WATCHING WASHINGTON BRISTOL BAY IMPASSE

A congressional hearing last week found no easy answers to the problem of how to resolve controversial offshore oil and gas leases.

A House merchant marine subcommittee held a hearing on a bill by Rep. Don Young (R-Alas.) that would allow the buyback of 23 tracts in Bristol Bay off Alaska.

It would cancel all leases in the area, block leasing for a decade, and repay operators in cash or forgive their delay rentals or royalties on other offshore leases.

Alaskan interests have long opposed leasing in the Bristol Bay area because of rich fisheries there. Lease sales planned in the late 1970s and early 1980s were canceled.

THE SALE

The government proposed Sale 92 in 1984 after reducing the sale area 83%, was sued, and prevailed in appeals that went all the way to the Supreme Court.

The sale was held Oct. 11, 1988, and bids totaling more than $95 million were accepted.

But the Exxon Valdez oil spill in Prince William Sound the following spring spurred even more opposition to drilling, and Congress banned drilling in appropriations bills.

Oil companies since then have filed suit. The General Accounting Office estimated that buybacks of Sale 92 leases would cost from $113-125 million in 1991.

Robert Stewart, president of National Ocean Industries Association, objected to Young's bill, saying it would make future lease cancellations easier. He also noted it does not guarantee Congress would vote the funds for buybacks.

Stewart warned the subcommittee, "Lease cancellations strike at the core of the business relationship between the offshore oil and gas industries and the federal government.

"These leases were purchased in good faith by operators who understood the rules as set forth in the OCS Lands Act, only to be told later that exploration of those leases would not be allowed by the same government that sold them in the first place.

"When this denial of the right to explore is followed by an extensive period during which neither the executive nor legislative branches of government are seen to seriously address compensation to those who have invested in these leases either directly or indirectly, loss of faith, and an unhealthy measure of cynicism about doing business with the government is a result."

He said any action on Bristol Bay leases will affect similarly contested tracts off North Carolina and Florida.

"Given the factual similarities that blanket all three areas, it is difficult to see how Congress can consider one without considering the others as well."

A LESSON LEARNED

Although Young's bill would formally cancel Bristol Bay leases, Stewart said, "We think the leases, for all practical purposes, have already been canceled. The issue that remains is compensation."

And he said the experience has taught industry-and hopefully governments lesson.

"We have learned that to go into a lease sale where the public does not support it is an invitation to financial disaster. It's a mistake to ever hold a lease sale where the public objects to it."