Wednesday, July 05, 2006

Drilling Rigs - Part 1

"This current bill... would position each coastal state against their adjoining coastal states, as states become the object of fiscal coercion to convince them to sacrifice their coastal waters to drilling impacts. "
-- Carolyn Esther McCormick, June 14, 2006
Drilling Rigs - Part I:
"Dividing the States of America"

[Ed - In the first half of her testimony, Carolyn Esther McCormick boils down to the essence the wide-ranging and complicated details of the full text of H.R. 4761. In the second part, she offers a synopsis of why those details spell disaster for coastal America.]

(Excerpt from)
Testimony of
Carolyn Esther McCormick
Managing Director, The Outer Banks Visitors Bureau,
Dare County Tourism Board, Manteo, North Carolina
Before the Committee on Resources, United Sates Congress
[edited and reformatted with subtitle guides for the web]

Mr. Chairman and members of the committee, good morning. My name is Carolyn Esther McCormick, and I am the Managing Director of the Outer Banks Visitors Bureau; Dare County Tourism Board, a North Carolina public authority. I am a resident of Nags Head, North Carolina; which is located along the Outer Banks and a mother of two girls. I am here today about preserving and continuing protection for America’s national treasures, our fragile economies, natural environment, fisheries and heritage for our children, our grand children and great grand children; and to voice concern over HR-4761.
* * *
Annually we welcome over 5 million visitors to our Nation’s seashore and National parks; our research indicates the main motivation for visitation is our natural, cultural and historic resources.

Tourism in America is a 1.3 trillion dollar industry with coastal communities representing over 700 billion dollars annually. Last year travel and tourism generated over 100 billion dollars in tax revenues for state, local and federal governments with 50% of leisure travelers this year making their vacation a “naturalistic trip”.

* * * [T]he House Resources Committee is today considering HR 4761, a complex offshore drilling bill that reverses ... current coastal protection, exempts various offshore activities from present environmental law, pre-empts longstanding state authority over subsea pipeline corridors in state waters, complicates efforts to repurchase non-producing federal offshore leases, and enables oil companies to avoid the cost of removing their drilling rigs at the end of production.

This current bill, HR 4761, would immediately lift all of the congressional offshore drilling prohibitions nationwide, and then would position each coastal state against their adjoining coastal states, as states become the object of fiscal coercion to convince them to sacrifice their coastal waters to drilling impacts. Other provisions of HR 4761 would immediately reverse presidential offshore drilling withdrawals in the Gulf of Mexico that were first put in place by former president George Herbert Walker Bush.

The bill would also greatly accelerate new offshore drilling off of Florida by requiring multiple lease offerings in the Lease Sale 181 area without the preparation of updated environmental studies. * * *

Oil and gas development is a dirty and destructive business that damages coastlines, harms ecosystems, and directly threatens our tourism, fishing and real estate economies. * * * The well documented socio-economic and environmental risks alone far outweigh the rewards and set the stage of a divided states of America.

Chairman Richard Pombo's, Committee on Resources, letter dated June 8, 2006, on the Hearing on HR 4761 ... states:
  • The Bill allows for coastal state self–determination and revenue sharing
  • Enhances the country’s ability to increase domestic production of oil and natural gas, alternative energy and minerals from the federal Outer Continental Shelf
  • Diminishes the amount of foreign–oil imports required to meet the nation’s energy needs
What HR 4761 does in reality [is this] --

Erases All Prior Coastal Protections

1. Immediately terminates the twenty-five year congressional moratorium that protects the entire US West Coast, all of the East Coast, and Florida’s Gulf Coast and Panhandle (section 15). This provision exposes all of the Florida Gulf Coast and Panhandle to near shore offshore oil and gas leasing, much closer to the coast than Lease Sale 181.

