US Interior Dept Posts Final 5-Yr Oil, Gas OCS Development Plan

WASHINGTON Apr 30, 2007 (Dow Jones Newswires)

The U.S. Department of Interior Monday published its final five-year oil and gas development plan for the Outer Continental Shelf, including proposed drilling lease sales for controversial acreage off the Alaskan and Virginia coasts.

The DoI says it expects the total production from 21 lease sales from 2007 to 2012 to produce 10 billion barrels of oil and 45 trillion cubic feet of natural gas over 40 years, and bring an estimated $170 billion in royalty revenues into federal coffers.

Twelve sales are scheduled for the Gulf of Mexico, eight off the coast of Alaska, and one in the Mid-Atlantic Planning Area, around 50 miles off the coast of southern Virginia. The Mid-Atlantic sale - slated for 2011 - can only go ahead if the president and Congress lift the current moratorium on acreage closed to drilling.

"The Outer Continental Shelf is a vital source of domestic oil and natural gas for America, especially in light of sharply rising energy prices and increasing demand for these resources," Interior Secretary Dirk Kempthorne said. "This energy production will create jobs, provide greater economic and energy security for America and can be accomplished in a safe and environmentally sound manner."

The program also includes a Central Gulf sale in 2007 that involves a portion of the Sale 181 area and, as mandated by the Gulf of Mexico Energy Security Act of 2006, one lease sale in the Eastern Gulf in 2008, the DoI said in a statement.

The DoI said the Virginia planning area excludes a 50-mile coastal buffer from leasing consideration, as well as a wedge-shaped No-Obstruction Zone to avoid conflicts with navigation activities in and out of the Chesapeake Bay.

The lease sale includes provisions for revenue sharing for states adjacent to offshore drilling.

In Alaska, two sales will be held in the Beaufort Sea, three in the Chukchi Sea, up to two in Cook Inlet and one in the North Aleutian Basin, where there are no existing leases.

The program will be submitted to Congress and the president. After 60 days, the Interior secretary can approve it to take effect July 1.

Industry groups applauded the plan - though some said the DoI's program didn't open up enough acreage - while environmental groups largely opposed increased OCS drilling, saying more petroleum production will increase greenhouse gas emissions.

"This is a good step forward for increasing American domestic energy supplies," said Lisa Flavin, an American Petroleum Institute spokeswoman.

The National Association of Manufacturers commended the DoI for the program.

"We cannot fuel our country without sound energy policies, including increasing access to domestic energy supplies in the OCS," said NAM President John Engler. "Safely developing the abundant supply of oil and natural gas in the OCS is a step in the right direction, but further investment and development in energy efficiency and other energy resources is critical for job growth and price stability."

Although the American Public Gas Association and the API approved opening up new lease sales, they both decried the fact over 80% of the OCS still remains off limits.

Late last year, Congress passed a bill that opened up new areas to oil and gas exploration and production, but left large swaths of acreage offshore closed for development.

"It simply makes no sense to take significant domestic supplies off the table given that with the advances in drilling technology we have experienced, we can increase access and supplies in an environmentally safe and sound manner," APGA president Bert Kalisch said in a statement. "The relief our members and their customers have been waiting for will not be provided by the leasing plan that was released today."

Environmentalists said they were particularly concerned about the Virginia and Alaska lease sales.

"Drilling off the coast is an environmentally risky operation," said Rose Garr, an official with the U.S. Public Interest Research Group.

"This is a step in the wrong direction in terms of energy policy and keeps the U.S. dependent on fossil fuels," said Athen Manuel, director of lands protection at the Sierra Club. "It's bad for the environment and is a dirty and dangerous business."

PIRG's Garr said the Virginia acreage is one of the best sites for offshore wind power, and the Bristol Bay lease sale in the North Aleutian, Alaska, area "is environmentally quite valuable," as one of the largest wild salmon runs in North America, one of the major whale-spawning grounds and home to native American subsistence living.

The DoI's Minerals Management Service said it is planning a three-and-a-half-year study of the Right Whale, and was working closely with local governments, native villages and tribes to address concerns over fishing, endangered species and other resources in the area.

All of the lease sales require Environmental Impact Statements. One of the MMS's recent lease sales in the Gulf of Mexico off the coast of Louisiana was delayed after the MMS was found to have conducted an inadequate impact statement .

Earlier this month, several U.S. representatives introduced legislation that would reinstate protections for Alaska's North Aleutian Basin lifted by the president in January.

Copyright (c) 2007 Dow Jones & Company, Inc.

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