Watching Government: Breaking the OCS impasse

April 18, 2005
A proposal to break the offshore leasing logjam has quietly emerged amid the clamor for greater access to US oil and gas resources.

A proposal to break the offshore leasing logjam has quietly emerged amid the clamor for greater access to US oil and gas resources. State Enhanced Authority for Coastal and Offshore Resources (SEACOR) would give states more control over, and revenue from, energy production from federal land off their coastlines. It also would allow them to limit energy leasing to natural gas.

Leading industry groups aren’t claiming credit for the idea, which has been circulating for more than a year. But several have expressed their support. That includes the National Ocean Industries Association, which held its annual meeting Apr. 14-16 in Washington, DC. “SEACOR underscores that if we are going to get serious about crafting an energy policy for the nation that ensures secure, affordable, reliable, and economically sustainable sources, we need to address the systemic supply challenge: access,” NOIA Pres. Tom Fry said.

“NOIA is open to new ideas that may provide opportunities to analyze resources on the [Outer Continental Shelf] so that policymakers can make informed decisions. For example, our industry supports sharing the revenue from offshore oil and gas resources with adjacent communities.”

The SEACOR approach

Under SEACOR, a coastal state’s offshore boundary would move to 12 from 3 nautical miles from shore. Although its oil and gas rights would still be limited to the first 3 miles, a state could veto any proposed oil and gas leases and would own all other minerals within 12 miles.

Currently, a coastal state receives 27% of revenues from leases issued after 1978 between 3 and 6 miles out and no money from leases beyond that point. SEACOR would give the state half of the revenues from all leases (including those issued before 1978) in the 3-12 mile range. Of those revenues, one-third would be earmarked for local coastal governments. The proposal also would establish veto authority for adjacent states based on nautical miles, royalty incentives for enhanced production, and earmarking of 10% of revenues from new leases for low-income household energy assistance.

SEACOR has the support of energy groups beyond producers. “We believe states should have the option to decide whether to lease an expanded portion of their coastal waters for responsible natural gas exploration and production,” said Rick Shelby, executive vice-president for public affairs at the American Gas Association, which represents 195 local distribution companies.

Setback in Virginia

Backers were encouraged when Virginia’s Senate unanimously endorsed SEACOR on Feb. 23 and cleared the way for Gov. Mark R. Warner to direct the state’s liaison office to work with Virginia’s congressional delegation to develop and enact the concept. But Warner vetoed the bill on Mar. 28. The measure, he explained, had two main deficiencies: It encroached on the governor’s role in directing the liaison office’s activities, and it directed Virginia to advocate federal legislation that hasn’t been introduced yet.