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Offshore Drilling Issue Troubles Oil Industry

THE battle over offshore drilling is heating up before the Clinton administration is quite ready.

Lawsuits filed last year against the government are proceeding in the United States Court of Federal Claims. The suits were brought by 12 oil companies that bought exploration rights off the coasts of Florida, North Carolina, and Alaska but were never allowed to drill.

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Claiming breach of contract and a taking without compensation, the companies want deficit-ridden Washington to refund the sales price and their expense costs. That alone exceeds $600 million, and the companies want interest as well.

Meanwhile, legislators from Florida want to halt drilling now under way near the state's northwest coast. They have proposed a law that would do that and prohibit future sales of exploration rights off Florida.

Similar bills have failed previously. But next week a House Appropriations subcommittee will begin hearings on the Department of Interior's budget. Every year since 1982 the subcommittee has restricted the amount of the outer continental shelf that Interior's Minerals Management Service (MMS) could offer to the oil industry.

The 740,000 acres that were excluded in 1982 had grown to 462.1 million acres by last year. Parts of Alaska and the western two-thirds of the Gulf of Mexico are the only available areas.

In the past the subcommittee has justified the moratoria by saying more studies were needed, but then refused to appropriate much money for any.

"It's just a circle," says Ron Whitmire, a spokesman for the National Ocean Industries Association.

A surge in natural gas prices has helped drilling in the Gulf of Mexico to recover. On March 17 there were 102 drilling rigs under contract, up from 65 a year ago.

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"It's a considerable gain," says Leonard LeBlanc, editor of Offshore magazine. "But it's not nearly enough." Twice as many rigs are needed just to replace current production.

Many companies are planning to step up operations in the Gulf. But Mr. LeBlanc says the industry will need regulatory relief, in the absence of even higher energy prices or bigger oil and gas discoveries, to sustain activity there.

Sen. Bennett Johnston (D) of Louisiana, an oil industry ally, is working on legislation to offer incentives to stimulate exploration in the gulf.

Manual Lujan, the previous Interior secretary, authorized companies operating in waters deeper than 200 meters (656 feet) to delay royalty payments so they could recover their costs faster. His successor, Bruce Babbitt, has put that order on hold until he can study the issue.

Mr. Babbitt, a former governor of Arizona, is "a western land person," Mr. Whitmire says. "He's going to have to do a lot of studying" on offshore issues.

"Babbitt doesn't know that much about the OCS [outer continental shelf]," agrees Gary Magnuson, vice president of the Center for Marine Conservation, the largest environmental group to specialize on ocean issues.

So far the secretary of the interior has said he wants to maintain existing moratoria for now, but that there is no money to buy back exploration rights.

Other issues have largely preoccupied Babbitt, like the April 2 "forest summit" in Portland, Ore., and the Endangered Species Act. The nominee for assistant secretary for land and minerals management remains unconfirmed. And the post of MMS director has been filled on an acting basis only.

Babbitt's first exposure to offshore issues could come on April 28, when he is scheduled to attend the meeting of the OCS policy committee, an oft-contentious advisory group representing industry, states, and environmentalists.

"The political process is paralyzed," says Mr. Magnuson, a member of the committee. "It's gotten so bad that everyone is willing to come to the table and start anew." He hopes for an "overall ocean framework" in which oil exploration, fishing, marine sanctuaries, and other legitimate uses are balanced.

Meanwhile, the oil industry-funded Marine Spill Response Corporation will begin operations this August with $400 million-worth of cleanup equipment, a $90 million budget, and a staff of 432.

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