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Outer Continental Shelf Policy in the 108th Congress (9-22-03)

Activities on the Outer Continental Shelf (OCS) are of interest to the geologic community for a variety of reasons. The availability of resources, possibilities for energy production, environmental impacts from all activities, and proximity to highly populated coastlines all play a role in OCS policy. Of all the activities on the OCS, the most visible, and contentious, are those associated with the leasing and development of OCS lands and the distribution of resulting revenues from these leases. Each year offshore royalties, rents, and bonus bids are collected by the Minerals Management Service (MMS) of the Department of the Interior (DOI) from oil and gas leases, as directed by the Outer Continental Shelf Lands Act of 1953. In recent years, environmental concerns have prompted the establishment of leasing and drilling moratoria that prohibit most OCS production. Currently, the only producing OCS areas are portions of the Gulf of Mexico, California, and Alaska. These moratoria have inevitably led to litigation over leasing and lease development. Even existing leases are not free from scrutiny, as the fate of collected OCS royalties is also heavily debated.

Most Recent Action

On September 17, 2003, the House Subcommittee on Energy & Mineral Resources held a hearing on the environmental advantages of modern oil and gas exploration. Discussion focused on support for Rep. David Vitter's (R-LA) "Rigs to Reefs" legislation (H.R. 2654), which would empower the Secretary of the Interior to authorize use of decommissioned offshore oil and gas platforms in the Outer Continental Shelf (OCS) for culture of marine organisms, scientific research or as artificial reefs. The Outer Continental Shelf Lands Act currently requires that these platforms be removed no later than one year after being decommissioned.

Several scientists attested to the thriving ecosystems supported by the derelict platforms, and Vitter spoke to the good fishing opportunities that they provided. Vitter also assuaged Billy Tauzin's (R-LA) and Stevan Pearce's (R-NM) qualms about liability, explaining that legal responsibility for the platform would transfer to whichever organization was using it. National Resource Defense Council (NRDC) Senior Policy Analyst Lisa Speer pointed to the lack of scientific consensus on the platforms' ecological benefits, warning against using the ocean as a dumping ground. Together with Subcommittee Ranking Member Ron Kind (D-WI), Speer raised concerns about high levels of heavy-metal contamination in fish around the drilling sites. (9/22/03)

The Energy Policy Act of 2003 (S. 14) was introduced in the Senate by Sen. Pete Domenici (R-NM) on April 30th. S. 14 aims to "spur diverse energy research and production" in order to enhance the nation's energy security. Provisions in the bill would extend royalty relief to deep-water oil and gas production, Alaskan offshore oil and gas production, and deep well production of natural gas in the Gulf of Mexico. S. 14 would also amend the Outer Continental Shelf Lands Act, in support of oil and natural gas exploration and development, by allowing easements on federal lands currently off-limits. The measure awaits final Senate passage, as does the energy bill passed by the House (H.R. 6) in April 2003.

Current Congress

In February of 2003, Rep. Barbara Cubin (R-WY) introduced a bill to amend the Outer Continental Shelf Lands Act. Cubin's bill (H.R. 793) would grant permitting authority to the Secretary of the Interior for easements and rights-of-way on exploration, development, production, transportation, or storage activities related to oil and natural gas on the Outer Continental Shelf (OCS). A controversial provision in H.R. 793 giving jurisdiction over the permitting of renewable energy development on the OCS to the Interior's Minerals Management Service (MMS) has raised much debate. Competing legislation proposed by Rep. William Delahunt (D-MA) would locate OCS permitting under the Commerce Department's National Oceanic and Atmospheric Administration (NOAA). Proponents of Delahunt's position argue that the MMS lacks experience with alternative energy resources, and that given their experience with the marine environment, NOAA is especially suited to this responsibility.

The Potential Gas Committee, funded by the American Gas Association, released a report on April 16th estimating a 3.3% overall increase from its 2000 report in total domestic natural gas and coal bed methane resources. As reported by Greenwire, industry representatives claim that the 10-year moratorium on leasing in areas on the Pacific and Atlantic OCS has been one of the largest barriers to accessing potential resources. This claim is supported by the U.S. Geological Survey's estimate that two-thirds of yet to be discovered natural gas resources are within federal lands or offshore.

