|
Lifting the ban on U.S. offshore drilling Legislation aimed at lowering natural gas prices would allow governors to open offshore areas under federal drilling moratorium Petroleum News
Two U.S. senators introduced federal legislation April 6 that would take “bold and aggressive steps” to ease runaway natural gas prices that are weakening the competitiveness of U.S. industry. Among other things, the proposed Natural Gas Price Protection Act would allow state governors to open offshore waters that were closed to oil and gas drilling by federal moratoriums, including portions of the gas-rich Lease 181 in the eastern Gulf of Mexico. The states would also be able to collect royalties on any gas produced from federal leases.
The legislation focuses on natural gas, which according to sponsors Sen. Lamar Alexander, R-Tenn., and Sen. Tim Johnson, D-S.D, isn’t adequately addressed in the current energy bill being considered by Congress.
“This legislation is an attempt to be more aggressive on all three areas impacting natural gas prices — energy efficiency and fuel diversity, natural gas supply and improved energy infrastructure,” Alexander was quoted in press reports from a briefing on the bill.
“Part of the solution has to be opening more access,” whether it’s off the coast of California or the Carolinas, said Duane Radtke, head of the natural gas production unit at Virginia-based Dominion Resources. Amends Alaska gas line act The 210 page legislation also amends the Alaska Natural Gas Pipeline Act by requiring a report every 180 days after the gas price protection act passes describing the progress made in licensing and constructing a gas line from the North Slope and any issues impeding its progress.
The report would be due every 180 days until eight days after the Alaska gas pipeline begins operation.
The legislation also calls for:
• promotion of natural gas production from gas hydrate resources on the outer continental shelf and federal land in Alaska by providing royalty incentives for the production.
• deployment of six coal gasification plants by 2013;
• tax incentives for aggressive investment in solar power generation;
• streamlining the permitting process for liquified natural gas terminals and giving the Federal Energy Regulatory Commission the exclusive authority for siting and regulating LNG terminals.
The act would require that FERC grant or deny a terminal or pipeline application within one year. It also clarifies the permitting process for pipelines and natural gas storage facilities.
Several industry representatives at the press briefing praised the bill, saying their companies had been hard hit by high gas prices.
“Natural gas in the U.S. is 10 times as costly as some other regions and is the most costly in the world,” said James Ray, executive vice president of Eastman Chemical Co.’s Texas division. He said his company was paying four times more for its daily supply of natural gas than it was in 1997.
Bob Hardy, plant manager at E.I. DuPont de Nemours & Co.’s New Johnsonville, Tenn., plant, said his company was facing some “real competitive disadvantages” from high U.S. natural gas prices.
“We have offshore competitors who can produce some of the same products we make here in Tennessee, ship them to the U.S. and deliver them to a customer’s loading docks for less than what it costs us to produce them here,” Hardy was quoted in a Dow Jones report on the legislation.
Natural gas in the United States costs around $7 per million British thermal units while it costs $4.50/MMBtu in China and $3.10/MMBtu in India, Dow Jones reported. Lease 181 in eastern Gulf key to success of bill Key to the success of the legislation is the development of the gas-rich Lease 181 in the eastern Gulf of Mexico. Alexander was quoted in press reports as saying revenue from the gas sales would nearly cover the estimated $6 billion costs of his legislation over five or six years.
Alabama permits drilling off its coast, but Florida does not. The proposed legislation instructs the Department of the Interior to draw the state boundary between Alabama and Florida regarding Lease 181 and portions of the lease that aren’t in Florida and are greater than 20 miles off the coast of Alabama and Florida would be leased to drillers before the end of 2007.
Alexander said if Lease 181 was fully developed, it could represent a fifth of the gas production of the entire Gulf of Mexico.
“It is the quickest, easiest place we could get more gas in this country,” Alexander said, noting that gas from Lease 181 could be brought to market via existing pipelines.
The legislation would empower the Department of Interior to issue gas-only drilling leases, which Alexander says would be more acceptable to environmentalists than oil and gas leases. Ninety percent of coastal acreage Roughly 90 percent of America’s coastal acreage is federally protected. Congress enacted the first moratorium on new offshore leases in 1981, expanding its reach on several occasions and renewing it every year since. There is a separate ban put in place by President George H.W. Bush in 1990 and extended by President Bill Clinton in 1998; it expires in 2012.
An estimated 16 billion barrels of oil and 78 trillion cubic feet of natural gas lie in offshore areas currently off-limits, according to government and industry statistics.
Charles Davidson, chairman and chief executive of Noble Energy, a Houston-based producer of oil and natural gas, said the industry is struggling to keep domestic production from declining any faster and that expanded offshore access will help, but not fix, the problem.
“Clearly, there are areas of the country where they don’t want to see oil and gas development offshore,” Davidson said. “It’s up to policy-makers to look at what’s the appropriate balance.”
—The Associated Press contributed to this report
| 