Outer Continental Shelf: Debate Over Oil and Gas Leasing and Revenue Sharing
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Outer Continental Shelf: Debate Over Oil and Gas Leasing and Revenue Sharing Updated April 3, 2009 Congressional Research Service https://crsreports.congress.gov RL33493 Outer Continental Shelf: Debate Over Oil and Gas Leasing and Revenue Sharing Summary Oil and gas leasing in the Outer Continental Shelf (OCS) has been an important issue in the debate over energy security and domestic energy resources. The Department of the Interior (DOI) released a comprehensive inventory of OCS resources in February 2006 that estimated reserves of 8.5 billion barrels of oil and 29.3 trillion cubic feet (tcf) of natural gas. Another 86 billion barrels of oil and 420 tcf of natural gas are classified as undiscovered resources. Congress had imposed moratoria on much of the OCS since 1982 through the annual Interior appropriation bills. A Presidential Directive issued by President George H.W. Bush in 1990 (and extended by President Clinton until 2012) also banned offshore oil and gas development in much of the OCS. Proponents of the moratoria contend that offshore drilling would pose unacceptable environmental risks and threaten coastal tourism industries. However, on June 18, 2008, President Bush announced his support for lifting the moratoria on offshore oil and gas development. However, President Bush said that he would not lift the executive ban until Congress acted to lift its ban first. But, on July 14, 2008, President Bush reversed his position and lifted the executive ban on the OCS before Congress acted. Congressional action approving the Continuing Appropriations Act for FY2009 (P.L. 110-329, enacted September 30, 2008), continued the funding of government activities through March 6, 2009, or until a regular appropriations bill is enacted, omitted language that provided for the congressional OCS moratoria along the Atlantic and Pacific coasts. The permanent appropriations law (P.L. 111-8) does not contain the OCS moratoria. Those areas may now be made available for preleasing, leasing, and related activity that could lead to oil and gas development. The moratorium, however, is still in place for most of the Eastern Gulf of Mexico which was placed off-limits statutorily until 2022 under the Gulf of Mexico Energy Security Act of 2006 (GOMESA) (P.L. 109-432). There are some indications in the 111th Congress that a total OCS ban is unlikely, but the question may be, how much of the OCS remains open and available for oil and gas drilling. Separate legislation (H.R. 1696) has been introduced to place MMS planning areas in the North Atlantic and Mid-Atlantic permanently off-limits to oil and gas leasing and development. Further, the Administration began planning its next five-year leasing program in August 2008 that would, if approved, be implemented as early as 2010 - two years ahead of schedule. The proposed new five-year program, introduced in January 2009, would supersede the current five-year leasing program from 2007-2012. A new five-year lease program, beginning in 2010, would allow the newly opened OCS areas to be offered in a lease sale sooner than if the MMS remained on their current schedule. The Obama Administration extended the comment period on the proposed five- year leasing program 180 days beyond its required 60 days to assess the information they have on the OCS for energy development, including renewable energy development. Royalty relief, particularly for deep-water projects, has come under closer scrutiny since it was revealed in a February 2006 New York Times article that leases issued during 1998 and 1999 did not contain price thresholds for royalty relief (above which royalties apply) as part of the Deep Water Royalty Relief Act (DWRRA) of 1995 (leases issued between 1996-2000). However, Kerr McGee Oil and Gas Corp. (now Anadarko Petroleum Corp.) filed a lawsuit challenging the Minerals Management Service’s (MMS) authority to impose price thresholds in the DWRRA leases. A recent U.S. District Court decision, which was upheld by a 3-member panel in the U.S. Court of Appeals, ruled that the Secretary of the Interior had no authority to impose price thresholds for oil and gas leases held under the DWRRA . Congressional Research Service Outer Continental Shelf: Debate Over Oil and Gas Leasing and Revenue Sharing Contents Most Recent Developments ............................................................................................................. 1 Background and Analysis ................................................................................................................ 2 Offshore Leasing System ................................................................................................................ 2 Federal Distribution of OCS Revenues ..................................................................................... 4 Coastal Impact Assistance ............................................................................................................... 5 Offshore Leasing Moratoria ............................................................................................................ 6 California Leases ....................................................................................................................... 8 Royalty Relief ........................................................................................................................... 9 Lease Development in the Gulf of Mexico .................................................................................... 11 Barriers to Development ......................................................................................................... 12 Natural Gas-Only Proposals .................................................................................................... 12 111th Congress Legislation ............................................................................................................ 12 110th Congress Legislation ............................................................................................................ 13 109th Congress ......................................................................................................................... 16 109th Congress Legislation (Enacted) ..................................................................................... 16 Lease Sale 181: Revisited ....................................................................................................... 17 Figures Figure 1. MMS Five-Year Program Areas ....................................................................................... 3 Figure 2. Distribution of Revenue from Federal and Indian Leases, FY2008 ................................ 8 Figure A-1. Lease Sale Area in S. 3711 ......................................................................................... 19 Appendixes Appendix. Legislation in the 109th Congress................................................................................. 16 Contacts Author Information ........................................................................................................................ 20 Congressional Research Service Outer Continental Shelf: Debate Over Oil and Gas Leasing and Revenue Sharing Most Recent Developments President Bush announced on June 18, 2008, that he would like to open areas of the Outer Continental Shelf (OCS) for oil and gas development currently under presidential and congressional moratoria (discussed in more detail below). However, the President stated that he would lift the executive branch moratoria only after Congress did so legislatively. But, on July 14, 2008, President Bush reversed his position and lifted the executive ban on the OCS imposed in 1990 by President George H.W. Bush. Congressional action approving the Continuing Appropriations Act for FY2009 (P.L. 110-329, enacted September 30, 2008), continued the funding of government activities through March 6, 2009, or until a regular appropriations bill is enacted, omitted language that provided for the congressional OCS moratoria along the Atlantic and Pacific coasts. The permanent appropriations law (P.L. 111-8) does not contain the OCS moratoria. Those areas may now be made available for preleasing, leasing, and related activity that could lead to oil and gas development. The moratorium, however, is still in place for most of the Eastern Gulf of Mexico which was placed off-limits statutorily until 2022 under the Gulf of Mexico Energy Security Act of 2006 (GOMESA) (P.L. 109-432). There are some indications in the 111th Congress that a total OCS ban is unlikely, but the question may be, how much of the OCS remains open and available for oil and gas drilling. Separate legislation (H.R. 1696) has been introduced to place MMS planning areas in the North Atlantic and Mid-Atlantic permanently off-limits to oil and gas leasing and development. Further, the Administration began planning its next five-year leasing program in August 2008 that would, if approved, be implemented as early as 2010 - two years ahead of schedule. The proposed new five-year program, introduced in January 2009, would supersede the current five-year leasing program from 2007-2012. A new five-year lease program, beginning in 2010, would allow the newly opened OCS areas to be offered in a lease sale sooner than if they remained on their current schedule. The Obama Administration extended the comment period on the proposed five- year leasing program 180 days beyond its required 60 days to assess the information they have on the OCS for energy development,