US Senators Push for Full Review of OCS Oil, Gas Resources

WASHINGTON Jan 26, 2007 (Dow Jones Newswires)

Some U.S. senators, realizing their plans for a new Outer Continental Shelf, or OCS, drilling bill are unlikely to succeed in a Democratic-controlled Congress, are now pushing for a more thorough review of OCS oil and gas resources.

Their hope is that new data might increase resource estimates and change the nature of the political energy debate, and the senators are pushing the Interior Department to move ahead with plans for updated geological surveys.

Sens. Mary Landrieu, D-La., and Pete Domenici, R-N.M. and ranking Republican on the Senate Energy and Natural Resources Committee, are anticipating higher estimates of resources on the shelf could bolster their argument that opening up more of the OCS to exploration and production is fundamental to any discussion on energy security.

"The best thing we can do is to provide (the Interior Department) with the money (it) needs to get busy...and see what's out there," Domenici said.

"Its a big-time asset that we have to find out about," he added.

Landrieu also urged the Interior Department to "pursue vigorously a more modern inventory."

"Whatever you're doing, it's not enough," Domenici said.

Late last year, after much political wrangling, Congress passed a drilling bill to open up access to some closed offshore acreage. The legislation, however, fell far short of the access that industry and many lawmakers, including Domenici and Landrieu, were seeking.

The current focus of energy policy is on alternative sources and fuels and higher energy efficiency. House Speaker Nancy Pelosi's, D-Calif., energy bill funnels axed oil subsidies and tax breaks into alternative energy. Meanwhile, Sen. Jeff Bingaman, D-N.M., chairman of the Senate Energy and Natural Resources Committee, has said encouraging alternative energy sources is at the top of his agenda. President George W. Bush, in his State of the Union Address, cited increased ethanol use as a strategic part of his plan for energy security.

However, Domenici, at a Senate Energy and Natural Resources Committee hearing reviewing OCS inventories, said he believes "it's unacceptable to speak of energy independence on the one hand, while supporting a moratorium that locks up 85% of the OCS acreage on the other." Under current law, most of the coastal areas off the U.S. are closed to oil and gas exploration and production.

"This moratorium locks up our nation's resources and weakens our foreign policy, national security and economic strength," Domenici said.

Some of the same lawmakers that pushed for broader acreage access last year than was finally passed by Congress are renewing their push for opening up OCS acreage.

Earlier this week, Landrieu and Rep. John Peterson, R-Pa., said they will propose an OCS-2 bill that would open up more closed areas to exploration and production. Domenici said he's also considering new drilling legislation.

But few think such proposals will succeed, especially with the political momentum in energy policy currently focused on alternative energy and fuels and increased fuel efficiency.

Bingaman said that because the OCS leasing program has already generated substantial controversy and because lawmakers historically have shown a lack of political will to reverse leasing bans for environmental reasons, "I believe there is not a political will to do so now."

"Our time and efforts are better spent focusing on areas that are already available in the Gulf of Mexico and on alternatives to OCS production, such as renewables, energy efficiency and conservation, biofuels, new technologies and opportunities for enhanced oil and gas recovery," Bingaman said.

With such a wall of resistance to new access, Landrieu and Domenici used much of their time in the committee hearing to instead focus on an updated review of the resources.

Interior Department Assistant Secretary Stephen Allred told the committee there "is a great uncertainty regarding the resource potential in areas where leasing has been prohibited and where the last geophysical surveys and drilling exploration occurred more than 25 years ago."

According to the Department of the Interior's Minerals Management Service, the OCS is estimated to hold around 86 billion barrels of oil and 420 trillion cubic feet of natural gas. But Allred said around 18 billion barrels of oil and 76.5 trillion cubic feet of technically recoverable gas remained unavailable for leasing consideration. And those estimates were made using old data.

New data might change those figures, he said.

And new numbers could change the political argument.

For example, Chevron Corp's (CVX) massive new "Jack" oil field was discovered ina geological strata of the Gulf of Mexico shelf that geologists previously hadn't explored. Such discoveries, particularly in untested zones, can change resource estimates. Also, new seismic survey technology, drilling techniques and four-dimensional geological scans have greatly improved the accuracy of resource estimates compared to data gathered 25 years ago.

Although the Interior Department's Minerals Management Service was mandated to update its resource inventories, the lack of funding has prevented a more comprehensive review with new data, Allred said.

Norwegian politicians have conducted a similar political strategy. Geologists there believe some of the largest remaining reservoirs in Norway lie around the closed and environmentally-sensitive Lofoten Islands off the western coast. While keeping the moratorium, the Norwegian Petroleum Directorate has been able to conduct new seismic surveys that the industry hopes will reveal the massive prospects they believe surround the island. Pro-exploration lawmakers and the oil industry hope that once the new resources are shown as a real possibility, it will influence the public opinion enough to open access.

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

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