Obama administration opposes Senate’s trio of OCS leasing bills

The Obama administration opposes a trio of US Senate bills that propose establishing or increasing states’ shares of federal oil and gas revenue from leasing and development off their shores, US Bureau of Ocean Energy Management Director Abigail Ross Hopper told the Senate Energy and Natural Resources Committee.

The Obama administration opposes a trio of US Senate bills that propose establishing or increasing states’ shares of federal oil and gas revenue from leasing and development off their shores, US Bureau of Ocean Energy Management Director Abigail Ross Hopper told the Senate Energy and Natural Resources Committee.

The bills would require sales off Alaska, in the eastern Gulf of Mexico, and off Atlantic coastal states from Virginia to Georgia without letting the US Secretary of the Interior exercise discretion to determine whether those areas are appropriate for leasing, Hopper said in testimony at the committee’s May 19 hearing on energy supplies.

“They would divert offshore energy development revenue from the [US] Treasury, reducing the net return to taxpayers and adding to the federal deficit,” Hopper said. “We understand that the Department of Justice has constitutional concerns regarding [the Atlantic Coast measure] that [it] will convey separately.”

The measures were introduced separately on May 11 by Sens. Lisa Murkowski (R-Alas.), Bill Cassidy (R-La.), and Mark W. Warner (D-Va.) with 23 others involving electricity as well as oil and gas which were discussed at the hearing.

Hopper said BOEM’s 2017-22 Draft Proposed US Outer Continental Shelf Program includes potential lease sales in eight planning areas which contain nearly 80% of estimated undiscovered technically recoverable oil and gas resources on the US OCS.

She said Section 18 of the federal OCS Lands Act (OCSLA) allows proposed sales and planning areas to be removed, but not added, during the 5-year program’s development without starting the process over.

‘No additional sales’

“Even if the eastern Gulf of Mexico moratorium as described in [the 2006 Gulf of Mexico Energy Security Act] were modified or lifted, no additional sales could be held in that area, nor could the sale area be expanded,” Hopper said. “Similarly, no additional sales in the Arctic or the Atlantic may be added to the 2017-22…program.”

While OCSLA Section 18 does not let the US Department of the Interior expand a 5-year OCS program once its development is under way, Congress can mandate additional sales legislatively, she conceded.

“Such legislation would mandate sales without considering factors required under OCSLA such as resource potential; equitable sharing of developmental benefits and environmental risks; the maturity of infrastructure needed to support oil and gas development, including emergency response; and input from local, state and federal stakeholders,” Hopper said.

But an American Petroleum Institute official said the trio of OCS bills before the committee would move the US past self-imposed restrictions which keep 87% of its OCS off-limits to oil and gas development as other Western Hemisphere nations move ahead more aggressively offshore.

“It is these types of legislative proposals that acknowledge that we will need oil and natural gas for decades to come and recognize our strong capacity to safely and responsibly produce those resources here at home,” API Upstream and Industry Operations Group Director Erik Milito said in his written testimony.

“These bills embrace a long-term, comprehensive approach to energy policy, because steps like these will help ensure we have the necessary energy for our citizens 5, 10, 15, and more than 20 years down the road,” he said.

‘Smart policy decisions’

“To be sure, the offshore energy that we produce today is available because of smart policy decisions made 10-15 years ago,” Milito said. “We need smart energy decisions today to provide energy stability for the generations to come.”

Brent Sheets, deputy director of the Alaska Center for Energy and Power at the University of Alaska at Fairbanks, told the committee that a significant amount of the nation’s conventional oil and gas resources remain on the Alaskan North Slope and in its offshore waters.

“This region contains more oil than any comparable region in the Arctic, including Russia, with approximately 40 billion bbl of technically recoverable oil and more than 250 tcf of conventional gas, according to the [US Energy Information Administration’s] database,” he said. “These numbers are likely dwarfed by Alaska’s unconventional resources, such as shale oil, heavy and viscous oil, and methane hydrates.”

Sheets noted that while the US is currently enjoying an oil and gas renaissance and consumers are enjoying significantly lower prices, “we cannot forget that the time to be investing in future fuel supplies is now so that they will be technically recoverable when the pendulum begins to swing toward high-priced energy again.”

Franz Matzner, who directs the Natural Resources Defense Council’s Beyond Oil Initiative’s Government Affairs Program, said that opening additional portions of the US OCS to oil and gas activity would be a big step in the wrong direction. He called for wider adoption of renewable energy standards instead.

“More offshore drilling is dirty, dangerous, and unnecessary,” he said in his written testimony. “It will keep our nation tethered to the fossil fuels of the past and threaten the health and economies of our coastal communities.”

Contact Nick Snow at nicks@pennwell.com.

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