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Interior Department Announces Key Advances in Offshore Energy Development

Energy & Environmental Law Update

January 16, 2009

The Department of the Interior (Interior) today announced three important advances that will potentially lead to greatly enhanced offshore energy development. First, Interior's Minerals Management Service (MMS) issued a Draft Proposed 2010-2015 Outer Continental Shelf (OCS) Oil and Gas Leasing Program (Draft Proposed Program) and notice of intent to prepare an environmental impact statement (EIS) for the program. Second, MMS released a notice of intent to prepare a programmatic EIS for geological and geophysical, (e.g., seismic) studies off the Atlantic coast. Finally, MMS announced the availability of the final EIS for the Cape Wind Energy Project, a proposed 130-turbine wind farm on Nantucket Sound.

The Draft Proposed Program and Atlantic EIS are two of several steps in processes that, once complete, could facilitate offshore oil and gas development in areas once prohibited by federal law. This is good news for oil and gas exploration companies or other members of the offshore industry who have long awaited the opportunity to explore and potentially develop vast domestic resources that have long been off limits. 

Draft Proposed Program: First Step in Expanded Offshore Energy Development

Section 18 of the Outer Continental Shelf Lands Act (OCSLA) requires the Secretary of the Interior to prepare an oil and gas leasing program consisting of a five-year schedule of proposed sales. The schedule must include the size, timing, and location of leasing activity that the Secretary determines will best meet national energy needs. No area may be offered for sale during the five-year period unless it is included in the five-year program.

On July 14, 2008, President Bush lifted an 18-year-old executive prohibition on leasing certain lands for oil and gas development on the OCS. Following the President’s action, Secretary Kempthorne directed MMS to begin the initial steps for developing a new five-year program. On October 1, 2008, Congress allowed the development moratorium it had imposed in the annual appropriations act since 1982 to expire, thereby removing the barrier to the potential development of billions of barrels of oil and trillions of cubic feet of natural gas.

The current five-year program runs from 2007 to 2012 and includes 21 lease sales in eight of the 26 OCS planning areas in the Gulf of Mexico, Alaska and the Atlantic. It does not include areas formerly under the congressional ban, with the exception of offshore Virginia. The new program can consider the entire OCS exclusive of the Eastern Gulf of Mexico. That planning area is subject to a development prohibition imposed by the Gulf of Mexico Energy Security Act of 2006. In the Draft Proposed Program, the Secretary proposes 31 OCS lease sales in all or some portion of 12 of the 26 planning areas — 4 areas off Alaska, 2 areas off the Pacific coast, 3 areas in the Gulf of Mexico, and 3 areas off the Atlantic coast. The public has sixty days to comment on the Draft Proposed Program.

Today's action is the second step in a lengthy process of public participation and analysis required by OCSLA Section 18: the initial solicitation of comments; the Draft Proposed Program; a proposed program; a proposed final program; and Secretarial approval. The completion of the 2010-2015 five-year program in its current draft form is not guaranteed. The Obama Administration will have the discretion to revise the plan and could impose restrictions on areas currently considered for development. Consequently, energy companies will need to work with the Obama Administration and MMS career officials to ensure that areas that are proposed for sale remain available.

Atlantic Programmatic EIS Paves Way for Exploration

The OCS currently provides 27 percent of U.S. domestic oil production and 15 percent of domestic natural gas production — most of that from the Gulf of Mexico. The areas formerly under the congressional appropriations ban contain an additional 18 billion barrels of oil and 76 trillion cubic feet of natural gas. These are conservative estimates due to limited exploration and data because of the congressional ban. Estimates tend to increase dramatically with improvements in technology and increased exploration.

Following the removal of the Executive ban and the expiration of the congressional moratorium, energy exploration and development companies have grown increasingly interested in taking the steps necessary to develop those once unavailable resources. Consequently, companies have begun applying to MMS for the right to conduct geological and geophysical studies in the Atlantic. Before MMS can make a decision on such requests, the agency must conduct the requisite National Environmental Policy Act (NEPA) reviews. Today's action is the first step in that process.

Bracewell & Giuliani is uniquely positioned to assist energy companies in developing and implementing strategies to help the Obama Administration finalize a new five-year program and complete other work that will help bring much needed domestic resources to market.  Should you need assistance in developing a strategy for energy development on the Atlantic OCS or other areas considered under the Draft Proposed Program, or need guidance on commenting on the Draft Proposed Program or Atlantic programmatic EIS, please do not hesitate to contact us.