2. Longstanding pre-existing presidential Outer Continental Shelf withdrawals, first put in place by former President George H.W. Bush, extended in duration by President Bill Clinton until 2012, and located within the Gulf of Mexico are immediately revoked upon passage of this Act, Section 9, item (2). The 2007-2012 Outer Continental Shelf Leasing Program is amended by this act to include two sequential lease sales, in January 2007 and June of 2007, to occur in the Gulf of Mexico within the Lease Sale 181 area, without any updating of existing Environmental Impact Statement analyses, (Section 9, item 2).

Avoids Facts About Environmental Impact of Drilling

3. Makes an arbitrary finding, without any supporting scientific documentation of any kind, that gas drilling more than 25 miles offshore and oil drilling more than 50 miles offshore would not adversely affect resources near the coastline (Section 2, item 4).

Arbitrarily Re-draws State Boundaries

4. Formally establishes what it calls new “State Seaward Boundaries”, which are arbitrary extensions of onshore boundaries between coastal states that continue out into the ocean, applying lines that are deemed entirely inequitable by many shoreline states (section 4).

Allows Oil Drilling on "Gas Only" Leases

5. Grants to the Secretary of Interior unilateral jurisdiction over preparing final regulations enabling what the bill calls “natural gas only” leasing (section 5, items 2,3,4), but gives the Secretary the sole right to decide to instead grant oil companies the right to produce oil on these “gas only” leases unless the Governor and the legislature of the nearby adjoining state, or the Governor and state legislature of any neighboring coastal state within 50 miles of the lease, object within 180 days of being notified of the oil discovery (section 6, items 1,2).

6. Grants to the Secretary of Interior the right to arbitrarily approve production of a
mixture of natural gas liquids (liquid gas condensate) and gaseous natural gas when the
Secretary is considering a lease to be defined as a “gas only” lease (section 6, item 8).

Green-lights Oil Tankers, Barges, and Pipelines Everywhere

7. Grants to the owners of offshore leases in any region the right to transport produced
crude oil through the waters of the adjacent state, and through the waters of any neighboring states, unless the adjacent coastal state or the neighboring state objects to production of oil from such a “gas-only lease”. Since the bill does not specify transportation method, such pre-approved transport of crude oil could be either by tanker, barge, or subsea pipeline (section 6, Item 4).

Grants Multiple Drilling Leases

8. Allows the Secretary of Interior to issue more than one lease for a given offshore drilling tract, so that each lease may apply to a separate and distinct range of vertical depths, different horizontal surface areas, or a combination of the two (section 6, Item 1).

Forces Public Repayment of Driller's Lease Fees and Costs While Granting 30-Year Priority for Exchange of "Oil for Gas Leases"

9. Requires that an oil company holding any offshore “gas only” lease that may repurchased by the federal government at the request of the lessee because it is found to contain oil instead of, or in addition to, natural gas, and therefore does not qualify as a natural gas lease, must be repaid by the federal government for the original cost of the bonus bid paid for the lease, for lease rents, for seismic acquisition costs, and for drilling costs, and for other unidentified “reasonable expenses”. The Secretary of Interior shall recover from the adjacent state and from local governments any funds previously shared with them that were derived from the repurchased lease, if such payments were payable after the date of repurchase. The lessee of a repurchased gas lease can obtain a priority right to acquire a future oil and gas lease within 30 years after the repurchase (Section 6, item 7).

10. Oil company partnerships would be allowed to bid jointly on tracts in offshore regions
determined by the Secretary of Interior to be “frontier tracts” or which are what the bill
calls “high cost tracts” (section 6, item [r]).

