BP Accident Imperils Offshore Gas Expansion; Consideration Of Renewable Incentives Worries Gas Advocates

Despite the different and superior safety profile for offshore natural gas exploration, the BP deepwater oil spill may well dissuade Congress from approving the addition by the Obama administration of gas-rich areas to the Minerals Management Service (MMS) 2007-2012 leasing plan.

Despite the different and superior safety profile for offshore natural gas exploration, the BP deepwater oil spill may well dissuade Congress from approving the addition by the Obama administration of gas-rich areas in the eastern Gulf of Mexico, the Virginia coast and near the Cook Inlet in Alaska to the Minerals Management Service (MMS) 2007-2012 leasing plan.

Bucking environmentalists who are generally part of the Democratic coalition, the Obama administration announced March 31 it would open those previously closed areas to energy exploration. In terms of the leases off the Florida coast, development would require lifting of a legislative moratorium against development there. “If the proposed areas ultimately end up being leased, it will represent the most significant increase in access to domestic energy from our oceans in decades," says National Ocean Industries Association (NOIA) President Randall Luthi.

Many in the Capital had forgotten the Senate Energy and Natural Resource Committee had actually taken a step toward burying the moratorium in the eastern Gulf in July 2009 when it passed an omnibus energy bill (S.1462) called the American Clean Energy Leadership Act of 2009. It allows leasing in the eastern Gulf 45 miles beyond the Florida shore. But that bill has gone nowhere.

The latest effort to drop the eastern Gulf moratorium was expected to come in the form of an amendment to a Senate Climate Change bill being readied by a group of bipartisan senators led by Sen. John Kerry (D-MA), Joseph Lieberman (I-CN) and Lindsey Graham (R-SC). Graham recently gotten cold feet because of issues unrelated to the bill. Lieberman and Kerry had been moving forward and were planning to endorse the Obama eastern Gulf opening in their bill. The accident has forced them to step back and think twice about the wording of any moratorium-ending amendment. Even so, the chances of the Senate passing a Climate Change bill, with or without a Gulf amendment, are considered relatively slim

The eastern Gulf areas covered by the moratorium are natural-gas rich. According to MMS estimates, they could contain 42 Tcf of natural gas. Brian Petty, executive vice president of government affairs for the International Association of Drilling Contractors, explains that 25% of America's natural gas supplies already come from the Gulf.

Even if Congress did pass a Climate Change bill ending the eastern Gulf moratorium, the areas off the Florida coast Obama is willing to lease would not come into play for some time. The updated 2007-2012 leasing plan contained all sorts of caveats. “True access to the areas included in the plan will require a number of interim actions, scientific analyses, and permitting processes that are the foundation of these larger plans and often take several years of work to accomplish. We hope that the release of this plan, which is largely a scoping document, truly represents an actual commitment to actual sales in new areas,” emphasizes Luthi. “This should be more than a virtual reality process.”