Senators Propose Eastern GOM Lease Buyback Program

Florida's Democratic Senators Bob Graham and Bill Nelson proposed Monday the U.S. government offer credits for oil and gas companies to relinquish up to 99 leases in the eastern Gulf of Mexico. Florida's state government and Congressional delegation oppose oil and gas drilling in eastern Gulf waters. They are concerned about damage to the environment and tourism industry.

In a proposed amendment to the pending energy policy bill, Graham and Nelson want to offer the companies credits that could be used for federal oil and gas royalties and rental payments on leases outside the eastern Gulf. The credits would be based on acquisition costs and other investments made in the eastern Gulf leases. The senators said the leases have a combined estimated acquisition cost of $90.8 million.

Under the voluntary program, companies would be able to apply for credits from Jan. 1, 2003, until March 30, 2008. The Interior Department would decide which leases to cancel, and the resulting credits could be used for rent and royalty obligations beginning in 2012.

Due to pending litigation, the program wouldn't include leases containing the Destin Dome natural gas discovery, located about 25 miles south of Florida's Pensacola Beach. The holders of those leases, ChevronTexaco Corp., Murphy Oil and Conoco Inc., are suing the federal government for not allowing that field's development.