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December 1, 2010

Salazar unveils tightly constricted offshore leasing strategy

Secretary of the Interior Ken Salazar today announced an updated oil and gas leasing strategy for the Outer Continental Shelf (OCS). It got a very mixed review from NOIA (the National Ocean Industry Association) and was slammed by API as "an extension of the offshore drilling ban that would halt job creation and economic growth.

Effectively, the new policy takes a number of areas that had once been under consideration for offshore drilling, such as offshore Virginia, out of the picture for years to come.

"Based on lessons learned from the Deepwater Horizon oil spill, the Department has raised the bar in the drilling and production stages for equipment, safety, environmental safeguards, and oversight. In order to focus on implementing these reforms efficiently and effectively, critical agency resources will be focused on planning areas that currently have leases for potential future development," said a statement from the Department of the Interior. "As a result, the area in the Eastern Gulf of Mexico that remains under a congressional moratorium, and the Mid and South Atlantic planning areas are no longer under consideration for potential development through 2017."

The Western Gulf of Mexico, Central Gulf of Mexico, the Cook Inlet, and the Chukchi and Beaufort Seas in the Arctic will continue to be considered for potential leasing before 2017.

"As a result of the Deepwater Horizon oil spill we learned a number of lessons, most importantly that we need to proceed with caution and focus on creating a more stringent regulatory regime," said Secretary Salazar. "As that regime continues to be developed and implemented, we have revised our initial March leasing strategy to focus and expend our critical resources on areas with leases that are currently active. Our revised strategy lays out a careful, responsible path for meeting our nation's energy needs while protecting our oceans and coastal communities."

The plan announced today also confirms many policies announced in March, including environmental analysis to determine whether seismic studies should be conducted in the Mid and South Atlantic, and "rigorous scientific analysis" of the Arctic to determine if future oil and gas development could be conducted safely.

Lease sales in the Western and Central Gulf of Mexico under the 2007-2012 program are currently scheduled to begin in approximately 12 months, after the Bureau of Ocean Energy Management, Regulation, and Enforcement (BOEMRE) completes appropriate environmental analyses that take into account effects of the Deepwater Horizon oil spill.

Analyses and public meetings will also take place to help determine if additional lease sales in these areas should proceed as part of the 2012-2017 program.

In connection with today's announcement, BOEMRE Director Michael R. Bromwich stated that he is in the process of completing an agreement with the National Oceanic and Atmospheric Administration (NOAA) through which NOAA will collaborate with BOEMRE in the environmental analyses for OCS planning.

GULF OF MEXICO

Lease sales in the Western and Central Gulf of Mexico under the 2007-2012 program are currently scheduled to proceed in late 2011 or early 2012, after the Bureau of Ocean Energy Management, Regulation, and Enforcement (BOEMRE) completes appropriate environmental analyses.

Interior will also soon begin public meetings and environmental analysis to inform decisions about when and where lease sales in portions of the Gulf of Mexico currently not under congressional moratorium will be held during 2012-2017.

Most of the Eastern Gulf of Mexico planning remains under a Congressionally-mandated drilling moratorium and is not proposed for leasing in either the 2007-2012 program or the 2012-2017 program.

ALASKA

Offshore drilling in Alaska is under careful review and consideration by the Department of the Interior and BOEMRE. These efforts include scientific and environmental studies, public meetings, and additional analysis of oil spill response capabilities in the Arctic.

BOEMRE will soon begin to hold public meetings in Alaska to gather important public input and information for an environmental impact statement that will help inform Secretary Salazar's decision on whether and where to schedule Alaska lease sales under the 2012-2017 program. The public meetings will cover the Beaufort, Chukchi, and Cook Inlet planning areas.

Decisions about the 2012-2017 program will be informed by an ongoing United States Geological Survey (USGS) assessment of resources, risks, and environmental sensitivities in Arctic areas, and input from other federal agencies, including the National Oceanographic and Atmospheric Administration (NOAA).

