Last week North Carolina Gov. Bev Perdue (D) wrote to U.S. Secretary of the Interior Ken Salazar to request assurance that he will not compel premature decisions on offshore oil and natural gas leasing programs in states. Governor Perdue notes that although two proposed lease sales could take place for OCS lands offshore North Carolina, her state has only just begun evaluating offshore energy potential. In addition, Gov. Perdue stated that more information is needed regarding location of lease sales, revenue sharing regime for leases off the Atlantic Coast, and potential for offshore renewable energy projects before her state can develop a firm policy on offshore oil and gas leases.
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Early this week, Sen. David Vitter (R - LA) introduced an amendment (free registration) to the DOI appropriations bill for FY2010 that would prohibit the use of funds to delay the five-year OCS Oil and Gas Leasing Program. A vote is expected this week.
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On Sept. 17 the White House released the Interagency Ocean Policy Task Force Interim Report for comments. The report is in direct response to President Obama’s request for recommendations that will augment national policy on the management of oceans, coasts and the Great Lakes. The Report proposes a National Policy for the stewardship of oceans and outlines governance modifications that would place the White House Council on Environmental Quality and the Office of Science and Technology Policy in charge of an interagency National Ocean Council charged with implementing the National Ocean Policy. In addition, the Report outlines nine National Priority Objectives, including the implementation of comprehensive coastal and marine spatial planning and management and better coordination of federal, state, tribal, local, and regional management of the oceans.
Along with accepting comments, the Interagency Ocean Policy Task Force has two upcoming public hearings on the issue.
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This week the Maryland Energy Administration (MEA) announced a new initiative to evaluate potential wind resources located offshore Maryland. According to MEA's press release, the initiative will include studies of the wind resources on Maryland's Atlantic coast as well as the OCS. In addition, MEA issued a Request for Expression of Information and Interest to companies interested in offshore wind projects. The Baltimore Sun provides additional coverage.
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In a very significant development, DOI Secretary Ken Salazar announced on September 16, 2009 that he will be "phasing-in termination of the royalty-in-kind program and an orderly transition over time to a more transparent and accountable royalty collection program." Salazar made the announcement in his testimony before the House Natural Resources Committee, which convened to discuss Committee Chairman Nick Rahall's proposed legislation that would create a new Interior agency to handle onshore and offshore lease sales, inspection, enforcement, and revenue collection, as well as an overhaul of the federal royalty program. Salazar's announcement comes on the heels of an August 2009 GAO report that found MMS was losing millions of dollars in royalty revenue. The royalty-in-kind program also made headlines in June 2008 when reports surfaced of MMS employees accepting gifts from oil and gas companies and abusing drugs and alcohol . In his testimony, Salazar told the House Natural Resources Committee that, "The royalty-in-kind program in my view has been a blemish on the department."
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Yesterday, DOE Secretary Chu announced the agency will award up to $14.6 million to facilitate the develeopment of advanced water power technologies. Twenty-two projects were selected to share in the award. The winning projects include new hydropower tranmission, new marine and hydrokinetic energy conversion devices at open water project sites, and studies of life-cycle costs for wave, current, and ocean thermal energy conversion technologies.
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In a August 2009 report released yesterday, the Government Accountability Office (GAO) found that MMS does not provide reasonable assurance that it is accurately and promptly identifying and collecting royalty-in-kind gas imbalances. As a result, GAO estimates that the agency is losing millions of dollars. In its report, the GAO cites several reasons why MMS is forgoing these revenues, including that the agency lacks the information necessary to calculate the full amount of revenues due, and that rather than compelling companies to document production and deliveries in a consistent format, MMS analysts spend time gathering and reformatting data instead of identifying and collecting on imbalances.
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California’s longstanding legislative ban on offshore drilling remains intact after a bill that would have sanctioned the state’s first new offshore oil lease in 30 years died in committee Friday. The bill, A.B. 1536, was designed to support an application by Plains Exploration and Production Co. to drill in state-owned waters. The bill was essentially a rehash of another failed bill originally developed to garner revenue for the struggling state.
