Bush administration opens offshore areas to leasing

16 January 2009 16:58  [Source: ICIS news]

WASHINGTON (ICIS news)--The outgoing Bush administration on Friday proposed wide scale offshore drilling leases for Atlantic and Pacific coast areas that previously were closed to development under a 27-year congressional moratorium.

The Interior Department’s Minerals Management Service (MMS) announced a new five-year offshore leasing plan for the 2010-2015 period that includes the first proposed drilling in the Atlantic and Pacific outer continental shelf (OCS) regions since the 1970s.

The US Atlantic and Pacific coastal areas were closed to drilling from 1981 until Congress - under public pressure for more energy resources - allowed its moratorium to expire at the end of September last year.

The US petrochemicals industry, which is heavily dependent on natural gas as a feedstock, and a broad coalition of other gas-dependent manufacturing interests had pressed Congress for years to lift the offshore drilling ban.

Backed by wide public displeasure with retail gasoline costs in mid-2008 that exceeded $4 (€3) per gallon and increasing US dependence on foreign oil imports, industry successfully argued that Congress could not afford to keep major domestic oil and gas reserves closed to development.

The MMS estimates that outer continental shelf regions contain some 86bn bbl of oil and 420,000bn cubic feet (bcf) of natural gas.

However, those reserves figures are based on old technology seismic surveys done in the 1970s, and many expect that the offshore areas may hold ten times as much oil and gas as estimated three decades ago.

The US annually consumes some 7,665bn bbl of oil and 22,000bcf of natgas.

MMS director Randall Luthi said the new five-year leasing proposal for the US Atlantic and Pacific coasts “marks an extremely important milestone in energy development”.

“A new era has arrived,” Luthi said, referring to the OCS development plans.

“Although much of the talk about the future is centered around renewable energy, the reality is that we will have to depend on oil and gas for at least the next generation,” Luthi said.

The new five-year plan was immediately welcomed by the American Petroleum Institute (API), with institute president Jack Gerard saying the new MMS leasing proposal “is a good step in the right direction”.

“American consumers have been demanding access to the oil and natural gas located off our coasts,” Gerard said, adding: “Developing our domestic resources is crucial to getting our nation’s economy back on its feet.”

Luthi noted that the incoming administration of President-elect Barack Obama will have authority to completely reject the five-year plan proposed on Friday.

However, if the Obama administration should decide it does not want to pursue offshore drilling, it will have to make a very public decision to scrap the new five-year plan and again close the OCS regions to development.

That could prove to be a politically difficult and unpopular move if US consumers are still paying high rates for transportation fuels and gas and oil for home heating.

($1 = €0.76)

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By: Joe Kamalick
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