Pays Revenues To Adjacent States and Non-Coastal Counties

11. A portion of federal receipts from lease tracts beyond 4 marine leagues and within 100
miles of any coastline that are available for leasing under the 2002-2007 Oil and Gas Leasing Program before adoption of this Act, and lease tracts beyond 4 marine leagues and within 100 miles from any coastline that were made available for leasing by this Act, as well as lease tracts located throughout the Alaska OCS region beyond 4 marine leagues and within 100 miles of any coastline - will be subject to a sharing of prescribed escalating percentages of OCS federal receipts according to an allocation formula specified in Section 7, (B).
  • A 75% share of federal receipts from tracts located within 4 marine leagues of any coastline shall be deposited into a separate account for subsequent allocation, Section 7, 4 (4).
  • For Bonus bids, 87.5 percent of the accrued federal revenues shall be conveyed to the adjacent state, and 6.25 percent shall be allocated to the federal Treasury, Section 7, (5) [i] and [ii].
  • For Royalties, 87.5 percent shall be allocated to the adjacent state or to any other producing state with a leased tract in its adjacent zone within 100 miles of its coastline that generated royalties during the fiscal year, except in the event that other producing states have a coastline point within 300 miles of any portion of the leased tract, the amount shall be distributed with one-third to the adjacent state and two-thirds to each producing state according to a formula inversely proportional to the distance between the nearest point on the coastline of the producing state and the geographic center of the leased tract, Section 7, (B) [i] through [iv].
12. For tracts partially or completely beyond 100 miles of the coastline, a separate escalating formula of deposits of federal receipts shall be followed (section 7 (c) (1) and (2)... .
  • [O]ne-third of the royalties shall be passed to the adjacent state - and two-thirds to each producing state - according to a formula inversely proportional to the distance between the nearest point on the coastline of the producing state and the geographic center of the leased tract, (section 7, (B) [i] to [iv].
  • Of these allocations, counties and county-equivalent political subdivisions shall receive 25 percent of the allocation based on the ratio of such coastal counties to the coastline miles of all coastal counties in the State.
  • Coastal counties without a coastline shall be considered to have 50 percent of the average shoreline miles of the coastal counties that do have shorelines.
  • Another 25 percent of the county allocation shall be based on the ratio of the county’s population to the coastal population of all counties in the state, 25 percent shall be allocated to counties with a coastal point within 300 miles of the leased tract - based on the county’s relative distance from the leased tract, (section 7, (2) (D).
  • And 25 percent of the allocation shall be based on the relative level of offshore oil and gas activities in the county compared to the level of oil and gas activities off of all counties in the state.
Requires No Accountability for Revenue Sharing Funds

13. Funds allocated to states and counties can be used for a broad and poorly defined array of purposes, and no standards are applied to ensure that the money is spent to restore damage caused by offshore oil and gas activities. Activities that further harm the coastal zone, including improvements to infrastructure associated with offshore energy production activities and any other purpose determined by state law can be funded with these allocations, and no accounting the federal government is required for any of these expenditures, except as otherwise required by law, Section 7, (3) [f].

14. The enactment of any future congressional legislative moratorium on expanded offshore oil and gas leasing will automatically prohibit any sharing of federal receipts from offshore drilling with the affected states or localities for the duration of any such restriction, (section 7, (3), [h]).

Expands Presidential Power to Deny State Petitions

15. The President is authorized by this bill to partially or completely revise or revoke any prior withdrawal made by the President under the authority of Section 9 (Section 9, [1]). Any such withdrawal requested by a state may be for a term not to exceed ten years, and the President is directed to accommodate competing interests and potential uses of the Outer Continental Shelf in considering whether or not to grant the withdrawal petition of any state (Section 9, [1]).

Grants Adjacent State Power Over Neighboring States; Allow Expedited Drilling

16. Governors of coastal states, with the concurrence of their state legislatures, may petition the Secretary of Interior to open any area adjacent to their state that is more than 25 miles from the coastline of any neighboring state for offshore gas leasing and related activities, or any area that is more than 50 miles from the coastline of any neighboring state for offshore oil and gas leasing and related activities, Section 9, item (3) (A). In analyzing the decision to lease an area under the terms of this provision, the Secretary of Interior needs only to prepare a cursory Environmental Assessment (EA) document, and is not required to prepare a full Environmental Impact Statement (EIS) as stipulated by the National Environmental Policy Act. Broad discretionary authority is granted to the Secretary of Interior with respect to the terms and conditions under which such offshore development will be allowed to occur, and, to expedite such new leasing, the Secretary of Interior is permitted to amend the current Five-Year Leasing Program to accommodate such new leasing unless less than 12 months remain in the current Five-Year Leasing Program, Section 9, item (3) (B) (C) (D).

