Virginia Pushing for Offshore Oil and Gas

- Virginia Pushing for Offshore Oil and Gas

Thursday, August 04, 2011
Rigzone Staff
by Barbara Saunders

While most states battle to keep offshore oil and gas development away from their coastlines, the State of Virginia pushes – with some success so far – to allow it.

The U. S. House of Representatives already approved legislation that would open Virginia's waters, beyond 50 miles of the coastline, to hydrocarbon exploration and production. However, a corresponding Senate measure got bogged down recently before that chamber's Energy and Natural Resources Committee.

The committee hit an impasse over the proposed revenue-sharing provisions. This would provide states with 37.5 percent of revenues from offshore leasing development.

The Obama Administration postponed South Atlantic lease sale 220 and other lease sales after the 2010 Macondo well disaster in the Gulf of Mexico

Now, the fate of the legislation is up in the air. The legislation – introduced by Virginia Democratic Sens. Mark Warner and Jim Webb – was incorporated into other legislation up for the committee's consideration.

Sen. Lisa Murkowski, a Republican who represents Alaska, expressed optimism that the committee would soon reach agreement on the proposal.

"We must recognize the importance of putting safety and the nation's need for greater energy production together," Murkowski said. "Our shared goal is to have safe production."

Sens. Murkowski and Mary Landrieu, a Louisiana Democrat, offered a revenue sharing amendment to the Outer Continental Shelf Reform Act (S. 917). Although several members on the committee spoke in favor of the concept of revenue sharing, the committee lost its quorum and the proposal was not voted on.

"Today's markup demonstrated bipartisan support for equitable revenue sharing for coastal energy-producing states," Murkowski said. "We'll keep working to fine-tune the language and reach agreement on a plan that's acceptable to our members."

Murkowski added that she would work with members of the committee from both parties on refining revenue sharing language to include funding for renewable energy projects at the state level. Once that was accomplished, Murkowski said she would hope the markup of the bill could be rescheduled as soon as possible so the Outer Continental Shelf Reform Act and revenue sharing could be voted on by the full committee.

"Those who understand the importance of inviting coastal states to be partners in our efforts to increase the nation's energy security are not going to let this issue go away," Murkowski said. "It is in our best interest to have American workers producing American energy, and revenue sharing will help us reach that goal."

The Landrieu-Murkowski revenue sharing amendment would allow coastal states to retain a portion of the revenues generated by energy production in federal waters, beginning in 2019. It would apply to all forms of energy production, from oil and gas to wind and hydrokinetic. Murkowski's new language would create a coastal state clean energy fund with 12.5 percent of the overall federal revenue from offshore production.

According to a Wood Mackenzie study, development of oil and natural gas resources off the Atlantic coast could produce $428 billion in revenues for federal, state and local governments.

The Obama Administration postponed until after 2017 lease sales in the South Atlantic in the wake of the 2010 Macondo well disaster. Since that time, Virginia's governor, senators and congressional delegation have come out strong in favor of lifting the moratorium and allowing lease sales to proceed.

Mike Ward, executive director of the Virginia Petroleum Council, told Rigzone that leasing is needed so the industry can assess the hydrocarbon resources off the state's coastline. "Some of the seismic technologies used are 30 years old now," Ward pointed out. "The question looms as to what might be out there."

The proposed Lease Sale 220 area begins 50 miles off the coast of Virginia and points eastward in a triangle shape about 183 miles, covering approximately 3 million acres. The federal government estimates that the area contains 130 million barrels of oil and 1,140 billion cubic feet of gas. At current national rates of consumption, this would supply six days of oil and 18 days of natural gas, according to the Southern Environmental Law Center.

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