A new five-year offshore leasing proposal, the first from the Obama administration, favors areas with current leases and does not include a sale off the Virginia coast, the US Department of the Interior said Tuesday.
The plan was slammed by Republicans and industry groups, which said it did not go far enough to create jobs or take advantage of US energy resources. Environmental groups said the program put sensitive Arctic resources at risk from the effects of an oil spill.
The proposed lease plan includes one sale in Alaska's Beaufort Sea and one sale in the Chukchi Sea. But those sales won't take place until 2015 and 2016, to give regulators time to evaluate the results of exploratory drilling that could begin in 2012. The delay will also give regulators time to analyze environmental and other issues, Interior said.
The proposal retains the flexibility to defer those Arctic lease sales even further, if necessary, or to increase them if exploratory drilling tentatively scheduled for 2012 by Shell in the Beaufort Sea goes well, Deputy Interior Secretary David Hayes told reporters.
Under the Outer Continental Shelf Lands Act, Interior must prepare five-year plans that include a schedule of offshore leasing as well as lease terms. The proposed 2012-2017 plan includes five lease sales in the Western Gulf of Mexico, five sales in the Central Gulf, and two sales in the Eastern Gulf in areas that are not under a congressional moratorium.
Interior Secretary Ken Salazar acknowledged that the plan was a cautious approach that emphasizes areas with existing infrastructure such as pipelines and delays Arctic development until more scientific study can be done.
But he countered criticism that the plan would not do enough to create jobs. He noted that US oil and natural gas production had increased in 2010 and, he said, the plan maximizes known areas of reserves while respecting environmental and cultural concerns.
"We don't believe that we ought to open up every single place and look under every single rock for oil and gas production," Salazar said. "We need to drill in the right places with the right protections."
The plan also includes shorter lease terms designed to encourage more rapid development and reduce the number of leases that go undeveloped. Leases will be granted for an initial seven-year term instead of the usual 10-year term. If companies show "diligence" in developing the lease, they can apply for a three-year extension, officials said. A similar scheme was adopted for a lease sale in the Gulf held in March 2010, one month before the deadly blowout of BP's Macondo well.
The plan also proposes to raise minimum bids for deepwater leases from $37.50/acre to $100/acre in large part to encourage the development of the parcels with the highest potential and discourage sales of parcels that might otherwise sit undeveloped.
Previous lease sales have "really low-balled the minimum bid," Tommy Beaudreau, the new director of the Bureau of Ocean Energy Management, said. He said raising the minimum bid would "focus investment where it's appropriate."
The proposed plan includes five annual area-wide lease sales in the Gulf's Western Planning Area and five annual lease sales in the Gulf's Central Planning Area. Also included are proposed sales in 2014 and 2016 in a small portion of the Eastern Gulf that was opened by the Gulf of Mexico Energy Security Act of 2006 (GOMESA).
"We believe there is moderate industry interest in that area and so we're proposing two lease sales in the GOMESA area," Beaudreau said.
One lease sale is tentatively set for Alaska's Beaufort Sea in 2015, with a second Alaska sale in the Chukchi Sea set for 2016. A special interest sale is proposed for Alaska's Cook Inlet in 2013 depending on industry interest.
The Alaska sales will be limited to specific areas identified by BOEM as having high potential and not in areas used heavily for fishing or areas with high environmental risk.
Missing is any sale in the mid or lower Atlantic, including a sale off the coast of Virginia, which was part of the current 2007-2012 lease plan, but was canceled in the wake of the Deepwater Horizon accident.
Salazar said the sale was not included because seismic data for the area is very old. Also, military officials expressed serious concerns about the triangle of ocean included in the Virginia Lease Sale 220. They said much of the tract was in areas where military exercises are regularly held.
"Frankly it's not going to be the panacea that Governor McDonnell and others have said it would be for Virginia," Salazar said, referring to Virginia Governor Bob McDonnell, a proponent of offshore leasing.
McDonnell noted that Obama supported exploration off Virginia before the Deepwater Horizon disaster. He urged Congress to pass legislation mandating a Virginia sale.
"This decision to exclude Virginia from the five-year offshore development plan will severely hinder Virginia's comprehensive strategy, will cost millions in potential investment, and will squander the opportunity to create thousands of jobs during a time when our economy needs our support," McDonnell said in a statement.
Republicans and industry groups called the draft plan a "missed opportunity."
"While today's decision is not unexpected, the lack of new access is deeply disappointing, and frankly bears little resemblance to the president's announcement in March of this year -- amid high energy prices -- that it had set the goal of reducing oil imports by one-third by 2025," Randall Luthi, president of the National Ocean Industries Association, said in a statement.
BOEM has scheduled 13 public hearings in December on the plan and is taking comments until January 9. A final plan will be released in June 2012.
