Richmond -- On Wednesday Virginia Governor Bob McDonnell signed into law the opening of the Virginia’s 2.9 million acre OCS to oil and gas drilling. Indeed the Governor stated he wanted Virginia to become the energy capital of the east coast. This historic passage, the Governor stated, was a message to Secretary of Interior Salazar that Virginia is “ready to go” on OCS, and that it was now up to the Secretary to proceed.
Although this is good news for future national energy development, the road ahead is still a long one. The Eastern Seaboard of the US has not had an OCS seismic study in decades. Similar to the situation in ANWR’s 10-02 area a new and expensive 3D seismic shoot over several years would have to be conducted by the industry to reassess oil and gas plays before any exploration could begin. Currently the Dept. of Interior’s Minerals Management Service estimates there are 130 million barrels of oil and 1.1 trillion cu.ft. of gas under Virginia’s 2.9 million acre OCS. Compare that to the proposal to develop 2000 acres in the 1.5 million acre 10-02 Area of ANWR which is estimated to contain 10.4 billion barrels of oil and 10 tcf of gas. ANWR lies 50 miles from the Trans-Alaska Pipeline with fully operational processing facilities at Prudhoe Bay. Virginia has no oil and gas processing facilities, but operates a single refinery for imported crude oil. New infrastructure would have to be built before potential OCS resources could be realized.
Regardless of states like Virginia or Alaska both promoting OCS development, no exploration would take place until the thorny issue of revenue sharing is addressed. In most cases a 50-50 split between federal and state coffers is expected before a state government is likely to agree to allow OCS exploration to take place. In Alaska by contrast 100% of federal OCS taxes goes to the Federal Government. In 2008 legislation promoting OCS development by Speaker Nancy Pelosi revenue sharing was set at 100% toward the federal coffers instantly killing the reality of the bill having any affect nationwide toward state legislatures promoting OCS.
The current United States 5 year OCS leasing plan (2007-2012), has currently been put on hold by Secretary Salazar. This, despite that the Congressional ban on OCS leasing (with exception to the Eastern Gulf) has lapsed, means America’s OCS is, by the Secretary’s indecision, still inaccessible. The Secretary initially stated in early 2009 he was reopening the 6 month public comment period on the current OCS plan putting all activity on hold until complete. That 6 month period expired in September 2009 and he announced last week regardless he would defer his decision until 2012 when the current plan expires.
The Federal Government through the Dept. of Interior’s Minerals Management Service regulates activity in the Federal OCS (usually from 3 miles and out). Individual states control the OCS within a 3.3 mile border. Texas, Florida and Louisiana are the only states that differ with 9, 9 and 3.6 mile state OCS borders respectively.
In Secretaries action and stalling have not done national OCS development any good. As Virginia now will join Alaska in waiting for the Secretary’s decision, private companies like Shell Petroleum who recently spent a record $2.6 billion on OCS leases in northwest Alaska’s Chuck Chi Sea are put in the lurch. This is an expensive situation considering leases last 10 years with yearly rental fees. Neither the lease clock, nor the annual fees stop even during the Secretary’s period of indecision. Exploration plans by the oil industry in Alaska have already been put on hold this and last year due this uncertainty costing the state’s economy billions in business.
US Estimated OCS Oil and Gas Estimates
