Offshore U.S. Lease Sale Proposal Adds Atlantic

The U.S. federal government has unveiled a draft five-year oil and gas leasing program that includes 14 potential lease sales—10 in the Gulf of Mexico (GoM), one each in the Chukchi Sea, Beaufort Sea and Cook Inlet, and one in the Atlantic.

The proposal, which designates suggested areas for lease sales from 2017 to 2022, could open nearly 80% of the nation’s estimated undiscovered technically recoverable hydrocarbon resources to drilling, according to the U.S. Department of the Interior (DOI). But some oil and gas industry leaders say the draft program misses some opportunities, notably additional areas in the GoM and the Atlantic.

Moreover, drilling would likely occur in the Atlantic, where existing oil and gas data are about 30 years old, after 2022 because the first leases would not be let until 2021 at the earliest.

Calling the draft program a “balanced approach to oil and gas development” that also protects “areas that are simply too special to develop,” DOI Secretary Sally Jewell said the proposed program continues the regionally tailored approach used in the current five-year plan and warned that the plan is still a work in progress.

“It is not final. We are in the early stages of what is a multiyear process to develop the plan,” Jewell said on a media call today. “These sales that you see proposed in this draft may be narrowed or taken out entirely in the future based on additional science, information and public comments that we receive.”

The current program includes 15 lease sales. The National Ocean Industries Association took issue with the fact that fewer, instead of more, sales are being proposed.

“The draft proposed program could have been much more robust had it included further analysis of the Eastern Gulf of Mexico with the caveat that should Congress lift the exploration ban before 2022, new areas could be included in a 2017 to 2022 leasing schedule,” NOIA President Randall Luthi said in a prepared statement. “Nova Scotia and New Foundland have been developing in the Atlantic for years, but the U.S. will continue to turn a blind eye to what potential might be off our own northern Atlantic shore. As for the Pacific, it has been a source of oil for generations, but without the ability to look in new areas and purchase new leases there, that source will continue to dry up.”

The draft plan does not propose any lease sales for the Pacific, and this should come as no surprise, Jewell said. “This is consistent with previous plans and reflects the longstanding opposition from the states of California, Oregon and Washington to oil and gas development off their coast,” she said.

Atlantic: The draft plan proposes one potential lease sale in an offshore area of Virginia, North Carolina, South Carolina and Georgia, a smaller area for which oil and gas industry leaders had pushed. The sale would include an 80-km (50-mile) buffer from the coast to reduce potential conflicts with Department of Defense, fishing, offshore wind and wildlife activities, Jewell said.

Currently, there are no active oil and gas leases in the Atlantic area. However, between 1976 and 1983, 10 oil and gas lease sales were held in the Atlantic, according to the Bureau of Ocean Energy Management (BOEM). During that time, 51 wells were drilled. These included five continental offshore stratigraphic test wells, all of which were deemed noncommercial. However, there have been many advances in E&P technology, and the potential for hydrocarbon finds still exists. But more information is needed.

“We are interested in learning more about the resource potential as well as the potential conflicts with the environment and other uses. The current data that we have about oil and gas resources in this area are about 30 years old,” Jewell said. “We also need to assess whether important infrastructure can be available to prepare for development in this region, particularly spill response capabilities.”

Following the proposal’s release, several oil and gas groups issued statements.

American Petroleum Institute (API) Director of Upstream Erik Milito said including the Atlantic in the proposal was a good step, but the proposal “represents the bare minimum for potentially opening that area by including only a single lease sale six years from now.”

Further discontent was expressed concerning offshore Alaska and the eastern GoM.

“New restrictions offshore Alaska and a rejection of billions of barrels of oil from the coastal plain of ANWR [Arctic National Wildlife Refuge], duplicative new regulations on industry operations, and the government’s refusal to even consider leasing in the eastern Gulf of Mexico and the Pacific are tying America’s hands against a future of affordable and reliable energy,” Milito said.

GoM: Unlike the current plan, which includes 12 lease sales in the GoM—some covering the western sections and others covering the central and eastern sections—the proposed program calls for 10 lease sales over the five-year period.

“This makes sense. The gulf is one of the most productive basins in the world and has well-established oil and gas infrastructure in place,” Jewell said.

BOEM Director Abigail Hopper explained that rather than holding a sale in the western area and separate sales in the central or eastern parts, for example, each of the proposed lease sales would cover the western and central parts as well as a portion of the eastern parts of the GoM that are not subject to congressional moratoria. The new approach, she said, allows BOEM staff to more effectively manage the sales while “providing greater flexibility to industry to invest in the gulf when and where they want, particularly given the significant energy reforms recently adopted by the Mexican government.”

The draft calls for one sale in 2017, two each in 2018, 2019, 2020 and 2021, and another in 2022.

Arctic: While the proposed program includes three potential lease sales in the Cook Inlet and the Beaufort and Chukchi seas, it takes some areas out of the running as President Barack Obama designated 9.8 million acres of the Beaufort and Chukchi seas off limits. The president’s actions aim to protect critical whaling grounds in the Beaufort Sea and establish a 40-km (25-mile) wide buffer along the Chukchi Sea coast to protect key subsistence areas for Alaska natives.

“These areas are well-established as protected areas and deferred in the current five-year program, but the president’s action today adds an additional layer of protection for these special areas,” Jewell said. “He also acted to protect the Hanna Shoal, a shallow 35-mile [56-km] long shelf off of northwest Alaska. Extensive research has shown that this is an incredibly biologicallyrich part of the ocean [and is] an important habitat for walruses and seals, in particular. Like Bristol Bay, there are some areas that are simply too precious to drill, and these areas certainly fit that bill.”

Luthi said the plan for offshore Alaska “continues to hobble the people of Alaska and the overall energy portfolio of the United States. Instead of a robust plan for potential development in an area that holds immense resource potential, the plan actually reduces the areas available for further analysis.”

The API, which issued a statement today before the draft was released publicly and another afterward, said the proposed program and other recent actions restricting energy development show a “disappointing lack of commitment to ensuring America’s position as a world leader in energy.”

“Staying competitive and reducing our dependence on oil from abroad depends on planning and decisions made today. What the administration has, in fact, proposed represents delayed economic opportunity and could cost us a lot of jobs and revenue to the government and threaten our energy security,” Milito said. “This is our energy moment, and we need smart, forward-thinking policies to realize this opportunity.”

Included in the areas currently off limits are those offshore the west coast and east coast. These, according to the federal government, include massive amounts of offshore undiscovered technically recoverable federal oil and natural gas resources.

Source: MMS, Department of Interior

There is still time to voice opinions and share data.

“We are early on in this process. The areas included for possible lease sales are not set in stone, rather they are options for us to continue to consider,” Hopper said. “In the coming months we will be engaging stakeholders in many different ways through public meetings, online collaboration and via written comments. The input we receive from state governors, federal agencies, native communities, environmental and industry organizations, and the general public will be incorporated into another proposal, which we will then release again for additional public comment.”

Contact the author, Velda Addison, at vaddison@hartenergy.com.