Though no further lease sales in the Chukchi and Beaufort Seas will be held under the 2007-2012 program, BOEMRE will continue to honor existing leases in the Arctic. Currently, one application to drill (APD) in the Arctic is pending before BOEMRE. The APD, submitted by Shell, proposes to drill one exploratory well in the Beaufort Sea in the summer of 2011. BOEMRE is processing that permit request. The Bureau is preparing additional environmental analysis of the area in light of Shell's permit application. BOEMRE is working closely with other federal agencies that also must approve aspects of the proposed drilling activity, including NOAA and the Environmental Protection Agency.

If Shell's proposed drilling operation is approved, BOEMRE would have safety personnel on site throughout the drilling operation to monitor the operation and hold them accountable for compliance with BOEMRE's drilling safety and environmental regulations.

MID AND SOUTH ATLANTIC

Because the potential oil and gas resources in the Mid and South Atlantic are currently not well-known, Interior will move forward with an environmental analysis for potential seismic studies in the Mid and South Atlantic OCS to support conventional and renewable energy planning. No lease sales will be scheduled in the Atlantic in the 2007-2012 program or in the 2012-2017 program.

National Ocean Industries Association (NOIA) President Randall Luthi today issued the following statement in response to Interior Secretary Ken Salazar's announcement on offshore leasing:

"We are both relieved and disappointed by today's announcement.

"On one hand, we've been pressing Secretary Salazar to move on the 2012-2017 offshore leasing plan. Time is simply running out to get the necessary planning work accomplished. The announcement is a relief in that it shows forward movement toward future offshore lease sales. This is important, since energy production from the OCS accounts for about 27 percent of the oil and about 14 percent of the natural gas produced in this country.

"Without question, we are disappointed that scheduled 2011 lease sales will be delayed or possibly cancelled and that new areas will not be considered, particularly offshore Virginia, where bi-partisan interest and support exists among the Governor, both U.S. Senators, and a majority of the Congressional delegation and in the Eastern Gulf where there is great promise for deepwater resources. Safety measures currently being finalized by industry will be in place in the next weeks and months, and to essentially put in place a moratorium for 7 more years in the eastern GOM and other offshore areas, goes too far.

"The delay of at least two years of scheduled lease sales shows a lack of understanding of oil and gas production. A lease sale is only one step in the process and doesn't necessarily mean production will occur. Likewise the argument that there are 29 million acres available for development shows a lack of understanding that oil and gas reserves are not located everywhere nor uniformly located under all 29 million acres.

"Limiting the areas for the EIS scoping process automatically removes them from potential development until after 2017. Today's decision, coupled with the slow permit approval in the Gulf of Mexico, will cripple our Nation's ability to produce home grown energy and high quality jobs for the next generation. It is estimated that energy exploration and production offshore Virginia alone, for example, would create thousands of new, well-paying jobs and generate millions of dollars in revenue.

"Getting the time-tested planning process moving again is a good step in the right direction because lease sales are as important to future energy security for the nation as restarting permitting on shallow-water and deepwater wells.

"What would be more valuable to the nation's economic and energy future would be the recognition that valuable energy resources lie in those areas that have been kept off-limits to even exploration for decades, and will now apparently continue to be locked away."

American Petroleum Institute President and CEO Jack Gerard warned that the administration's decision today could result in the loss of tens of thousands of American jobs, billions less in government revenues and an increasing dependence on foreign energy sources:

"As our country looks for ways out of the hole of lackluster economic growth and job creation, today's decision shows that this administration would rather keep digging than take the ladder to increased economic prosperity offered by developing our nation's domestic energy resources.

"The oil and natural gas industry is a reliable vehicle for growing the economy and creating good-paying jobs. This decision shuts the door on new development off our nation's coasts and effectively ensures that new American jobs will not be realized. It will stifle investment, deny billions in revenue for critical government services and increase our dependence on foreign energy sources.

"The oil and natural gas industry is committed to safe and environmentally responsible operations, and both the industry and regulators have added new safeguards to ensure such operations.This reversal on new lease sales off America's coasts comes on top of a de facto moratorium, which has all but stopped new drilling in the Gulf of Mexico."


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