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President Obama Expands Offshore Oil and Gas Leasing

Beveridge & Diamond, P.C., April 2, 2010

Standing in front of the “Green Hornet” -- a Navy fighter jet expected to be the first plane to break the sound barrier on a fuel mix that is half biomass -- on March 31, 2010, President Obama proposed allowing oil and gas leasing off large portions of the Atlantic and Alaska coastlines as well as in the eastern Gulf of Mexico.  The announcement came as “part of a broader strategy that will move [the Nation] from an economy that runs on fossil fuels and foreign oil to one that relies more on homegrown fuels and clean energy.”  While the President’s proposal has already drawn criticism from environmentalists on the left and Republicans who favor even broader leasing on the right, the bottom line is that any new drilling is a long way off.

As a result of both congressional and presidential moratoria, new offshore leasing has been prohibited on the West Coast, all of the East Coast, and portions of Alaska and the Gulf of Mexico since the early 1980s.  All that changed in 2008 when President Bush lifted the presidential ban on drilling and Congress allowed its corresponding restriction to lapse.  But despite those significant steps, there have been hurdles to offshore drilling, including a 2009 DC Circuit decision striking down the environmental analysis of the 2007 - 2012 leasing program.  In light of the foregoing, observers have anxiously watched and waited since President Obama took office to see which way the energy policy winds might be blowing.   

The President’s plan calls for offshore oil and gas development on the East Coast from Delaware to central Florida as well as in portions of the eastern Gulf of Mexico more than 125 miles from Florida’s coast.  The plan also calls for four more lease sales by 2012 in the Gulf of Mexico, and sales off the Virginia coast and in the Cook Inlet in Alaska, but only if the Virginia and Alaska sales can be done in an environmentally-responsible manner and do not interfere with military activities.  Notably, the plan will not include offshore drilling from New Jersey northward in the Atlantic; off California, Oregon, and Washington; and in Alaska’s Bristol Bay, an area that environmentalists consider especially sensitive.  President Obama has also delayed planned lease sales in the Chukchi and Beaufort Seas off Alaska to allow for further environmental study.

While the President’s proposal continues the trend toward new offshore development, industry has a long road ahead before it can begin drilling.  Under federal law, a 5-year program must first be in place before lease sales can occur.  Once the 5-year program and necessary environmental reviews are complete, the Minerals Management Service, the federal agency tasked with administering offshore oil and gas leases, will hold a competitive lease sale.  Successful bidders must then comply with complex exploration and development plan approval processes, which include the opportunity for state review and participation, before beginning to drill.  From the date of lease issuance, it can take up to ten years before production begins, and not all leases yield oil or gas production.  

Reactions to the plan have been mixed.  Conservationist groups label it “a wholesale assault on the oceans,” while industry proponents offer warm, though not necessarily overwhelming, praise.  But the divide may not be as clear as it seems.  Environmentalists have praised the bar on leasing in Bristol Bay, while at least one Republican Congressman, Mike Pence, has called the move “a smokescreen,” adding that “only in Washington, D.C., can you ban more areas to oil and gas exploration than you open up, delay the date of your new leases and claim you’re going to increase production.” 

But the shades of gray seen across the political and ideological spectrums should not come as a surprise, as the President himself acknowledged trying to steer a course between staunch opposition to new offshore drilling and advocacy for opening all US waters to energy exploration.  Steering such a course and balancing this country’s energy needs and its environmental concerns has never been easy.  Only time will tell if this new approach takes flight -- just like the “Green Hornet.”   

A link to a comprehensive overview of the President’s plan can be found here.

If you would like further information or to discuss the implications of this recent activity in more detail, please contact Peter Schaumberg at 202-789-6043 or pschaumberg@bdlaw.com, Fred Wagner at 202-789-6041 or fwagner@bdlaw.com, or Bill Sinclair at 410-230-1354 or wsinclair@bdlaw.com.  

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