The National Ocean Industries Association staff reports to the membership on U.S. regulatory and legislative issues that impact offshore petroleum. A brief summary of the key issues, NOIA's outlook on the issues, and actions taken and planned are presented below.
OCS IMPACT ASSISTANCE
Issue: Members of Congress from coastal producing states have proposed legislation that would share, under a new formula, federal revenues generated from oil and gas development on the Outer Continental Shelf.
Background: Since the inception of the federal offshore oil and gas leasing program, states have sought a greater share of the economic benefits resulting from OCS activity. The nation's oil and gas industry historically has supported the concept of providing impact assistance to coastal states and communities with oil and natural gas exploration and development activities occurring off their shores. NOIA has endorsed the concept of OCS impact assistance through two separate resolutions of its Board of Directors.
On February 10, 1999, House Resources Committee Chairman Don Young (R-Alaska) introduced H.R. 701, the Conservation and Reinvestment Act. Joining Young in introducing the bill was a bipartisan group of 31 representatives. The bill would collect $2.8 billion in OCS revenues, give LWCF full $900 million funding, direct $1 billion toward coastal states restoration, and earmark millions more for state wildlife, urban parts and species recovery programs.
A provision is included in H.R. 701 to ensure that areas held in moratoria are precluded from both revenue inflows and for the computation in determining the state's allocation. Young succeeded in moving H.R. 701 through committee and now has 305 co-sponsors, making its passage seem very likely when the bill moves to the House floor.
In the Senate, progress on an impact assistance bill has not been as significant. To help expedite the process, Sen. Mary Landrieu (D-La.) introduced a measure on March 1, which is reflective of H.R. 701. Landrieu's first impact assistance bill, S. 25 - Reinvestment and Environmental Restoration Act of 1999 - is lingering in the Senate Energy and Natural Resources Committee. Committee Chairman Frank Murkowski (R-Alaska), who is primary cosponsor of S. 25, has said the bill would have no trouble passing the panel, but he wants to settle the concerns of western Republicans averse to more federal land acquisition.
Action: NOIA will work with both House and Senate members and staff on each proposal. The association will ensure that no additional financial burdens are placed on industry and support, as appropriate, coast producing states' legislators in their efforts to obtain passage of coastal impact assistant legislation.
DEEP WATER ROYALTY RELIEF
Issue: On November 2000, Section 304 of Outer Continental Shelf Deep Water Royalty Relief Act (Public Law 104-58), a provision that provides for automatic deepwater royalty suspensions for new leases, will expire.
Background: In 1995, NOIA took a leadership role in achieving passage of the Deep Water Royalty Relief Act. While the act is not solely responsible for the surge in deepwater Gulf of Mexico activity, it should certainly receive a large measure of the credit. Following the area-wide Western Gulf of Mexico lease sale in August of this year, no further lease sales will include automatic deepwater royalty suspensions due to the expiration of Section 304 of the act. The NOIA Board and membership have asked the association's Government Affairs Committee to develop a position regarding the pending expiration of that provision.
Action: The association's Government Affairs Committee has facilitated a multi-trade association effort examining the future of royalty relief policies in the Gulf of Mexico. The committee has held a series of discussions with MMS officials on the future of the royalty relief provision and discussed the agency's position regarding both a legislative reauthorization of the provision and the use of existing regulatory authorities to maintain the automatic relief for certain areas and leases in the Gulf.
MMS made it clear that the suspension volumes contained in Section 304 are, under current circumstances, too generous and that simple re-authorization of the measure would not gain administration support.
MMS also expressed the view that its authorities to provide royalty relief under the OCSLA and DWRRA were sufficient to create incentives in all appropriate cases. MMS challenged industry to look at those existing authorities and propose methods for using them that would meet industry's need for certainty, and, at the same time, the agency's desire for flexibility.
In response, the committee convened its DWRRA Working Group. The group formed several sub-teams to take a creative look at the issue and how existing statutory authorities could be used to retain the provision. Those sub-teams included ultra-deep water, process simplification, and marginal properties.
The following is an update on the activities of the various sub-teams:
- The "Ultra-Deep" Sub-team, which was tasked with examining how and what royalty policies might be available to ultra-deep areas of the Gulf, selected a water depth of 5,000 ft as the line of demarcation between deep and ultra-deep water. In making this distinction, the committee took into consideration both technology developments and needs along with development patterns. In addition, using a computer model called The Field Plan, the committee has produced data regarding the number of developments and satellite developments that would occur using varying assumptions regarding royalty rates and other factors.
- The Process Simplification Sub-team, which was charged with seeking a simpler process for applying for and obtaining royalty relief, began by undertaking an exacting review of the existing statutory. Through this process, the team determined that MMS does have all the authority needed to grant royalty relief in a variety of circumstances. The team concluded that the surest way to simplify the process is the replace the computer model currently used by MMS with one commonly used by industry when considering field development options.
- The Marginal Properties Sub-team was tasked with developing a definition for offshore marginal wells that could serve as the basis for instituting relief similar to that granted for onshore marginal wells. On January 21, 2000, NOIA met with officials from the Department of Energy's Fossil Fuel and Domestic Policy departments to determine whether DOE would be willing to lend its considerable computing and modeling resources to assist in developing a definition for offshore marginal properties. The agency agreed to meet with officials from the Energy Information Administration and several outside consultants to discuss the best possible route to meet that objective. This effort is expected to go forward in a timely fashion.