Invalidates State Constitutions and State Laws; Require Repeated 10-Year State Moratoria

17. The Governor of a state, acting with the concurrence of its state legislature, may also petition that any area within 125 miles of the state’s coastline be withdrawn from leasing, for either oil or gas or both, but each state must submit separate petitions for distances within 50 miles of the coastline, with separate votes by the legislature each time, and must submit separate petitions for areas beyond 100 miles of the coastline, but not exceeding 125 miles of the coastline. The Secretary of Interior shall, within 90 days, prepare an Environmental Assessment to evaluate the effects of approving the state’s petition. The Secretary shall not approve a state’s petition for more than a total of ten years, but may approve such petitions repeatedly ad infinitum, in response to repeated requests from the state at appropriate intervals, Section 9, [h] (1) and (2).
Any state’s constitutional provision, or any state statute or state law, that has the effect of restricting either the Governor or the state legislature, or both, under this section, shall automatically forfeit for that state any sharing of federal Outer Continental Shelf receipts and simultaneously be prevented from exercising any state request for any withdrawal from leasing, for the duration of such state constitutional or state legislative action, Section 9, (B) [i].

Requires 75% Acreage to be Leased

18. The bill will require that seventy-five percent of the available un-leased acreage within each offshore planning area be offered in each Five-Year leasing Program, Section 10, item (1).

Allows Executive Power to Ignore All Other Laws

19. The bill authorizes the Secretary of Interior to consider and analyze leasing throughout the entire US Outer Continental Shelf without regard to any other law affecting such leasing. The bill elevates any military space-use conflicts to the President for resolution, if the Secretary of Interior is unable to resolve such conflicts with the Secretary of Defense, Section 10, item (1).

Bars States from Prohibiting Pipelines

20. If the governor of an affected coastal state requests in writing a modification of any proposed leasing action at least 15 days prior to the submission of the Five-Year Leasing Program to Congress, the Secretary of Interior shall reply to that Governor in writing, granting or denying such request, Section 10, item (2). The Secretary of Interior, at the beginning of the development of each Five-Year Leasing Program, provide each adjacent state with a current estimate of potential oil and gas resources off of that state, and with a best-efforts projection of the share of federal leasing receipts that state can expect to receive if it cooperated with federal offshore leasing plans off of its coastline, Section 19, item (2).

21. If a coastal state requests protection for its offshore waters, no subsea pipeline carrying oil or gas can be sited through the protected zone unless more than fifty percent of the production projected to be carried by the pipeline within its first ten years of operation is from that same state’s adjacent zone waters, Section 11, item (f)(1). No state may prohibit the construction of a subsea pipeline for natural gas through its adjacent waters. No state may object to a natural gas pipeline landing location on its coast unless it proposes two alternate pipeline landing locations on its own coastline, each located within 50 miles on either side of the proposed landing location, Section 11, item (2).

Exempts Oil Company Exploration and Drilling from Environmental Protection

22. Many damaging offshore oil and gas activities would be exempted from the need to prepare an Environmental Impact Statement (EIS) under NEPA, including the conduct of seismic airgun surveys, and individual lease sales would no longer require the preparation of an Environmental Impact Statement (EIS), as the generic Environmental Impact Statement prepared for each Five-Year Leasing Program would be deemed by this Act to be sufficient to comply with NEPA for all lease sales in the Program. No Environmental Impact Statement (EIS) would need to be prepared for a Plan of Exploration, and no EIS would be required for a Plan of Development after the first one is prepared for each area, Section 12, item (2)(A)(B)(C). A development and production plan may be submitted by a lessee that is deemed to cover more than one lease at a time. An exploration plan would be required to be reviewed by the Secretary of Interior within ten (10) days of submission, Section 19, (2)(B).

