US plan to expand offshore drilling to take final shape

The Trump administration in January is expected to release its proposed offshore oil and natural gas leasing program for 2019 through 2024, an effort aimed at boosting drilling in federal waters from the south Atlantic to the Arctic. But opposition from state lawmakers and environmental groups, limited commercial interest, and caution from within the administration, may focus the effort entirely on the Gulf of Mexico, particularly expanding drilling into portions of the eastern Gulf currently blocked by Congress. In addition, Interior Secretary Ryan Zinke’s planned departure from the administration by the end of this year could complicate the effort’s path forward. Zinke briefed President Trump on the offshore plan during a December 17 White House meeting, sources said. Interior Department officials have offered little insight into their plans for the leasing program next year and could keep all 47 planned lease sales in the proposed program and then pare it down before it is finalized late next year. Here’s a look at the areas where Interior has, so far, said they plan to offer drilling rights and what the agency may do in 2019. GULF OF MEXICO Despite the Trump administration’s proposal to offer leases in nearly all federal waters, US offshore operators are mainly focused on the Gulf, particularly expanding drilling into areas of the eastern Gulf, currently under a congressional drilling moratorium which runs to 2022. US House and Senate members from Gulf-bordering states had been negotiating a plan which would extend the moratorium for much of the eastern Gulf beyond 2022, while opening some areas, particularly in untapped portions of the Norphlet Field, to drilling before 2022. Congressional aides said those talks fell apart as Democrats prepared to take over the House in January. Under the Interior’s draft proposal, there are a total of 12 Gulf of Mexico lease sales planned through 2024, including two every year from 2020 through 2022 and three in both 2023 and 2024. The Trump administration is expected to retain all of these sales in their proposed plan expected next month, according to industry lobbyists. According to Interior estimates, the eastern Gulf has between 2.55 billion and 3.19 billion barrels of unleased undiscovered economically recoverable oil under price scenarios from $40/b to $160/b. By comparison, the Central Gulf has between 17.2 billion and 21.9 billion barrels and the Western Gulf has between 6.99 billion and 9.1 billion barrels under those same price scenarios. OFFSHORE FLORIDA In early January, just days after his agency unveiled the draft offshore lease program, Zinke announced he was “removing Florida from consideration for any new oil and gas platforms.” The announcement was criticized as a political favor for Florida Republican Governor Rick Scott, who has since been elected to the US Senate in November and for being confusingly vague. Proponents of offshore drilling have speculated that Zinke’s reference to “oil and gas platforms” indicate drilling may still take place from floating production storage and offloading units. In addition, it remains unclear which waters Zinke may define as offshore Florida. In November, Florida voters approved an amendment to prohibit drilling, either for exploration or extraction, for oil and natural gas in state waters, which includes submerged lands 10.36 statutory miles off Florida’s west coast and 3 nautical miles off the east coast. In addition to the 12 Gulf of Mexico sales, which could include eastern Gulf waters, the draft leasing program includes three sales in the South Atlantic and one in the Straits of Florida. Lobbyists claim that the Straits of Florida and South Atlantic sales are likely to be removed when the proposed plan is unveiled next month. OFFSHORE ALASKA In its draft proposal, the Interior scheduled 19 sales, roughly 40% of all sales over a five-year period, to take place in offshore Alaska. Alaska’s congressional delegation, three Republicans who are all vocally in support of expanding offshore drilling, believe the draft proposal goes too far, however. Alaska Senators Lisa Murkowski and Dan Sullivan and Representative Don Young have pressed Zinke to keep three sales planned for the Beaufort, three for the Chukchi and two for Cook Inlet, but to scrap 11 additional sales in federal waters offshore Alaska, including the Hope Basin, Kodiak and Gulf of Alaska. Last month, the Interior said it was preparing an environmental impact statement for a 2019 Beaufort lease sale that would open as much as 65 million acres of federal Arctic waters to oil and natural gas drilling. ATLANTIC OCEAN The Interior has proposed holding nine lease sales for drilling rights in the Atlantic, including three in the South Atlantic, one in the Straits of Florida, two in the North Atlantic and three in the Mid-Atlantic. Industry sources claim they only expect, at most, the three Mid-Atlantic sales to remain by the time the plan is finalized. Late last month, the National Oceanic and Atmospheric Administration Fisheries issued final authorizations for five companies to conduct geophysical surveys in the Atlantic Ocean. The Interior is expected to issue permits for that seismic testing, which will survey oil and gas reserves in Atlantic waters from Delaware to northern Florida. The Atlantic has not been surveyed in over three decades. Atlantic drilling will be opposed by every East Coast governor when Maine Governor-elect Janet Mills, a Democrat, takes office next month. Outgoing Maine Governor Paul LePage, a Republican, was the lone East Coast governor in support of Atlantic drilling. Environmental groups have sued NOAA in an attempt to block Atlantic seismic testing. PACIFIC OCEAN The Interior’s plan includes seven lease sales along the West Coast, including six off California’s coast. There are currently 38 active leases offshore California, which produce about 16,000 b/d. But commercial interest in federal waters offshore California is limited and non-existent along most of the West Coast. Due to opposition from West Coast state and federal lawmakers to Pacific drilling, sources said they expect the Pacific sales will likely be removed.

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