Navigating the Seas of Success: Crafting a Five-Year Plan

(Dow Jones) The Obama administration proposed a moderate expansion of offshore drilling Tuesday, revealing a five-year plan that represents the first blueprint for offshore oil production since the Deepwater Horizon spill.

The plan, released by the U.S. Interior Department, proposes to open up regions in the Arctic and the oil-rich Gulf of Mexico for future leasing, but blocks access to the Atlantic and Pacific Oceans. There are no active leases in the Atlantic or Pacific currently.

U.S. officials said they excluded those areas because they are concerned about oil-spill response capabilities. They also said they want to accommodate West Coast lawmakers who object to drilling activity off their coasts.

The federal government shouldn’t “open up every single place and look under every single rock for oil and gas production,” Interior Secretary Ken Salazar said to reporters Tuesday. “We need to drill in the right places with the right protections.”

Salazar said the federal government wants to expand drilling in places where oil production already takes place, such as the Gulf of Mexico, and where the existence of oil and natural gas is already known. Tuesday’s proposal involves a little more than 170 million acres.

Republicans criticized the Interior Department’s plan and said the Obama administration missed an opportunity to ramp up domestic oil production and produce thousands of jobs.

“The Obama administration’s draft plan places some of the most promising energy resources in the world off-limits,” said Rep. Doc Hastings, a Washington Republican who chairs the House Natural Resources Committee.

The oil and gas industry urged the administration to reconsider its decision to block future leasing in the Atlantic. “Taking these areas off the table at this stage could impede the nation’s drive toward enhancing both its economic and energy security,” said Erik Milito, group director of upstream and industry operations at the American Petroleum Institute.

The administration’s plan identifies the regions to be offered for lease auctions from 2012 to 2017. Two-thirds of the proposed auctions are in the Western and Central Gulf of Mexico, where most of the offshore oil production already takes place.

The proposed regions contain more than 75% of the oil and gas that has yet to be discovered, but is still recoverable, in federal waters available for exploration, the Interior Department said.

Of the 15 leases the administration is proposing, two are in the Arctic Ocean off the northern coast of Alaska. Environmental groups criticized the administration for proposing to expand drilling in the region, saying frigid conditions there would make it difficult to respond to oil spills.

Environmental groups have already tried to block drilling projects in the Arctic. They have fought various permits awarded to Royal Dutch Shell PLC (RDSA, RDSA.LN) during its years-long push to begin exploratory drilling in the Beaufort and Chukchi Seas.

“Moving forward without basic science or demonstrated response capacity continues failed policies of the past that have led to controversy and litigation,” said Michael LeVine, Pacific senior council with the environmental group Oceana.

U.S. officials acknowledged they lack a full understanding of the Arctic’s environment and ecosystem. For that reason, the U.S. decided to delay lease auctions in the Arctic until 2015 and 2016 “to use the intervening years to better address the science gaps,” Interior Deputy Secretary David Hayes said.

“The approach that we’re taking there is a cautious one,” Hayes said.

-By Tennille Tracy, Dow Jones Newswires

Lease sales included in the proposed 2012-2017 Offshore Oil and Gas Development Program:

Western Gulf of Mexico: Five annual areawide lease sales beginning in the fall of 2012 that make available all unleased acreage.
Central Gulf of Mexico: Five annual areawide lease sales beginning in the spring of 2013 that make available all unleased acreage.
Eastern Gulf of Mexico: Two sales, in 2014 and 2016, in areas of the Eastern Gulf that are not currently under congressional moratorium.
Beaufort Sea: One sale in 2015 with time to learn from any interim exploration and further analyze environmental issues, subsistence use needs, and infrastructure capabilities – so that the lease sale can be tailored to balance these issues.
Chukchi Sea: One sale in 2016, with time to learn from any interim exploration and further analyze environmental issues, subsistence use needs, and infrastructure capabilities – so that the lease sale can be tailored to balance these issues.
Cook Inlet: One special interest sale including the entire planning area, which is initially scheduled for 2013, but may be moved to later in the program depending on industry interest in the sale.