US: Offshore drilling ban expires
IT IS NOT what Congress did, but what it did not do in late September that could significantly effect the country's energy supplies. Lawmakers opted not to attach a provision to a federal temporary spending bill that would have extended the 25-year-old ban on drilling in federal waters off the Atlantic and Pacific coasts, allowing the prohibition to lapse at midnight on 30 September. A different statute, which bars drilling within 125 miles off Florida's Gulf Coast until 2022, remains in force.
Congressional inaction also led to the expiration of a two-year-old ban on leasing public lands in the western US for development of oil-shale reserves. President George Bush had threatened to veto the spending bill – which could have shut down the government – if it had contained restrictions on oil and gas development.
Offshore oil and gas activity in the US, which accounts for production of more than 25% of the country's natural gas and more than 30% of its oil, has been concentrated in the western and central Gulf of Mexico and off the Alaskan coast. But the rest of the outer continental shelf has been off-limits for exploration since Congress first enacted the moratorium in 1982, and legislators have re-authorised the ban in federal spending bills each year.
Executive orders issued by the first President George Bush and then Bill Clinton also directed the US Department of the Interior not to conduct leasing or preleasing activity in areas covered by the ban, until 2012. The existing administration withdrew the order in mid-July and pressed Congress to lift its ban.
The US Minerals Management Service (MMS) estimates that the offshore sectors that had been covered by the ban contain 18bn barrels of recoverable oil and 76 trillion cubic feet of gas, about half of which lies off the California coast; but these figures are considered conservative because they are based on decades-old data.
Repealing the prohibition is just the first of many time-consuming steps that must take place before oil or gas production from these areas can begin. Next, the MMS must indicate specific tracts to be auctioned in its five-year leasing plans; typically, completion of the environmental-impact studies required to develop a leasing programme takes about two years and is followed by multiple rounds of public comment and Congressional approval.
Although the present five-year plan, which includes 21 lease sales, will not expire until 2012, in July, interior secretary Dirk Kempthorne directed the MMS to take initial steps towards developing a new five-year programme that encompasses some areas included in the ban. Says MMS director Randall Luthi: "We are, in effect, getting a two-year jump-start on that process, but it is still a multi-step and multi-year effort to develop the programme."
If implemented, the new programme would replace the portion of the existing programme remaining after the new plan's effective date. As a result, some tracts in previously prohibited areas could be available for lease as early as 2011. But even after leases are awarded, the Interior Department must review and approve the leaseholders' exploration and drilling plans. Including the time required for field development, another seven to 10 years could pass before commercial production from the leases would take place.
According to the Interior Department, the oil-shale plays, primarily under about 2m acres in Colorado, Utah and Wyoming, contain an estimated 0.8 trillion barrels of recoverable oil – more than the proved reserves of Saudi Arabia. The MMS developed draft regulations for a commercial oil-shale programme in July and, with the drilling ban no longer in effect, is expected to issue final regulations by the end of the year. However, no technology exists to make large-scale oil production from shale commercially viable.
The expiration of the drilling prohibition lays the foundation for exploiting high-potential areas offshore and in the country's west. But because of the long lead times and technical challenges involved, the measure is unlikely to have a significant near-term effect on domestic oil or gas supplies, or prices at the pump. Furthermore, the victory for drilling advocates could be short-lived if governments in states that oppose offshore drilling, such as California, decide to fight efforts to operate off their coasts, or if Congress reverses its course and reinstates all or part of the ban next year.