The House of Representatives has passed its comprehensive energy bill, H.R. 6, which would support research and exploration in the areas of ultra-deepwater natural gas and petroleum resources. Also known as the Energy Omnibus bill, H.R. 6 was introduced by Rep. W.J. "Billy" Tauzin (R-LA) on April 7. The Outer Continental Shelf Shallow Water Deep Gas Royalty Relief Act contained in H.R. 6 suspends royalties on natural gas from deep wells on already leased tracts of the shallow waters in the Gulf of Mexico. It would also amend the Outer Continental Shelf Lands Act to give the Interior Secretary would have the authority to suspend royalties in Alaskan offshore areas, in addition to the aforementioned shallow Gulf waters. H.R. 6 also permits easements for previously unauthorized activities on the OCS if they "support exploration, development, production, transportation, or storage of oil, natural gas, or other minerals," a provision very similar to Rep. Barbara Cubin's (R-WY) bill, H.R. 793. H.R. 6 would replace the Alaska National Interest Lands Conservation Act of 1980 with the Arctic Coastal Plain Domestic Energy Security Act of 2003 (H.R. 39). H.R. 39 proposes "a competitive oil and gas leasing program that will result in an environmentally sound program for the exploration, development, and production of the oil and gas resources of the Coastal Plain." The bill would repeal the prohibition on production in the Alaskan National Wildlife Refuge (ANWR), arguing that ANWR's existence as a wildlife refuge is "compatible" with environmentally friendly drilling. On April 11 an amendment to H.R. 6 was introduced by Rep. Lois Capps (D-CA) and agreed to by the House that removes language in the energy bill that would direct the Interior Secretary to conduct a "comprehensive inventory" of all oil and gas resources throughout the U.S. OCS. The House Energy Bill will need to be reconciled with its Senate counterpart (S. 14), which is still being considered by that chamber.

Background

The Outer Continental Shelf (OCS) is defined by current law as the submerged lands that stretch between 3 and approximately 690 geographical miles seaward of the U.S. coastline. Within the first 3 miles of a state's shore, all subsoil and seabed resources are managed by the state. The Gulf of Mexico coasts of Texas and Florida are the exception, with state waters extending to approximately 9 geographical miles. Beyond 690 miles, or 200 nautical miles (nm), the seabed and subsoil are considered to be in international waters. The 200 nm expanse beginning at the shoreline is referred to as a nation's Exclusive Economic Zone (EEZ).

The OCS and EEZ are extended if the coastal margin is geologically defined as extending beyond the 200 nm limit. Such extensions can be found off of Alaska, the Atlantic coast, and in the Gulf of Mexico. Where the geological continental margin is narrow, as in the Pacific, federal jurisdiction is limited to within the 200 nm zone.

State jurisdiction over coastal resources was passed and signed into law under the Eisenhower administration, with the Submerged Lands Act of 1953. In the same year of the Submerged Lands Act, Congress and President Eisenhower passed into law the Outer Continental Shelf Lands Act (OSCLA), which grants to the Secretary of the Interior authority over all mineral resources on the OCS. Prior to 1953, the federal government had claimed jurisdiction over all offshore resources, beginning in 1945.

OSCLA provides regulations and procedures for the leasing of federal OCS lands, ensures environmental protection of affected areas, and contains provisions that ensure the government a fair market value for any production on federal lands. A fixed royalty of one-eighth or one-sixth of the market value is collected off of any gas or oil production by the Interior Department's Mineral Management Service (MMS). Since the early 90s, OCS leasing has only taken place in the Central and Western Gulf Coast of Mexico, with 95% of OCS royalty revenues coming from offshore of Texas and Louisiana. In addition to royalties, OCS revenues include rents and bonus bids.

Sources: Congressional Research Service, Department of the Interior, E & E News Daily, Greenwire, Hearing Testimony, Mineral Management Service.

Contributed by Emily R. Scott, 2003 AGI/AIPG Summer Intern and Ashley M. Smith, 2003 AGI/AAPG Fall Semester Intern.

Background section includes material from AGI's Outer Continental Shelf Leasing and Royalties Update for the 107th Congress.

Please send any comments or requests for information to AGI Government Affairs Program.

Last revised on September 22, 2003


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