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Oil leaders, GOP allies, downplay administration’s seismic plans

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House Natural Resources Committee chairman Rep. Doc Hastings, R-Wash, leads a committee hearing. (AP Photo/Kevin Wolf)

Posted on March 28, 2012 at 11:37 am
by Jennifer A. Dlouhy

The Obama administration’s announcement that it may allow seismic studies potentially paving the way for offshore drilling along the East Coast is political posturing designed to distract voters concerned about high gasoline prices, oil industry leaders and Republican lawmakers said today.

The administration’s move “continues the president’s election-year political ploy of giving speeches and talking about drilling after having spent the first three years in office blocking, delaying and driving up the cost of producing energy in America,” said Rep. Doc Hastings, R-Wash. “The president is focused on trying to talk his way out of what he’s done, rather than taking real steps to boost American energy production.”

At issue is Interior Secretary Ken Salazar’s announcement in Norfolk, Va., this morning that the government is assessing the environmental effects of allowing seismic surveys along the mid- and south-Atlantic that could help locate hidden pockets of oil and gas. If ultimately approved, the studies by private geological research companies also could help guide decisions about where to place renewable energy projects off the coast.

The Interior Department is issuing a draft environmental impact statement that assesses the consequences of seismic research on marine life in the area. The Obama administration had planned to release a similar document in 2010, before the Gulf of Mexico oil spill.

If the draft environmental assessment is finalized after public comments and hearings, the Bureau of Ocean Energy Management could give companies permits to conduct the studies off the coasts of eight East Coast states.

Salazar said that if the geological research turned up promising results, that could open the door to offshore drilling in the area within five years, even though the administration currently has ruled out that kind of exploration before 2017. A government plan for selling offshore drilling leases from 2012 to 2017 does not include any auctions of Atlantic territory.

“If the information that is developed allows us to move forward in a quicker time frame, we can always come in with an amendment,” Salazar said. “We’re not prejudging that at this point in time. My view is … we need to develop information so we can make those wise decisions.”

Industry officials noted that under federal laws, it could take years for the government to revise the 2012-2017 leasing plan, even if federal officials decided to pursue Atlantic drilling.

Erik Milito, upstream director for the American Petroleum Institute, said the administration is repackaging old news and old plans to make it appear it is making real progress to encourage more domestic energy development.

“This is political rhetoric to make it appear the administration is doing something on gas prices, but in reality it is little more than an empty gesture,” Milito said.

Randall Luthi, the president of the National Ocean Industries Association, likened the administration’s announcement to giving the industry “a canoe with no oars, since there are no lease sales planned anywhere off the East Coast.”

If allowed to conduct seismic surveys, geological research firms would ultimately give the resulting information to the government and sell it to companies eager to analyze the data.

But Milito questioned whether seismic companies would pursue the work, given that some of their best customers — oil companies — wouldn’t be able to use it to plan offshore drilling for years, if at all.

“Without an Atlantic coast lease sale in their five-year plan, the administration’s wishful thinking on seismic research has no ultimate purpose,” Milito said. “The White House has banned lease sales in the Atlantic for at least the next five years, discouraging the investment and job creation, and ultimately production, which would make seismic exploration valuable.”

Still, at least six companies already have told the government they want to conduct seismic research along the East Coast.

“We have gotten significant expressions of interest from companies in contracting for these seismic surveys,” said Tommy Beaudreau, the director of the Bureau of Ocean Energy Management. “I am confident that, assuming the process continues on the track we anticipate, that there will be significant interest next year in conducting these surveys.”

Geological research uses seismic waves to map what lies underground or beneath the ocean floor. The shock waves — which some environmental advocates say may harm marine life — map the density of subterranean material and can gives clues about possible oil and gas.

Seismic studies also help identify geologic hazards and archaeological resources in the seabed — information useful in determining the placement of renewable energy infrastructure as well as oil and gas equipment.

The existing seismic surveys of the Atlantic coast are decades old, and in the years since, “there have been enormous technological advances,” Salazar noted.

“We do need to have seismic moving forward so we can really understand what the resource potential is,” Salazar added.

Source

Obama administration advances plan for seismic research along Atlantic coast

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Posted on March 28, 2012 at 12:01 am by Jennifer A. Dlouhy

The Obama administration will announce Wednesday that it is advancing a plan to allow new seismic research designed to help identify hidden pockets of oil and gas in Atlantic waters along the East Coast.

The move by the Interior Department is the beginning of a long path that eventually could lead to new offshore drilling off the coast from Delaware to Florida.

Senior administration officials who spoke exclusively to the Houston Chronicle confirmed the plan on condition they not be identified ahead of the official announcement.

The plan could mean new work for Houston-based seismic firms, which likely would conduct some of the first such surveys of the region in decades.

The announcement comes as President Barack Obama tries to assuage concerns about rising oil and gasoline prices ahead of the November election, amid Republican criticism that his energy policies have sent costs higher.

