Latest federal Gulf of Mexico lease sale lacking for some

12 04, 2012 by Houma Courier

Louisiana’s two U.S. senators said the federal government’s latest lease sale in the western Gulf of Mexico falls “far behind” previous efforts and future repeats will only “stymie the process” that allows energy to underwrite many of the state’s needs.

Since it was announced over the summer, Sen. David Vitter, a Metairie Republican, has been highly critical of the Interior Department’s five-year plan for oil-and-gas leasing in the Gulf.

Meanwhile, senior Sen. Mary Landrieu, a New Orleans Democrat, has also called on the “administration to change its policy on offshore leases and expand its” Gulf leasing plan.

At the latest Gulf sale last week — the first under the new five-year plan — the Bureau of Ocean Energy Management offered more than 20 million acres and attracted $133 million in high bids for 116 tracts covering 652,522 acres on the Outer Continental Shelf. A total of 13 offshore energy companies submitted 131 bids for the leases off Texas.

Vitter said the numbers are “well behind previously projected revenue levels” and was only the third since the 2010 drilling moratorium, issued and later lifted by President Barack Obama following the BP oil spill.

“There is no disputing the fact that our nation’s domestic energy production on federal lands is far lower than what was projected before this administration took office, and is trending in the exact opposite direction of the rapid growth we’re seeing on private and state land,” Vitter said.

Landrieu said it brought in only a third of the total high bids expected, and it leased about 400,000 acres less than the last lease sale in the Western Gulf.

The next federal lease sale is set for March 20 and will focus on the central Gulf, which includes Louisiana, Mississippi and Alabama. About 38 million acres will be made available then for investors.

It will be held in New Orleans and “could lead to the production of up to nearly a billion barrels of oil and nearly 4 trillion cubic feet of natural gas,” according to Interior Secretary Ken Salazar.

Despite the criticism, Salazar said last week’s sale offered a strong preview of what’s to come as the five-year plan takes hold.

He said domestic oil-and-gas production has grown each year the president has been in office, with domestic oil production in 2011 higher than any time in nearly a decade and natural gas production at its highest level ever.

Additionally, foreign-oil imports now account for less than 50 percent of the oil consumed in America, the lowest level since 1995, he said.

Tommy P. Beaudreau, director of the Bureau of Ocean Energy Management, an arm of the Interior Department, said it’s part of the administration’s “all-of-the-above energy strategy” and that last week’s sale made its own history.

“This is the first sale under the president’s five year program in which we are making available all of the offshore areas with the highest conventional resource potential for exploration and development,” Beaudreau said.

The highest bid for a single tract during the late November sale was for $17 million and submitted by Chevron.

Vitter said he wants the department to go back to the previous five-year leasing plan that would have opened up nearly all of the Outer Continental shelf for lease sales.

The current offshore plan would keep 85 percent of offshore areas closed to new American energy production, he added.

Landrieu said she is pushing legislation, known as the Offshore Petroleum Expansion Now Act, or OPEN Act, that would include an additional 11 lease sales above the administration’s plan and open up areas in Virginia and southern California.

The OPEN Act would also increase revenue sharing for energy producing states and eliminate the $500 million cap that Congress placed on revenues.

“This legislation will also address an inequity that I have been fighting my whole career,” she said, “that while producing states like Louisiana have shared in virtually none of the revenues from the energy we produce off our shores, states that produce energy on federal lands onshore receive 50 percent of these revenues.”

Aside from the fact that the administration withdrew an earlier proposal that called for more Gulf lease sales, and has ignored alternative proposals from lawmakers to do the same, Vitter said the federal government is making mistakes by focusing on different forms of energy that aren’t oil and gas.

“At the leasing and production stages, large sums of monies come into the federal treasury,” said Vitter, who has proposed his own legislation. “But, instead of encouraging production and this revenue, the administration has made it a standard to stymie the process and focus attention on unproven expenditures like offshore wind.”

While the federal government does not allow offshore oil-and-gas leasing in the OCS, it is allowing lease sales for wind energy — and Vitter said all energy production in the Atlantic Ocean should be treated equally.

He has joined fellow GOP Sen. Lamar Alexander of Tennessee in asking Salazar for the “economic reasoning” behind the decision.

“The administration has a habit of picking energy industry winners and losers, and we want an explanation,” Vitter said. “Secretary Salazar should at least be able to defend the economics of the lease sale for wind energy.”

For example, Vitter said the federal government receives significant revenue from royalties for offshore oil and gas production in the form of rents, royalties, bonus bids and taxes. The current royalty rate oil and gas companies must pay is between 12.5 percent and 18.75 percent.

“Can the same be said for this offshore wind project?” Vitter asked.

In October, the department reached agreement on a lease for commercial wind-energy development. In federal waters, the lease covers 96,430 acres about 11 nautical miles off the coast of Delaware.

It is the first lease completed under the Interior Department’s “Smart from the Start” approach to facilitate “environmentally responsible” offshore wind development along the Atlantic Outer Continental Shelf by “identifying wind energy areas in a coordinated, focused approach with extensive environmental analysis, public review and large-scale planning.”

Salazar said renewable energy from sources like wind and sun have doubled since the president took office, and the Delaware lease pushes the mission forward.

In July, Vitter joined Sen. Jeff Sessions, a fellow Republican from Alabama, filing legislation for a five-year leasing plan that would further open other areas in the Gulf and permit production in areas of the Pacific and Atlantic Oceans, as well as Alaska.

Vitter said it’s “more in line with the energy and economic needs of the United States” and a better deal for Louisiana.

The president’s current plan call for 12 lease sales in the Gulf. It further outlines lease sales for Arctic waters but restricts activities on the Atlantic and Pacific coasts.