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The House Committee on Natural Resources will be considering new legislation aimed at offshore energy programs. Chairman Nick Rahall (D-WV) announced that the committee will hold hearings on September 16 and 17 to consider H.R. 3534, a bill Rahall introduced yesterday, based on draft legislation circulated earlier this year. The Chairman's bill proposes a new Interior agency that would handle onshore and offshore lease sales, inspection, enforcement, and revenue collection, as well as an overhaul of the federal royalty program. In addition, the Energy and Mineral Resources Subcommittee held a hearing today on H.R. 2227, a bill sponsored by Neil Abercrombie (D-HI), as well as over 30 Republicans and conservative Democrats. The bill also addresses the federal royalty program and proposes that federal revenues be shared with coastal states that have offshore production. Under the bill, 30% of royalty revenues would go to states, and the remaining 70% would go towards an extension of renewable energy tax credits, carbon sequestration, and nuclear energy. Both bills are available on Thomas.gov.
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The MMS today published a notice of preparation of an Environmental Assessment (EA) for the proposed oil and gas lease sale (215) in the Western Gulf of Mexico Planning Area (off the Texas and western Louisiana coasts), which is tentatively scheduled for mid-2010. The EA will examine the potential environmental effects of and alternatives to the proposed lease sale, based on any changes and any new relevant information not available at the time the Supplemental Environmental Impact Statement for Western Planning Area Sales 210, 215 and 218 was prepared published September 2008). Comments regarding the Environmental Assessment are due by October 9, 2009.
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The U.S. Court of Appeals for the Ninth Circuit in North Slope Borough v. Minerals Management Service et al., Case No. 08-35180, recently upheld MMS's actions regarding the proposed sale of certain oil and gas leases in the Beaufort Sea. North Slope Borough and the Alaska Eskimo Whaling Commission had challenged the MMS's decision not to prepare a supplemental environmental impact statement for a proposed oil and gas lease sale on a tract of the OCS on the Beaufort Sea. The three-judge appellate panel found that MMS's determination that new environmental assessments were unnecessary was not arbitrary and capricious, that the agency satisfied its duties under the National Environmental Protection Act, and that MMS took the required "hard look" at new information related to the impact of rising oil prices. In addition, the court tip-toed around the climate change issues in the case and found that MMS did not act improperly in determining that the cumulative effects of global warming on polar bears could be mitigated. In effect, this decision supports the lower court's finding that "the public interest in energy development favors proceeding with the scheduled sales" of the leases.
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The Offshore Energy Law Blog notes that on September 9, 2009, DOI's Bureau of Land Management will offer 28,489 acres of land in Colorado in the first ever online auction of its kind by the agency. The internet pilot program was mandated by Congress in the Consolidated Appropriations Act of 2008. DOI plans to utilize various security measures to ensure that activists do not disrupt the public auction. For example, bidders will preregister on a website created specifically for the lease sale and will give their credit card number, which will be verified. Although this is related to onshore E&P activities and beyond the scope of our typical coverage, we are interested to see whether the online auction is successful and whether in the future MMS may utilize such a process for future auctions of offshore leases. Stay tuned for an update after September 9.
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Natural Gas Week provides analysis of the ongoing debates in Virginia and South Carolina over offshore natural gas exploration in federal waters. In Virginia, the debate is focused on the looming gubernatorial election where both the Democratic and Republican candidates support offshore drilling. In South Carolina, policymakers are awaiting a report on the feasibility of drilling in state waters from the South Carolina Natural Gas Exploration Study Committee . Although the report has not issued yet, based on media and other reports it appears that the conclusion is going to be that natural gas E&P offshore South Carolina should go forward. Interestingly, Virginia but not South Carolina would be included in legislation introduced earlier this year in the U.S. House seeking to permanently ban offshore drilling in the Mid- and North Atlantic OCS planning areas. [Subscription required]
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The St. Petersburg Times reports that a group of independent oil producers called Florida Energy Associates has engaged in significant lobbying efforts in the Florida state legislature. The newspaper reports that the group has spent more than $230,000 to support a bill that would permit drilling in Florida state waters off the Gulf coast. That bill passed the state House of Representatives in April 2009 but not the state Senate.
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