Date ArticleType
8/21/2017 Member News
Industry Sends Wish List for Leasing Plan Revamp


Industry sends wish list for leasing plan revamp

Nathanial Gronewold, E&E News reporter

Published: Monday, August 21, 2017

As the federal government reconsiders the current offshore energy leasing plan, industry has a long list.

Last week ended the Department of the Interior's request for information (RFI) period regarding a pending overhaul of the five-year schedule for auctioning off oil and gas drilling rights in the outer continental shelf. President Trump ordered the review shortly after his election victory, and Interior Secretary Ryan Zinke launched the review in early summer.

An array of associations affiliated with the oil and gas industry responded with a 15-page letter requesting that all federal waters be made accessible for seismic testing and to drilling rigs. Environmentalists oppose the current review, which will likely reinstate prior decisions by the Obama administration to auction off blocks in the Atlantic and Arctic oceans to oil companies. The previous administration rescinded those plans in 2016.

A closer look at the letter, endorsed and signed by nine organizations, shows that the industry's wish list goes beyond increasing the number of acres accessible to rigs.

"At a minimum" the groups want the middle and south Atlantic zones incorporated in a new plan, which will presumably run from 2019 to 2024. The current five-year plan is scheduled to operate from 2017 to 2022.

Industry also wants the eastern Gulf of Mexico near Florida to be included in the next offshore drilling rights leasing schedule, even though that area is now off-limits due to a congressional moratorium lasting until 2022. Florida's government is opposed to offshore drilling near its shores, seeing it as a threat to the state's tourism industry. The military has also voiced concerns that have helped to keep the eastern Gulf free from drilling rigs.

In the letter, the industry argues that the entire Gulf Eastern Planning Area should be added to a new five-year program in anticipation of either the moratorium's expiration or of an act of Congress that ends the drilling moratorium earlier.

For the eastern Gulf near Florida, "lease sales can be scheduled and held in the latter part of the 2019-2024 Program without any Congressional action," the letter states.

The groups also want the government to reconsider the minimum bid amounts necessary to win blocks at auction, and the royalty rates companies can expect to pay. In essence, they argue that lower minimum bid amounts and lower royalty rates wouldn't affect government revenues, as they would entice more companies to explore for hydrocarbons offshore, especially in an environment of low oil and natural gas prices.

The Bureau of Ocean Energy Management (BOEM) recently steeply lowered the royalty rate for oil and gas production in water columns of less than 200 meters deep. (Energywire, July 7).

The industry is grateful but says that a similarly lower rate should be applied throughout Gulf oil and gas operations.

"BOEM should consider extending the lower royalty rates to leases in all water depths to help ensure that capital investments in the [Gulf of Mexico] remain competitive with opportunities available in other areas around the world," they said.

Some things they don't want changed.

The groups say they are satisfied with the current design of the auctions, with multiple periodic rounds. The groups also say they are pleased with BOEM's decision to offer up for auction all available blocks in the Gulf of Mexico area-wide, aside from the region under moratorium. But the industry says BOEM needs to expand its definition of "area-wide" to include the entire Gulf in the planning, including moratorium areas.

Signatories are the American Petroleum Institute, Alaska Oil and Gas Association, Petroleum Equipment Suppliers Association, International Association of Geophysical Contractors, Independent Petroleum Association of America and four other pro-industry organizations.

Environmentalists stand opposed to the Trump administration's bid to expand offshore drilling. Ten environmental lobbies issued their own joint statement to the government's RFI, essentially stating that there is nothing to reconsider — no expansion of the current leasing plan should occur, they argue.

"There are no new facts to consider. The case is overwhelmingly against drilling in the Atlantic and Arctic Oceans, or expanding it in the Gulf of Mexico or Pacific," says the green coalition, which includes the Sierra Club, the Natural Resources Defense Council, the Alaska Wilderness League, Greenpeace and more. "The public opposes this reckless step and there is no need in the United States for the limited energy that would be produced."

The government's RFI expired Thursday. The Trump administration's push to expand offshore drilling was dealt a blow when Virginia Gov. Terry McAuliffe (D) expressed that state government's opposition in a letter (Energywire, Aug. 18).