No sale on new offshore leases

Oil and gas producers, and the companies that support them offshore, were dealt another economic blow by the Obama Administration last Wednesday when U.S. Interior Secretary Ken Salazar placed a ban on new lease sales for drilling operations off the east coast and in the eastern part of the Gulf of Mexico for at least one year and as many as seven.

During an afternoon conference call, Salazar, along with Bureau of Ocean Energy Management, Regulation and Enforcement Director Michael Bromwich announced that in response to the April 20 BP Deepwater Horizon explosion and oil spill they felt it best to focus oil and gas production on existing leases and not expand to new areas at this time.

This action marked a reversal on previous policies set by federal agencies and for now placed on hold, scheduled lease sales in March 2011 and August 2011 for areas in the Gulf of Mexico.

When asked about those sales and the impact not conducting them would have on the central and western parts of the Gulf, Salazar said that the March 2011 lease sales would be pushed forward, but offered no timeframe as to when they might take place. He would only say that lease sales in the Gulf might resume in late 2011 or early 2012. Bromwich said that they would not be constrained by any deadlines.

The reason offered for this action by Salazar and Bromwich, after they came under fire last month by oil industry professionals and political leaders when they made a stop in Houma only to deliver what was reported as vague statements and no insight as to when full production might resume, was that they needed more time to conduct scientific research.

Salazar noted that for the eastern Gulf there remains a congressional drilling ban that would have to be lifted before any lease sales could take place. He did not comment on what had been termed a de facto moratorium taking place off the coast of Louisiana and neighboring states.

“It is also important to remember that there are already significant areas of the central and western Gulf of Mexico that have been leased to companies but which are not currently active,” the interior secretary said. “In fact, companies are moving ahead with oil and gas development on less than one third of the leases that they currently hold in the Gulf.”

Salazar said that the federal government wants to continue environmental and seismic research in the Gulf of Mexico and in the Atlantic Ocean during the duration.

Neither Salazar nor Bromwich offered details of their research plans although Bromwich had claimed that their announcement would offer clarity regarding their efforts for what he called, “responsible development of energy and mineral resources on the outer continental shelf.”

“As you know, we continue to implement important regulatory reform initiatives that set high standards for offshore energy development,” Bromwich said. “I want to emphasize that these standards are fully consistent with continued offshore oil and gas exploration development and production, but we will continue to emphasize the role of science and strong environmental analysis as we move forward.”

Independent Petroleum Association of America Chairman Bruce Vincent said that the announcement made by Salazar and Bromwich demonstrated a set agenda that is hostile toward domestic energy production companies.

“If there is any question as to whether or not this Administration is more interested in picking winners and losers in the energy market and waging an unbridled war on America’s oil and natural gas producers than creating jobs and putting our nation on a path toward energy security, they were put to rest with today’s misguided announcement that will keep even more taxpayer-owned energy resources further out of reach and under Washington’s lock-and-key,” Vincent said.

Vincent, who is also president and CEO of Houston-based Swift Energy Co., suggested that Salazar and Bromwich’s announcement only added to the frustration felt by oil producers, suppliers and industries that will be impacted both directly and indirectly because of another stall in offshore drilling.

“More uncertainty, less access to American oil and natural gas, and even more bureaucratic red tape is not a common sense energy plan,” Vincent said. “It is, however, an attack on the American economy and our nation’s energy security.”

Salazar and Bromwich said that the resumption of oil lease sales would only take place after BOEMRE had completed its environmental analysis. No timeline was given.