Eastern Gulf drilling is important first step

Jan. 1, 2007
We enter the new year with high hopes and lofty expectations. No where is this more true than in the oil and gas industry.

Don Stowers, Editor-OGFJ

We enter the new year with high hopes and lofty expectations. No where is this more true than in the oil and gas industry.

The 109th Congress passed landmark legislation that will allow vastly increased exploration and drilling in the eastern Gulf of Mexico. After years of bickering, the House of Representatives on Dec. 8 approved by a 367-45 vote a measure that opens up a vast area in the east-central Gulf south of Florida’s panhandle - about 8.3 million acres - that had previously been off-limits to drilling.

The Senate passed the bill 79-9 the next day, and President Bush signed it into law on Dec. 20.

As global energy supplies tighten and demand increases exponentially in developing nations such as China and India, it behooves the United States to develop fully its own oil and natural gas assets and to diversify its resources as much as possible by incorporating renewable fuels into the energy mix. Opening up the eastern Gulf is a critical first step.

Similar legislation had been blocked in the past by legislators with various agendas. In Florida, state and federal officials had long opposed opening up their offshore to drilling for fear that oil spills could impact Florida’s beaches and hurt that state’s $50 billion tourism-driven economy.

However, compromises were reached in this Congress that brought on board most Florida lawmakers, including Gov. Jeb Bush. In the end, all but 6 of Florida’s 25-member Congressional legislation supported the bill, including both Florida senators, Bill Nelson, a Democrat, and Mel Martinez, a Republican.

The compromise legislation lifts a presidential ban on a section of Lease Sale 181, an area that may hold 1.3 billion barrels of oil and 6 trillion cubic feet of natural gas. But it keeps oil companies from drilling any closer than 125 miles from the Florida panhandle and even farther - up to 325 miles - from that state’s western coastline.

The bill calls for the Interior Department to begin offering leases within a year. Production is expected to follow in four or five years.

The legislation is expected to produce a much-needed revenue windfall for four Gulf Coast oil-producing states that were hard hit by Hurricanes Katrina and Rita in 2005. It calls on the Interior Department to provide Louisiana, Mississippi, Alabama, and Texas with 37.5% of future royalties collected from Gulf oil and gas production. Louisiana would get about half. The royalty funds would be used to restore coastal wetlands and to repair hurricane damage, past and future.

Barry Russell, president of the Independent Petroleum Association of America, whose members drill 90% of the nation’s oil and gas wells and hold 90% of the leases in the Gulf of Mexico, noted, “This bill is not the solution [to our energy problems] but is a necessary first step to improving American energy security.”