no separation in MMS decisions on whether to lease tracts and whether to permit postlease development.
It noted that although Interior has required some OCS development and production plans to be modified, it has never denied one.
NAS said that has led the public to believe that leasing means development.
"Until this problem is resolved, effective environmental assessment and credible public dialogue will be difficult. A more comprehensive environmental impact statement (EIS) at the development and production stage could take advantage of improved knowledge and additional studies to gain information."
BOXER BILL
Antidrilling members of the House of Representatives have viewed moratoriums as largely a defensive measure, but now they are beginning to go over to the offensive.
Rep. Barbara Boxer (D-Calif.) and 50 other lawmakers have pledged to press their recently filed bill that would establish "drill free" zones around coastal states-in effect making existing moratoriums permanent and creating new ones.
The bill would ban offshore drilling within 50 miles of Massachusetts and Maryland; 100 miles of Florida, Georgia, South Carolina, Delaware, New Hampshire, Maine, Oregon, Washington, and Alaska; 125 miles of New Jersey, New York, Connecticut, and Rhode Island; 145 miles of California; and 175 miles of North Carolina.
It would require the government to buy back "particularly sensitive" tracts already leased: tracts in the North Aleutian basin and off the Everglades, south of 26 N. Lat. and east of 86 W. Long.
"We learned a very harsh and frightening lesson when the Exxon Valdez crashed off the Alaska coast," Boxer said. "We learned that we must not take for granted our magnificent coastline or fisheries and that we must not put our faith in oil spill technology which simply cannot do the job."
Lujan has said, "With today's climate, I'm not so sure it wouldn't pass if it went to the floor of the House."
NOIA says proponents of the bill are "playing on America's renewed concern for a clean environment and on the aftermath of the Alaskan oil spill, which had no connection to offshore development."
COASTAL ZONE MANAGEMENT
The House may vote soon on a bill that would strengthen states' involvement in offshore leasing.
The Merchant Marine Committee has reported out a bill to overturn a 1984 Supreme Court decision upholding the federal government's rights to hold offshore lease sales despite coastal state objections. The Senate commerce committee plans hearings on similar legislation.
"Consistency" legislation has never gone far in Congress before, but it has a powerful sponsor in the House this year: Rep. Walter Jones (D-N.C.), the merchant marine chairman, who opposes a wildcat that Mobil Oil Corp. wants to drill off his home state.
The Supreme Court held that federal offshore leasing was not an activity that "directly - affects" the coastal zone, as defined under the 1972 Coastal Zone Management Act, and thus did not have to be "consistent" with state plans.
WILDERNESS LANDS
For more than a decade, administrations and Congresses have grappled with whether to designate certain federal lands, mostly in the West, as undevelopable wilderness.
The process began in the late 1970s when the Forest Service completed its roadless area review studies evaluating the wilderness potential of 62 million acres in the national forest system. The Forest Service and BLM began recommending lands to Congress for legislative designation as wildernesses.
However, the law did not prevent drilling in wilderness study lands. In 1982 Congress banned drilling in those areas until their wilderness potential could be evaluated.
In intervening years, BLM and the Forest Service have made numerous recommendations for wilderness protection, and Congress has approved many of them.
But the process is continuing, and exploration is not allowed in many areas of the West being considered for wilderness designation.
The Rocky Mountain Oil and Gas Association estimates oil companies have been denied access to more than 301 million of the 724 million onshore acres the federal government owns. That 301 million acres is roughly equal to the area of Colorado, Wyoming, and New Mexico combined.
STATUS OF BILLS
Congress is considering several wilderness bills.
In February the House passed a bill by Rep. Morris Udall (D-Ariz.) designating 1.45 million acres of BLM lands in Arizona as wilderness. Another Udall bill, designating four wildlife refuges (Imperial, Havasu, Kofa, and Cabeza Prieta) as wilderness passed the House in April.
Earlier in the session, Sens. Dennis DeConcini (D-Ariz.) and John McCain (R-Ariz.) had filed wilderness legislation covering 895,000 acres of BLM and Fish and Wildlife Service lands. But earlier this year they adopted the Udall bills and have held hearings on them.
Two Colorado wilderness bills are pending. Sen. Tim Wirth (D-Colo.) filed a bill covering 750,000 acres, and Sen. Bill Armstrong (R-Colo.) filed one designating 471,900 acres as wilderness. No action has been taken on either.
The Senate energy committee has approved a bill by Sen. James McClure (R-Idaho) creating 1.4 million acres of wilderness and setting aside another 764,000 acres as "special management areas." In the House, Rep. Peter Kostmayer (D-Pa.), chairman of an Interior subcommittee, introduced a bill designating 3.9 million acres as wilderness.
For Utah, Rep. Wayne Owens (D-Utah) has filed a bill designating 5 million acres of BLM lands as wilderness, and Rep. James Hansen (R-Utah) filed a bill nominating 1.4 million acres. Neither bill has been acted on.
Last December President Bush signed a law designating various Nevada lands, totaling 733,000 acres, as wilderness. Other states with wilderness bills pending are Alaska, California, and Maine.
FOREST LEASING RULES
One roadblock to onshore leasing recently fell when the U.S. Forest Service issued its long delayed rule governing oil and gas leasing on national forest lands (Apr. 16, p. 24).
The 1987 Federal Onshore Oil and Gas Leasing Reform Act gave the Forest Service authority to issue its own leasing rules, which formerly was exercised by the Bureau of Land Management. The Forest Service said the rule sets out a process similar to the one the BLM uses.
The rule drops the Forest Service's earlier proposal that would have enabled the agency to void leases already issued if it determined that oil operations would threaten the environment.
It also deleted a provision that would establish procedures for determining the suitability of National Forest System lands for leasing. The agency said its revised rule instead focuses on the process and decision criteria it will use to decide whether to authorize BLM to lease the lands.
The rule prescribes a two stage leasing process. First, the Forest Service will analyze which forest lands should be made available for leasing. Then it will decide which lands it actually will permit the BLM to lease.
The rule adopted BLM's bonding requirements rather than develop its own, additional bonds for surface disturbing activities.
REVOKABLE ONSHORE LEASES
It is unclear whether Congress will act to implement NAS's recommendations that the federal government consider issuing revokable leases in environmentally sensitive onshore areas (OGJ, Oct. 9, 1989, p. 30).
NAS reported to Congress that in high petroleum potential areas where surface value conflicts can't be resolved during planning, lands should be made available for leasing "with a right only to drill exploratory wells in defined locations."
Development approval would depend on information generated by that drilling. If further exploration and development were denied, the leaseholder's direct costs would be reimbursed.
NAS said the federal planning process is working well on most federal lands, resolving most exploration and development issues.
It said there are a few areas in the Rocky Mountains where oil industry interest conflicts with "high resource values." But there "has been little exploration, and therefore little site-specific information on potential oil and gas resources is available."
It said separating the exploration and development stages in those areas would provide the agencies with more information on oil and gas resources before commitments are made for full development.
Oil company spokesmen say a two stage leasing process would compound the risks of exploration and make federal leases unattractive.
Copyright 1990 Oil & Gas Journal. All Rights Reserved.