Interior looks at options for expanding offshore drilling

Interior Department officials Wednesday proposed expanding offshore energy production in the eastern Gulf of Mexico and studying whether production also should occur off the coast of Virginia.

The long-awaited draft five-year plan from the department's Mineral Management Service does not propose changes in federal offshore energy production bans that have been a key point in skirmishes over competing congressional offshore energy proposals.

But the Interior Department is proposing for the first time to study the potential off the coast of Virginia, where production is currently banned.

"We believe that is a significant step," said an official from the Independent Petroleum Association of America, which represents companies that hold the vast majority of leases in the Gulf of Mexico.

The Interior Department also is proposing to offer leases in one-third of a 6-million-acre tract in the eastern Gulf of Mexico known as Lease Sale 181.

Lease 181 is not currently covered under either presidential or congressional bans on offshore oil and natural gas production that extend beyond the Gulf of Mexico and portions of the coasts of California and Alaska.

But Interior has never sold leases in that area because of concerns raised by Florida and military officials that production there might impede military training and testing, tourism and the marine ecosystem. Supporters of developing that area say it is needed to expand domestic production, lower high natural gas prices and save U.S. manufacturing jobs.

Interior officials say the proposed five-year plan would not interfere with military readiness or pose an environmental risk to Florida, since the department is not proposing to offer leases within 100 miles of Florida's coast.

But Sen. Bill Nelson, D-Fla., told reporters Wednesday that Interior's plan would, at one point, cross the "Military Mission Line" which extends south from the Florida Panhandle and about 234 miles west of Tampa Bay. It also "does not recognize" a possible need by the Defense Department to expand a 25-mile non-production buffer from its area of operations, he said.

Nelson and Sen. Mel Martinez, R-Fla., introduced a bill last week to permanently ban production as far as 260 miles off Florida's coast, while for the first time acknowledging they will accept production in at least a portion of Lease 181.

Interior officials also are proposing to study the possibility of expanding production off Alaska's coast to include the North Aleutian Basin, which is covered under the two federal bans. The presidential oil and natural gas ban expires in 2012, while the congressional oil and natural gas ban has been extended annually.

House Resources Chairman Richard Pombo, R-Calif., offered a bill last year that would let states opt out of the federal bans, while Rep. John Peterson, R-Pa., offered his bill this year to lift the federal bans on natural gas production. Peterson's bill does not address bans on oil production. Efforts to alter the federal bans have fared poorly in the Senate.

Senate Energy and Natural Resources Chairman Pete Domenici, R-N.M, ranking member Jeff Bingaman, D-N.M., and Energy and Natural Resources members Jim Talent, R-Mo., and Byron Dorgan, D-N.D., introduced a bill this week expanding production in Lease 181 while keeping the federal bans intact.

Their bill requires the Interior Department within one year to begin leasing portions of Lease 181, but not within 100 miles of Florida's coast and east of the Military Mission Line without Defense Department approval.

The committee will hold a hearing on that legislation later this month.

Domenici told reporters Wednesday that while he will work with Nelson and Martinez, "We don't want to end up negotiating where we end up with little or nothing."

Bingaman said their bill complements an agreement about a decade ago between former President Clinton and then-Florida Democratic Gov. Lawton Chiles.

The Bush administration took Lease 181 off the table in 2001 in part due to concerns raised by Bush's brother, GOP Florida Gov. Jeb Bush. "The world has changed since then," Dorgan said.

Interior Department officials plan to finalize the draft 2007-2012 plan in the spring of 2007 after considering public comments.