NOIA continues to explore the options available to industry and work closely with MMS policy officials and NOIA friends on Capitol Hill and within the Department of Energy.
OCEANS POLICY
Issue: Since 1998, both the House and the Senate have introduced and advanced bills calling for the establishment of a commission to conduct a comprehensive review of federal ocean and coastal activities and issue recommendations on long-range strategies for improving U.S. ocean policy.
Background: During the second session of the 105th Congress, considerable progress was made in both the House and Senate to advance ocean bills to establish an oceans commission. In response, a coalition of six energy trade associations, including NOIA, expressed strong reservations over the possible self-implementation of any commission recommendation by the administration without congressional oversight. The coalition also called for balanced representation on the commission membership, and for the commission to give equal attention to economic, technical and environmental considerations as it prepared its study of national ocean policies. The measure died during the final days of the 105th Congress when the Houses were unable to reconcile differences in the bills.
During the 106th Congress, similar legislation has once again been introduced. In May of 1999, Sen. Ernest Hollings (D-S.C.), introduced S. 959, an Oceans Act bill that is the same as that considered during the 105th Congress. In July of 1999, Rep. Sam Farr (D-Calif.) introduced H.R. 2425 with 47 cosponsors. Farr's bill follows closely with S. 959, which has drawn objections from industry.
In February of this year, a Congressional Oceans Caucus was formed to create a voice within Congress on ocean issues and serve as the focal point for increasing awareness in the House of Representatives on issues of ocean policy. Caucus co-chairs are Reps. Tom Allen (D-Maine), Sam Farr (D-Calif.), Jim Greenwood (R-Pa.) and Curt Weldon (R-Pa.).
Action: Given the leadership role being taken by Farr and statements he has made indicating he will use the caucus to advance his Oceans Act legislation, NOIA is watching the initial activities of the caucus closely. In addition, NOIA continues to monitor congressional interest and action in advancing bills calling for the creating of an ocean commission. Given the recent campaign pledges over OCS activities, the presidential extension of the OCS moratoria and continued congressional and administrative missteps on offshore energy policies, NOIA has expressed serious reservations over any such ocean commission proposals.
EASTERN GULF OF MEXICO
Issue: For the first time since 1988, the Minerals Management Service will hold a lease sale in the Eastern Gulf of Mexico. Sale 181, which is tentatively schedule for December 2001, is the only area in the Eastern Gulf available for leasing in the 1997-2002 OCS Oil and Gas Leasing Program. Industry views Sale 181 as the first step in expanding access to domestic offshore resources.
Background: On January 25, 1999, the MMS announced a call for interest and information on Sale 181, which includes 1,033 blocks on 5.9 million acres. All blocks are 100 miles or more from the Florida coast. To date, MMS has not received any complaints or objections to Sale 181 from Florida.
Action: In May of last year, an inter-association group was formed to ensure that Sale 181 occurs in a timely basis, without tract deletions, and with favorable terms and stipulations. A great deal of time was spent last year working with MMS Gulf of Mexico Regional Office as it negotiated with the Air Force over a proposed EGOM missile testing range. These discussions will continue through the early part of 2000.
ESSENTIAL FISHERY HABITAT
Issue: Amendments to the Magnuson-Stevens Fishery Conservation and Management Act, signed into law October 1996, requires the National Marine Fisheries Service (NMFS) to identify essential fish habitat and minimize the "adverse effects" on fish habitat from both fishing and non-fishing activities, including oil and gas operations. The agency approved a plan in 1999 identifying the entire Gulf of Mexico - all coastal, marsh and marine areas - as essential habitat.
Included within the plan were mitigation recommendations that were inappropriately applied to onshore and offshore oil and gas operations. While the EFH issue has yet to result in noticeable impacts on offshore operations, impacts are evident in wetlands and other onshore areas with oil and gas operations.
Action: NOIA along with the Louisiana Mid-Continent Oil and Gas Association, API, and Bill Berry of Burlington Resources, held a series of meetings last year with congressional staff and administration officials to highlight the current and future problems facing industry from the EFH regulations. The industry message during each meeting was the same; the EFH provisions as implemented have gone well beyond the scope intended by Congress, resulting in permit delays and creating a powerful new tool for adversely affecting coastal development.
On March 9, Berry testified before the House Resources Subcommittee on Fisheries Conservation, Wildlife and Oceans, on behalf of NOIA and several industry trade associations, on the Magnuson-Stevens Fishery Conservation and Management Act. Berry cited industry concerns in three general areas:
- The capricious manner in which Essential Fish Habitat has been broadly defined, including the lack of sound scientific analysis
- The resulting redundant regulatory reviews, with regard to oil and gas activities, which are already among the most heavily studied and regulated of any industrial sector in the nation
- The potential for the spread of EFH consultation in permitting processes to include projects far inland of the offshore and coastal waters.
A hearing is also planned in the Senate Commerce Committee. NOIA will continue to monitor activity and advocate for sound and responsible fisheries conservation.