23. The Secretary of Interior is given the authority to review each development and production plan to ensure that it is consistent with all statutory and regulatory requirements applicable to the lease, Section 10, (e) (4). The language of the bill is not clear as to whether this provision exempts plans of development and production from the traditional federal “consistency determinations” customarily conducted by coastal states under the authority granted to them by the Coastal Zone Management Act, a critical opportunity for impacted states to participate in planning decisions affecting their coastline. The Federal Energy Regulatory Commission and the Department of Interior will decide between their two agencies which will prepare a single Environmental Impact Statement related to facilities for the transportation of natural gas, Section 10, (h).

Imposes Restrictions on Outer Shelf Revenues

24. The bill creates what is called a “Federal Energy Natural Resources Enhancement Fund Act of 2006”, derived from a share of federal Outer Continental Shelf receipts that can be utilized for a wide range of mitigations for damage done by offshore drilling and for natural resource restoration and enhancement uses, but not for land acquisition of any kind, Section 14, (5).

Allows "New Primacy" for Oil Drillers

25. The bill grants broad new primacy to the Department of Interior in use of the Outer Continental Shelf, and states that no federal agency may permit construction or operation of any facility, or designate or maintain any transportation corridor or operating area, on the Federal Outer Continental Shelf or in State waters, that will be incompatible with, in the view of the Secretary of Interior, oil and gas leasing and substantially full exploration and production of tracts that are geologically productive for oil or natural gas, Section 16 (a).

26. The bill grants the Secretary of Interior the authority to repurchase, or buy back, any offshore lease if the lessee requests such a repurchase and if the Secretary finds that such lease is qualified for such repurchase because a federal permit was denied (except denial under the Coastal Zone Management Act), or because a condition of approval was attached to a permit that was not mandated by federal statute. The bill establishes that the financial restitution that a lessee shall receive will be the amount that a lessee would receive in a restitution case for a material breach of contract. If the Secretary of Interior fails to make a final decision on a request by a lessee for a repurchase of a lease within 180 days of the request, a ten percent increase in the compensation due to the lessee will be added if the lease is ultimately repurchased, Section 17 (b)(1 through 6).

Allows "Off-site" Mitigation

27. The bill sets a precedent for allowing offsite environmental mitigation at a location away from the area impacted; see Section 18, if the Secretary of Interior believes that such mitigations generally achieve the purposes for which mitigation measures are put in place.

Permits Permanent Ex-Oil Rigs; Ignore State Preferences; Trade Leases

28. The Secretary of Interior would be instructed to issue regulations enabling the application of decommissioned oil rigs for offshore fish farms, artificial reefs, and other purposes, and all platforms would no longer need to be removed and the drilling site would no longer need to be restored at the end of the project’s economical life cycle, at the sole discretion of the Secretary of Interior, Section 10. A state may request to opt-out of this program of leaving decommissioned rigs in place onsite, but the Secretary of Interior may or may not honor the state’s request.

29. The existing requirement in the Omnibus Energy Act of 2005 to conduct a comprehensive seismic inventory of all Outer Continental Shelf waters would be rescinded, (section 22).

30. Certain undefined existing leases within 100 miles of California or Florida could be exchanged by the lessee, if the lessee so requests and if the Secretary of Interior agrees, for
a new oil and gas lease, any part of which is located between 100 and 125 miles of the coastline, and which is completely beyond 100 miles of the coastline, off of the same state, Section 27, (1).

31. Existing Coastal Impact Assistance is repealed, Section 28. 32.

Reduction of onshore leasing royalties collected for tar sands and oil shale may be enacted at the discretion of the Secretary of Interior to offer incentives the development of such resources, Section 29.
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