Saturday, April 28, 2007

U.S. to unveil 5-year offshore drilling plan Monday

energy

WASHINGTON (Reuters) - The U.S. Interior Department will unveil on Monday its official plan for oil and natural gas drilling in federal waters through 2012, the department said on Friday.

The department's Minerals Management Service, which oversees offshore federal lands, declined to give details of the announcement, other than that the "multi-year program would significantly increase the nation's domestic energy supplies while protecting the coastal and marine environments."

The department must issue a drilling plan that outlines where it expects drilling in the U.S. Outer Continental Shelf every five years.

The MMS said in January the drilling plan could include a contentious area in the eastern Gulf of Mexico near the Alabama-Florida offshore border known as Lease Sale 181 and Bristol Bay in Alaska's North Aleutian Basin.

That would reverse Bristol Bay drilling bans established by Congress and President George H.W. Bush after the 1989 Exxon Valdez oil disaster in Alaska's Prince William Sound.

The Washington Post, citing a congressional source, reported in its Saturday edition that the plan includes federal waters near Virginia where drilling is currently prohibited, as well as Bristol Bay. Under the plan, any drilling off Virginia would not begin before 2011, the Post said.

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Bill Clinton in 1998 also used his executive powers to withdraw the areas from lease consideration through 2012. President George W. Bush later modified that order to permit drilling in some Alaskan and Gulf Coast waters.

Environmental groups say oil drilling could mar Bristol Bay, which has the world's largest wild salmon run and teems with other wildlife like sea otters.

More drilling in the Gulf of Mexico comes after Congress voted last year to rescind a 25-year ban on drilling off Florida's coast and redistribute billions of dollars in federal royalties to four nearby Gulf Coast states.

That legislation diverts an estimated $170 billion in federal royalties to states from the federal treasury over 60 years. Drilling royalties are the government's second-biggest revenue source after taxes.

The new Democratic-led Congress may try to recast existing leases the government signed with energy companies, including faulty offshore drilling leases issued in 1998 and 1999 that lost the U.S. Treasury about $2 billion.

The MMS in January also raised royalty rates for most new federal deep water leases to 16.7 percent from 12.5 percent of the value of the oil and gas found, which could raise an additional $4.5 billion over 20 years.

The higher royalty rates will take effect with the first 2007 tracts in the Gulf of Mexico the government will offer to lease to energy companies, which is scheduled for late August.

(Additional reporting by Peter Szekely)