The administration had signaled plans to allow Atlantic seismic research before the 2010 Gulf of Mexico oil spill stalled approval of offshore activities.

Interior Secretary Ken Salazar will announce the plan in Norfolk, Va. at Fugro Atlantic, a company that conducts geotechnical and marine research.

Future seismic research in the Atlantic waters could help guide decisions about where to allow drilling leases and equipment that generates renewable energy, such as wind turbines.

But it would be at least five years before the government sold any leases in Atlantic waters. Interior Department plans governing those decisions through 2017 do not include lease sales  in the region.

Geological research uses seismic waves to map what lies underground or beneath the ocean floor. The shock waves — which some environmental advocates say may harm marine life — map the density of subterranean material and can gives clues about possible oil and gas.

Seismic studies also help identify geologic hazards and archaeological resources in the seabed —  information useful in determining the placement of renewable energy infrastructure as well as oil and gas equipment.

Energy companies use the data to plan where to buy leases and how to prioritize projects. But they know little about what lies below federal waters along the East Coast. Existing seismic surveys of the area are more than 25 years old and were conducted with now-outdated technology.

Oil industry officials have downplayed the significance of allowing seismic surveys along the Atlantic Coast, noting the government makes no guarantee that it will let them drill. That skepticism also could limit the market for seismic research firms.

But the administration has said that collecting the data for different regions — even if they aren’t targeted immediately for development — is key to understanding their potential. Obama asked the Interior Department to speed up its search for Atlantic resources in May 2011.

Wednesday’s action takes the form of a federally required draft statement on the environmental effects of seismic surveys in the outer continental shelf along the East Coast.

The public will have a chance to weigh in on that draft environmental impact statement during hearings along the East Coast.

Source

Offshore Energy Leases Fall from $10 Billion to Zero Under Team Obama

Even as the Obama administration postures on behalf of deficit reduction and job creation, it continues to advance policies that undermine energy production in the Gulf region and lower federal revenue, Sen. David Vitter (R-La.) has pointed out in his correspondence with top officials in Washington D.C.

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Most recently, in a letter addressed to Interior Secretary Ken Salazar and Bureau of Ocean Energy Management Regulation and Enforcement (BOEMRE) Director Michael Bromwich, warned of a severe revenue fall off attached to declining energy lease sales.

“Under the Obama administration’s management, revenue from our offshore lease sale program has gone from $10 billion to nothing in just three years,” Vitter said. “Revenue cannot be generated from sales that do not happen, and jobs cannot be created on leases that private industry cannot acquire. We’re in a severe fiscal crisis and we’re facing significant economic challenges related to job creation, yet the administration continues to neglect our offshore resources.”

In fiscal year (FY) 2008 revenue from bonus bids on offshore leases was approximately $10 billion, but for FY 2011 that amount is down to $0, according to Vitter’s letter. “Revenue cannot be generated from lease sales that do not occur, and jobs cannot be created on leases that private industry cannot acquire,” he continued.

Unless, the administration reverses course, Vitter anticipates “long-term economic impacts that include lose jobs, lost royalties and lost rental fees.” Companies will be reticent to own a lease if they cannot be reasonably certain that exploration plans or permits will be approved, he added.

Daniel Kish, senior vice-president of policy with the Institute for Energy Research (IER), sees an “opportunity cost” for the Gulf region that may not be recaptured anytime soon.

“The Obama administration has virtually put a stop to energy development in federal waters,” Kish said. “This is like planting seeds, if the government won’t allow to the seeds to be planted now, they are preventing future production. We are talking about a lost generation of economic activity.”

In September, President Obama rolled out a new deficit reduction plan built around income tax increases for higher income Americans.

“We can’t just cut our way out of this hole,” Obama said during a speech at the White House.  “It’s going to take a balanced approach. If we’re going to make spending cuts … then it’s only right that we ask everyone to pay their fair share.” Obama also said that would veto any deficit reduction plan that includes only spending cuts and no tax increases.

“When you include the $1 trillion in cuts I’ve already signed into law, these would be among the biggest cuts in spending in our history,” Obama continued. “But they’ve got to be part of a larger plan that’s balanced –- a plan that asks the most fortunate among us to pay their fair share, just like everybody else. And that’s why this plan eliminates tax loopholes that primarily go to the wealthiest taxpayers and biggest corporations –- tax breaks that small businesses and middle-class families don’t get.”

But the slow pace of permits for oil drilling also contributes to the deficit, Vitter explained in a previous letter to administration officials. The right mix of policies could unleash America’s abundant supply of domestic energy resources, which would in turn boost revenue into the federal treasury, Vitter argued.

“I share the frustration of Louisianians and Gulf Coast residents with the disparity between  the president’s rhetoric and the Interior Department’s actions,” Vitter said. “The administration’s policies have led to massive deficits and job losses, especially in Louisiana, and it’s time for the president to stop lecturing about job creation and allow our energy industry workers to get back to work.”

