DOI Announces Plan to Modify its Oil and Gas Leasing Program to Allow Offshore Drilling in Nearly All US Waters | Practical Law

DOI Announces Plan to Modify its Oil and Gas Leasing Program to Allow Offshore Drilling in Nearly All US Waters | Practical Law

The Department of the Interior released a draft proposal to allow drilling in nearly all US waters, the largest expansion of offshore oil and gas leasing ever proposed by the federal government.

DOI Announces Plan to Modify its Oil and Gas Leasing Program to Allow Offshore Drilling in Nearly All US Waters

by Practical Law Finance
Published on 11 Jan 2018 • USA (National/Federal)
The Department of the Interior released a draft proposal to allow drilling in nearly all US waters, the largest expansion of offshore oil and gas leasing ever proposed by the federal government.
On January 3, 2018, the Department of the Interior's Bureau of Ocean Energy Management released a draft proposal outlining proposed changes to the focus of the National Outer Continental Shelf Oil and Gas Leasing Program (National OCS Program) for 2019-2024. Currently, the National OCS Program designates about 98% of the Outer Continental Shelf (OCS) acreage off limits for purposes of oil and gas recovery. The proposed changes would allow for over 90% of the total OCS acreage available to be considered for future exploration and development. The lease sales in the draft proposal would be the largest number in US history.
The draft proposal lease sales include:
  • Gulf of Mexico. 12 total sales, including 10 biannual lease sales in the Western, Central, and Eastern Gulf of Mexico that are not subject to a Congressional moratorium, and two sales in the East and Central Gulf of Mexico after the expiration of a Congressional moratorium in 2022.
  • Alaska. 19 total lease sales in the Chukchi Sea, Beaufort Sea, Cook Inlet, Gulf of Alaska, Kodiak, Shumagin, Aleutian Arc, St. George Basin, Bowers Basin, Aleutian Basin, Navarin Basin, St. Matthew-Hall, Norton Basin, and Hope Basin.
  • Pacific. Seven total lease sales in the Pacific Region, including two in Northern California, two in Central California, two in Southern California, and one in Washington/Oregon.
  • Atlantic. Nine total lease sales in the Atlanta Region, including three in the Mid- and South Atlanta, two in the North Atlantic, and one in the Straits of Florida.
While these regions are included in the draft proposal, they may not ultimately end up in the final changes to the National OCS Program management.
This proposal is in line with the current administration's plans to establish the US as a dominant force in the global energy market.
Comments on the draft proposal must be submitted by March 9, 2018.
On January 9, 2017, Interior Secretary Ryan Zinke exempted Florida from the offshore lease program prompting other states to criticize the exemption as politically motivated and to seek their own exemptions.

Practical Implications

The proposed expansion is likely to be challenged by coastal states' attorneys general as a threat to their states' tourism industries. It may take years, therefore, for this program to be implemented.
It is worth noting that an offshore drilling program is capital intensive and takes time to implement. As a result, it is unlikely that the oil and gas sector will be able to take advantage of this expansion in the next three to seven years. Moreover, given the controversy surrounding this expansion, some companies may choose not to make the financial commitment required lest the policy be reversed or limited under a new administration.