EASTERN US GULF OF MEXICO Destin Dome may yet revive Eastern Gulf of Mexico

The Eastern Gulf of Mexico Planning Area, part of the Outer Continental Shelf, extends along the northeastern coast of the Gulf for about 700 miles, from Baldwin County, Alabama to the tip of the Florida Keys. State leases, from shore to 10 miles out, are held by Coastal Petroleum.

The Destin Dome dry gas fields in the US Gulf of Mexico have lain untapped for more than 25 years, thanks to Florida legislation and federal cooperation. But, Chevron USA is determined to develop what could be the largest known gas fields in the US Gulf.

The company's efforts in Destin Dome have brought renewed focus on this least developed area of the Gulf of Mexico. As lease sales continue and companies buy up blocks farther offshore, focus will inevitably turn to this area where environmentalism has put a halt to most activity.

As a state, Florida does not like offshore hydrocarbon development. Laws currently in place reflect the populist attitude that any development is an environmental hazard the state is not willing to risk. No one knows this better than Coastal Petroleum. Coastal's predecessor, Arnold Exploration, originally secured mining rights in the 1950s to most offshore Florida state lands.

Two leases covered coastal water 10 miles out from Apalachacola to six miles south of Naples. Caretaker to these massive holdings, Coastal has yet to develop them. The company has given up all its rights for the inner three miles of the lease, and given up drilling, but not mineral rights, to the mid-three miles, as well as drilling rights to the outer three miles of the lease.

This is Coastal's only property, and its legal maneuverings to drill on the concession has been a full-time job for decades.

In 1990, the Florida state legislature passed Chapter 90-72, limiting offshore oil drilling, which halted Coastal Petroleum's plans to drill a well off Apalachacola. Coastal sued. The legal fight eventually made it to the First District Court of Appeals when Florida asked Coastal to post bonds as security in case of a spill or disaster.

Coastal's options

Coastal recently got word that the state cannot require a $500 million bond or a $1.92 billion bond for the project, but it did request that Coastal give notice of intention for a permit. Because this would open up a round of public hearings and cause further delays, Coastal appealed. A brief-to-show-cause is under advisement. If a petition is granted by the courts, then the state will have to issue a permit to drill.

For Philip Ware, Coastal Petroleum president, this is the light at the end of the tunnel. If the permit is granted, the company would only need a US Corps of Engineers permit to begin an exploration well about 10 miles south of Apalachacola and 10 miles offshore.

Pat Kincade, attorney for the Florida Department of Environmental Protection, said the state has gone through all the procedures for issuing a permit, but the question is, "Will the public have a chance to challenge the permit?"

This permit is for one exploratory well only. For further exploration, Coastal would have to go through the same process, which would take at least 90 days, or as long as a year if the well were in an environmentally sensitive area, Kincade said. To sub-lease any of these lands, Coastal would have to have the approval of the governor and board of trustees who represent the land owner, which is the state.

Federal OCS waters

Outside the 10-mile limit that designates state waters around Florida, the atmosphere is not much more favorable. The federal government has agreed not to sell any leases within 100 miles of the state waters. All leases that have previously been made in these waters eventually reverted back to the federal government. The Eastern Gulf of Mexico planning area, part of the outer continental shelf, extends along the northeastern coast of the Gulf for about 700 miles, from Baldwin County, Alabama to the tip of the Florida Keys.

Outside this 100-mile "dead zone", there are currently 156 active leases. All of these are North of Latitude 26. Forty-seven exploration wells have been drilled on these leases. Eight of these wells made discoveries, but only one development plan has been filed for activities offshore Alabama.

In January 1989, Destin Dome Block 56 Unit 1 was approved for exploration, with Conoco as operator. This lease consisted of six blocks and was later increased to 11 blocks with Chevron USA as the successor unit operator.

The 11 Blocks in the unit are Destin Dome Block 12, 13, 14, 15, 16, 54, 55, 56, 57, 99, and 100. Chevron drilled three exploratory wells. Two of these were drilled in 1987 on Block 56 and showed significant quantities of natural gas in the Jurassic Norphlet section of the lease, according to MMS. This gas is part of the Norphlet formation currently being produced in Mobile Bay.

In May 1995, Chevron filed a draft supplemental plan of exploration to drill a third well on the adjacent Destin Dome Block 57, located about 29 miles south of Pensacola, Florida. The plan was to define the formation further. This well struck free gas, which led to the filing of a development plan. Because this is the first development plan in the EGMPA, the MMS said it will require an environmental impact study for approval and opened a public information office in Pensacola.

Under the new five-year plan, released last November by the US Secretary of the Interior, only one of 16 scheduled lease sales is planned for the EGMPA. The proposed sale area is a small portion of the Eastern Gulf Planning Area and will be available for lease in 2001.

By that time, Chevron USA should have a clear idea of what it has tapped into.