Without a higher volume of additional permits, the number of active oil rigs will continue to decline in the Gulf, Vitter warned in one of his earlier letters. The 2011 permitting rate is well below the historical average, Vitter observed.

As of early September, “there were 19 floating units operating in the Gulf, up from four in the third quarter of 2010, but down from the average of 28 recorded in the 2007-2009 period,” he wrote.

Up to 20 oil rigs could leave the Gulf, in addition to 11 that have already left, since the administration’s moratorium on deepwater oil and gas drilling went into effect in May 2010, according to a new report.

The future could still be there for the Gulf coast with the right mix of policies, the American Petroleum Institute (AEP) has concluded in a new study.

If U.S. companies were permitted to drill with fewer regulatory hurdles, they could boost government revenues by $800 billion and generate over a million new jobs by 2030, according to API.

But even with a change in administration heading into 2013, the Gulf region is not likely to experience a robust recovery in the short term, Kish, the IER policy expert, warns.

“It will take time to correct these policies,” Kish said. “The Obama administration has shifted the entire ground on which the Gulf of Mexico operates.”

by Kevin Mooney

Original Article

API: Industry meets final requirement for drilling to resume

Bill Bush | 202.682.8114 | bushw@api.org

WASHINGTON, February 17, 2011 — The U.S. oil and natural gas industry has completed the final requirement necessary to return to production in the Gulf, according to the American Petroleum Institute, with today’s news that the industry-led Marine Well Containment Company had completed testing.

“The oil and natural gas industry’s more than 60-year history of safely drilling more than 42,000 offshore wells, our unprecedented response to last year’s Gulf accident, our ongoing efforts to raise the bar on safety standards, and our record of workplace safety, all speak to our commitment to safety,” said Jack Gerard, president and CEO of API.

“The readiness of the Marine Well Containment Company and the systems necessary to respond to a deepwater drilling incident, show this industry has met every requirement for resuming operations in the Gulf and is ready to get back to work providing the energy this country needs,” said Gerard.

(read more)

API: Industry meets final requirement for drilling to resume.

Increased oil production would generate more revenue than Obama’s proposed fees

Federal officials are on course to forfeit more than $1.35 billion this year from Gulf of Mexico royalty payments made by oil companies. Yet instead of boosting oil production to close the gap, President Obama is proposing new fees in its 2012 budget.

The fees would generate about $65 million from oil production in the Gulf of Mexico.

Obama’s oil spill commission recommended the fees last month as a way for the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) to cover inspections of drilling rigs and permit processing. The fees would apply to offshore drilling rigs, costing operators about $16,700 per inspection, according to Interior Secretary Ken Salazar.

Obama’s budget also proposes a new $4-per-acre fee on companies for not producing, an ironic levy, given the Department of Interior’s inaction on drilling permits since last year’s Deepwater Horizon oil spill disaster.

The administration is currently blocking at least 103 drilling plans for the Gulf of Mexico. Only two new deepwater drilling permits have been issued since Obama lifted the moratorium he imposed on drilling in June 2010. The two permits represent an 88 percent decrease from the historical average.

The future doesn’t look promising. According to data from the U.S. Energy Information Administration (EIA), production in the Gulf of Mexico is expected to fall by 250,000 barrels per day each year for the next two years. The Gulf of Mexico normally accounts for more than 25 percent of all U.S. production.

With oil hovering near $90 a barrel and the royalty rate at 18.75 percent, that equals $3.7 million in lost revenue each day for the federal government. Add it up over the course of a year and the federal government is losing out on $1.35 billion from oil companies.

Both of Louisiana’s senators criticized Obama’s budget for its impact on the oil and gas industry. Sen. Mary Landrieu, D-LA, said bluntly that it “doesn’t meet my approval.”

Sen. David Vitter, R-LA, meanwhile, vowed to block the confirmation of an Interior Department official over the stalled permits. He singled out the proposed fees as the latest attack on American energy.

“Louisiana’s coastal economy has been stifled, but American taxpayers have been stuck with a bill of crippling national debt in part due to lack of domestic production in the Gulf of Mexico,” Vitter said. “The permitting process is already a real mess, so instead of increasing permitting fees, just issue permits — which will bring in more money than increased fees anyway.”

The offshore industry paid $8.3 billion in royalties, $237 million in rent and $9.4 billion in lease bids in 2008, according to government data. Last year those numbers dropped to $4 billion in royalties, $245 million in rent and $979 million in lease bids.

Lease sales — which have provided significant government revenue in the past — are usually held twice per year. But this year could mark the first time since 1965 the federal government has failed to hold a lease sale in the Gulf of Mexico.

“The best way for the federal government to raise more revenue for the treasury would simply be to restart economic activity in the gulf and get folks back to work,” said Randall Luthi, president of the National Ocean Industries Association. “The administration could generate much, if not all the requested revenue, just by conducting offshore sales.”

Rob Bluey is the director of the Center for Media and Public Policy at the Heritage Foundation.

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