Menu

Despite Expiration of Drilling Ban, Offshore Oil Still Years From Flowing

The welcome sign is going out to oil and gas companies off the Atlantic and Pacific coasts.

A quarter-century ban on offshore exploration expires in this coming week, but don't expect to see a chain of drilling platforms from the beaches anytime soon.

It will take a couple of years, at least, before any oil or natural gas leases are issued, years more before any oil is found and perhaps a decade before any of it begins to flow to refineries.

And what if Congress, after completing a bill Saturday that removes the freeze, changes its mind next year and again puts some of the coastal waters off-limits?

For 26 years, Congress has issued an annual directive barring the Interior Department from issuing any leases for oil and gas drilling in federal waters on both coasts. It omitted the directive this time after public opinion swung in favor of drilling in response to $4-a-gallon gasoline this summer.

The prohibition has blocked access by energy companies to what the government estimates to be 18 billion barrels of recoverable oil and 76 trillion cubic feet of natural gas beneath the country's Outer Continental Shelf.

While the freeze ends this Wednesday, the start of the new budget year, oil and gas companies are not revving up their seismic monitoring boats — much less their drilling rigs.

"We do think ... the reserves are significant, so we're very interested in having those areas open for exploration," said Marvin Odum, president of Shell Oil Co., a dominant player in deep-water oil exploration in the Gulf of Mexico.

The available data "shows good resources on both coasts," Odum said in a recent meeting with reporters, adding that other companies as well as his own would be interested in pursing those areas. But he also said he is "keeping a close eye" on what the government does next.

Where the oil might be is one big question.

The government's estimates are 30 years old. Modern 3-D seismic studies pinpointing where the oil lies will not be possible until the Interior Department establishes leasing plans that include the newly available areas, industry executives say.

Democrats already are saying they will try next year to carve out coastal buffers and other areas such as the Georges Bank off New England for special protection. Republican leaders promise to fight any new bans on drilling, but also want to assure states they will get a share of the billions of dollars in royalties.

Who wins the Nov. 4 presidential election is the biggest factor.

It's the government's oil and gas. The Interior Department, directed by the White House, will have wide discretion over where leases will be made available and how soon.

"We will drill offshore and we will drill them now," Republican nominee John McCain proclaimed at the GOP convention. He probably would direct the department to accelerate its leasing schedule to include the newly opened regions.

Democratic Barack Obama is certain to take a more measured approach if elected. While Obama has said he favors limited expansion into areas that have been off-limits, he has given no specifics, and insists it should be done only as part of a broader agenda that promotes alternative energy and conservation.

"Companies generally aren't going to commit a lot of resources to areas they don't feel certain about," says Nicolette Nye, director of public affairs for the National Oceans Industries Association, which represents offshore exploration and drilling companies.

Anticipating that the freeze might end, the administration and the industry already were trying to speed up the leasing process to include off-limits waters

Under law, the Interior Department establishes five-year leasing plans offering specific areas and scheduling lease auctions for them. Including the required environmental studies, it routinely takes two years just to develop a leasing plan.

The current five-year plan does not expire until 2012. But Interior Secretary Dirk Kempthorne has directed his department to provide the next president "a jump start" toward incorporating some of the newly available offshore waters into the leasing process as soon as possible.

The new five-year plan could be in place as early as 2010, with areas that have been off-limits available for leasing during the 2010-2015 period.

"We're giving the next administration a two-year head start" said T. David Smith, a spokesman for Interior's Minerals Management Service. They "will have several opportunities to modify, change, stop, or whatever they need to do to it," he added.

Industry groups want to move even more quickly. They want the next president to have the ability to conduct "emergency leasing" if there is a "national energy security crisis."