Big Oil Again Pushes Congress to Open Offshore Acreage

WASHINGTON (Dow Jones Newswires), Feb. 26, 2009

Big Oil once again pushed U.S. lawmakers to open up the Outer Continental Shelf to oil and gas development, arguing Wednesday that resource estimates could be multiplied if the federal government would expand offshore drilling access.

Although a moratorium on offshore drilling expired last year in the face of political pressure fueled by high energy prices, Democratic leaders in Congress and President Barack Obama's administration are prioritizing alternative, low-carbon energy and have indicated they'll restore bans in many areas.

In the past month, Interior Secretary Ken Salazar has stalled development of a five-year drilling plan by six months and said he would draft a new program that would close controversial and sensitive areas, but possibly allow development in areas previously closed by the ban. On Wednesday, Salazar also canceled an oil-shale lease sale solicited under the previous administration. State governors, including Virginia's Timothy Kaine, have also been pushing for Interior to halt future offshore leases sales.

Like Salazar, House Natural Resources Committee Chairman Nick Rahall, D-W.Va., says that besides reintroducing bans on some areas of the OCS, he wants to reform the government's royalty program, including repealing some royalty-relief programs, such as those designed to encourage deepwater development.

Oil industry officials warned Rahall's committee Wednesday that the Democrat's strategy of delaying new access is shortsighted and that the government needs every available resource to meet demand growth - including expanded oil and natural gas drilling - especially as the country tries to build a clean energy economy.

"Those who would say we can attain energy security without oil and natural gas are as incorrect as those who would say that we can drill our way out of our current energy challenges," said former Energy Department official Karen Harbert, now head of the U.S. Chamber of Commerce's Institute for 21st Century Energy.

Devon Energy Corp. Chief Executive Larry Nichols says his company estimates around 55 trillion cubic feet of natural gas and 14.3 billion barrels of crude lie untapped off the Atlantic and Pacific coasts, and the unexplored eastern coast of the Gulf of Mexico holds an estimated 21.5 trillion cubic feet of natural gas and 3.7 billion barrels of crude.

"There might be more, there might be less, but we can't know unless we evaluate and explore," said BP America President (BP) Lamar McKay.

Gary Luquette, president of Chevron Corp.'s North America unit, pointed out that current resource estimates for the Gulf of Mexico had multiplied eight times from original calculations as firms explored and surveyed the area with new technology. For example, a 5 billion-barrel field discovered several years ago in a geological strata previously thought to be unproducible changed the way geologists predict recoverable resources in the Gulf of Mexico.

Marvin Odum, president of Royal Dutch Shell's U.S. operations, said he hoped Democrats aren't using delaying tactics. "I'm looking for some of those positive indications that it's not endless cycle, but you never actually get to development," he told reporters on the sidelines of the committee hearing.

"I hope these are real steps toward opening some new areas for energy supply," he said.  

Copyright (c) 2009 Dow Jones & Company, Inc.

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