US Interior Secretary: New Oil Lease Plan May Include Closed Areas

WASHINGTON (Dow Jones Newswires), July 30, 2008

The U.S. Secretary of the Interior Wednesday ordered the agency to start preparing a new five-year oil and natural gas lease sale program that will include areas currently under a congressional moratorium.

The announcement will likely ratchet up the pressure on Democrats in Congress who have been under an concerted attack by Republicans to lift the moratorium on drilling.

Interior Secretary Dirk Kempthorne said if Congress were to lift the moratorium, the program would allow the agency to start a lease sales program in the Outer Continental Shelf areas currently closed to exploration within three years.

"The American people and the president want action, and this initiative can accelerate an offshore exploration and development program that can increase production from additional domestic energy resources," Kempthorne said.

"This initiative could provide a significant advantage for the incoming administration, offering options it would not otherwise have had until at least 2010," Kempthorne said. "Today's action would provide a two-year head start for the next administration on developing a new five-year program," he said.

The current program runs from 2007-2012 and includes 21 lease sales in eight of the 26 Outer Continental Shelf planning areas in the Gulf of Mexico, Alaska and the Atlantic. It doesn't include areas under a congressional ban, with the exception of Virginia, which the government estimates contains an additional 18 billion barrels of oil and 76 trillion cubic feet of natural gas in yet-to-be-discovered fields.

Democrats have found themselves on the defensive from an orchestrated Republican attack pushing the majority to "Drill More, Use Less." The GOP's offensive is strengthened by the fact that lawmakers must soon return home to constituents outraged by sky-high energy prices and who predominantly support increased domestic exploration. A raft of polls have shown a surge in public support for an expansion of domestic production, including offshore.

Earlier this month, President George W. Bush lifted a decades-old presidential moratorium on drilling in closed areas of the Outer Continental Shelf, putting the onus on Congress to lift its own annually renewed moratorium on nearly identical areas off the east and west coasts and in the Gulf of Mexico. The administration has since released an array of reports and agency documents that knock down lawmakers' contentions that speculation was a price driver for skyrocketing crude and gasoline prices, and point to the billions of barrels of crude and trillions of cubic feet of natural gas production potential.

Last week, the Commodity Futures Trading Commission released an inter-agency report that found supply-and-demand factors - and not speculation - were driving prices. Almost simultaneously, the Interior Department published proposed rules for the commercial development of the estimated 800 billion barrels of oil shale resources in the western U.S. The following day, the U.S. Geological Service found that 22% of the world's undiscovered, technically recoverable petroleum resources lay in the rock formations north of the Arctic circle, much of which is off the Alaskan shore.

In both the House and the Senate, the Appropriations Committees have canceled mark-ups of Interior funding bills after Republican members have said they would offer amendments that would revoke the moratorium.

The GOP's plan would give states the right to choose whether to drill off their shores - and to sweeten the deal - a hefty share of the revenues from production. Kempthorne said his department would be seeking input from state governors, many of whom have shown a new interest in offshore drilling.

If the Republican tactic fails before the August recess, aides for leading Republican senators said the GOP leadership may also consider blocking a budget vote that renews the congressional moratorium on Outer Continental Shelf drilling. While such a move - which could shut the government down - would likely only be used as a last resort, some lawmakers may consider the issue important enough to force the Democrats' hand, one aide said.

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