New alliances, new opportunities

On its face, the formulation of energy policy is a complex undertaking. Decision-makers must consider a world of ever-rising demand and increasing international competition for supply against requirements to develop new and renewable sources and the infrastructure for delivering them and answer calls for improving environmental sensitivity and enhancing conservation efforts. Navigating these often conflicting goals can seem like a massive tightrope act.

Beneath this complexity, however, one core issue remains straightforward. Success over the next decade, at least, hinges on increasing supplies of traditional energy sources such as oil and natural gas. If we are going to get serious about energy policy, therefore, we must address the biggest immediate obstacle to increasing supply: limitations on access.

Real progress toward a new access strategy is possible this year. 2006 is the moment for action.

The issues are not new, but they are being debated differently this year. New voices are being added to the mix, moving the discussion beyond one that simply pits energy companies against environmentalists. NOIA is representing the offshore industry in reaching out to state-level leaders, engaging them in the formulation of a number of key energy policy programs that directly affect the economies of their states and the cost-of-living for their citizens.

Energizing state leaders

In January, NOIA launched a two-prong strategy to improve its grassroots advocacy efforts. The first part of the campaign is to inform state houses throughout the nation on the importance of providing access to the Outer Continental Shelf for exploration and development of the nation’s valuable offshore resources.

NOIA has worked to build coalitions with various end-user groups in numerous states throughout the nation. In the Midwest states, NOIA is working with the Agriculture Energy Alliance -- a broad based coalition of more than 100 farm organizations and agribusinesses and the American Chemistry Council’s Midwest office, to reach legislators and policy makers. NOIA is also working with state farm bureaus and state manufacturing association along the Atlantic seaboard and out West. In all these states, coalition members are working to either pass joint resolutions or produce leadership letters urging development of offshore energy resources to revoke the Administrative withdrawal and Congressional moratoriums on offshore energy development. Upon passage of these state resolutions or leadership letters, copies would then be sent to the members of the state’s congressional delegation and the President.

We seem to be witnessing a groundswell of public opinion and a push for greater OCS access from the state and local levels, which will in turn bring greater pressure to bear on federal lawmakers in Washington.

Consumer groups

Also notable is the growing involvement of trade and consumer groups such as the American Gas Association, the Industrial Energy Consumers of America, the National Association of Manufacturers, the Agriculture Energy Alliance and the American Iron and Steel Institute. These energy end-users are changing the political calculus of the access question by offering powerful testimony of the negative economic consequences of tight supply and rising prices, as well as positive local economic development impact that often accompanies offshore development.

Perhaps no issue is of greater importance to the offshore industry than the creation of the next 5-Year Outer Continental Shelf (OCS) Leasing Plan, and it is vital to keep state leaders and consumer groups actively engaged throughout its formulation.

The 5-Year Plan determines where and when companies can lease parcels of ocean lands on which to explore for and produce oil and natural gas. Since areas included in the plan are considered for leasing (but need not be leased), and areas not included in the plan may not be leased at all, the development of the 5-Year Plan has implications for both moratoria and non-moratoria areas alike.

The current 5-Year Plan is one of the smallest, most limited ever issued. Our industry must be a vocal proponent of ensuring that the next 5-Year Plan builds in the appropriate amount of flexibility to cope with energy demand spikes and other uncertainties by expanding our access to offshore hydrocarbons.

The publication of the scoping notice last August indicated the start of the planning process and was followed by a 45-day comment period, after which MMS compiled a more complete draft proposed leasing program. This was followed by a 60-day comment period that ended on April 11.

The Draft Proposed Program has some encouraging components: On Feb. 8, the Minerals Management Service (MMS) issued its highly-anticipated draft offshore oil and gas leasing plan for 2007-2012, marking the beginning of a public comment period that will run through April 11. Comments will be reviewed for possible inclusion in a revised version, which will be issued for further public input.

The Draft Proposed Plan includes several notable departures from past practices that begin to address the limitations on access to the oil and gas resources on the nation’s Outer Continental Shelf.

First among these new approaches to access is the language that incorporates the possibility of leasing off the coast of Virginia from 2007. The Virginia coast is currently off limits for oil and gas exploration - like 85% of the waters around the lower 48 states - as a result of presidential and congressional moratoria.

In addition, the Draft Proposed Plan attempts to deal with the controversial issue of Lease Sale 181 acreage in the Eastern Gulf of Mexico by including areas of the “bulge” but neglecting to include any acreage within 100 mi of the Florida coast. This removes from consideration the “stovepipe” portion of the 181 area, a tract of land known to be rich with natural gas deposits.

As part of this effort to open more of the acreage in the 181 area, the MMS is proposing to transfer part of the “Sale 181” area in the Gulf of Mexico from its eastern planning area to its central planning area. The Sale 181 area refers to a small portion of the Eastern Gulf of Mexico Planning area to the south of the Alabama- Florida border that was opened for leasing in 2001 with follow-up sales for the same area in 2003 and 2005.

Also, the draft for 2007-2012 includes provisions for oil and gas leasing in a previously undeveloped area in the North Aleutian Basin off the coast of Alaska. The MMS said that reflects a request by the State of Alaska for further analysis of that area’s energy potential.

Finally, the Draft Proposed Plan breaks new ground by offering for consideration and further study an area in the Eastern Gulf, south of the original 181 sale area, out to the edge of the Exclusive Economic Zone. For this area, the offshore Virginia acreage, and the North Aleutian Basin, MMS has scheduled proposed lease sale dates. Including these areas currently under administrative withdrawal and/or legislative moratoria is encouraging. It could pave the way to conduct lease sales if the administrative withdrawals/legislative moratoria are lifted before 2012. NOIA had strongly urged the MMS to include such areas under withdrawal and moratoria.

By working with consumer groups and state leaders, the offshore industry is taking the greatest possible advantage to ensure that our input is incorporated into the next 5-Year Plan from the outset. This is the time for us to be proactive, making our case not only in the public comment process, but in the court of public opinion as well.

2006 sets the stage

Development of the next 5-Year Plan has enormous implications for access to oil and gas resources. Over the coming year, the offshore industry has an opportunity - indeed, a responsibility - to participate in the crafting of the new Plan. In addition, the offshore industry must continue to develop new coalitions of interest groups and local leadership. Working closely with these new allies is already changing the nature of the debate.

If we are successful, 2006 could very well turn out to be the year in which we see real change in the limitations on access to the mineral resources of the offshore.