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    Terry Scholten

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    OEMM Web Team

Frequently Asked Questions: Draft Proposed Program (DPP)

Proposed New 5-Year Outer Continental Shelf Oil and Gas Leasing Program
January 16, 2009; Updated February 17, 2009

Q1: What did Secretary Salazar announce at his offshore energy press conference on February 10, 2009?

A1. The Secretary announced his strategy to develop an offshore energy plan that includes conventional and renewable energy resources. He announced four steps to start his plan:

	extending the comment period on the DPP an additional 180 days to September 21, 2009;
	directing the Minerals Management Service (MMS) and US Geological Survey (USGS) to assemble all known information about offshore energy resources and identifying where there are gaps;
	holding meetings on the three coasts and in Alaska to provide for more public and stakeholder input; and
	issuing the final rulemaking for renewable energy.

Q2. How does this announcement affect the DPP? What about the current program for 2007-2012?

A2. The Secretary’s announcement extended the comment period on the DPP for an additional 180 days in allow for greater public input. His announcement did not alter the substance of the DPP. However, there may be time frame changes in a final program in order to complete all the remaining program preparation steps required under the OCS Lands Act. The Secretary stated that this announcement did not affect the current program.

Q3: Why did MMS initiate the process for another 5-year program now?

A3: In light of the then-existing energy situation and former President Bush’s lifting of the Presidential Withdrawal, the Secretary of the Interior directed MMS to begin the initial steps for developing a new five-year program. On August 1, 2008, we published a Federal Register Notice requesting information on whether to start a new program and what areas should or should not be included. As of October 1, 2008, Congress discontinued its longstanding moratoria on leasing, making most of the OCS available for leasing consideration in a new program. In effect, this action gave the Obama Administration and the Nation, a two-year jumpstart on the multi-step and multi-year process that could eventually offer some of these newly available areas for leasing consideration.

Q4: With this new program, will you be able to lease new areas that were under Presidential withdrawal and Congressional moratoria?

A4: This action constitutes the first of three proposals that could lead to greater access to the resources of the OCS and expansion of our domestic energy production. No area can be leased without being included on an approved 5-year program. This DPP is followed by a comment period (that has been extended) that precedes publication of the proposed program that also is followed by a comment period. A proposed final program must sit before Congress and the President for at least 60 days before the Secretary can approve a final program. In addition an Environmental Impact Statement will be prepared in accordance with the National Environmental Policy Act (NEPA). Even after the Secretary approves a final program, there is a lengthy public preparation process for each lease sale that includes consultation with stakeholders at several junctures and more specific environmental analysis also in accordance with NEPA. No leases can be issued in any areas that are not on the current program until both processes are complete.

Q5: What areas are going to be available

A5: For the draft proposed program, the Secretary proposes 31 OCS lease sales in all or some portion of 12 of the 26 planning areas—4 areas off Alaska, 2 areas off the Pacific coast, 3 areas in the Gulf of Mexico, and 3 areas off the Atlantic coast. The Secretary’s decisions are just a starting place, designed to encourage discussions about the OCS areas of greatest interest, with the greatest potential. It is expected that a final program will offer less area than being proposed here. That is the nature of the “winnowing” process under the Act. Any new areas that are included in the final program will not be available for leasing until the 5-Year Program is complete, having incorporated multiple rounds of public comment.

Q6: How will the new program affect the current program?

A6: If implemented, the new program would replace and supersede the portion of the current program remaining after the effective date of the new program. Currently scheduled sales for mid-2010 to mid-2012 would likely be included in any new program and are so included in this draft proposal.

Q7: Did Congress lift their ban?

A7: Congress discontinued their longstanding annual appropriations moratoria as of October 1, 2008. The only areas remaining under congressional restrictions are the majority of the Eastern Gulf of Mexico and a small portion of the Central Gulf within 100 miles of Florida. These areas are under restriction until 2022 pursuant to the Gulf of Mexico Energy Security Act of 2006.

Q8: Now that there are no restrictions, what is happening off in the Mid-Atlantic off the coast of Virginia?

A8: The current program for 2007-2012 schedules Sale 220 in the Mid-Atlantic Planning Area offshore the coast of Virginia in 2011. With the lifting of the executive and congressional restrictions as of July and October respectively, MMS initiated the presale process with a Call for Information and Notice of Intent to Prepare an EIS for Sale 220 on November 13, 2008. The draft proposed program for 2010-2015 proposes Sale 220 in 2011 as it is configured in the current program. The DPP proposes two additional sales in the entire Mid-Atlantic Planning Area in 2012 and 2015.

Q9: How much oil do you really think is out there?

A9: The MMS estimates about 17.84 billion barrels of oil and 76.47 trillion cubic feet of natural gas to be technically recoverable in the areas currently off limits. Those numbers are very conservative as little exploration has been conducted in most of those areas during the past 20-30 years. Our estimates are based on the available data. We have seen, though, that the numbers tend to increase dramatically as technology improves and exploration activities occur. As a result of the Secretary’s announcement, MMS and USGS will be taking another look at the available resource information and reporting on where there are gaps.

Q10: What are the steps in the 5-Year leasing Process?

A10: The process currently used by MMS, as mandated by Section 18 of the OCS Lands Act, includes three separate public comment periods, two separate draft proposals, development of an environmental impact statement, and the final proposal. It culminates in a decision by the Secretary of the Interior on a new 5-Year Program. Additionally, there is an “annual review” step for the years when a 5-Year Program is in place and a new one is not yet being developed.

Q11: What type of information is MMS seeking?

A11: The MMS would like to receive all comments and suggestions relevant to the size, timing, and location of proposed lease sales. In addition, MMS specifically asked four questions in the DPP:

	Should there be buffer zones (i.e. areas where certain activities are prohibited or restricted)? If so, how large should they be? What criteria should be used for setting them (e.g., visual impacts, infrastructure, etc.)? Should they be uniform in all new areas or vary by area according to issues of concern and/or technical constraints?
	Are there specific areas/subareas that should be excluded because they are particularly sensitive? Or because oil and gas activities may significantly conflict in area with other uses for which the area/subarea might be better suited (e.g., alternative energy)?
	This Administration views revenue sharing as a strong feature of state participation in coastal resource development. When former President Bush modified the presidential withdrawal, he called upon Congress to address new legislation to enhance current revenue sharing laws, to allow broader state participation in fiscal planning related to future coastal resource development. Please provide your views on what policies and programs MMS, Congress and the Administration should consider relative to OCS revenue sharing.
	For those areas proposed for leasing consideration in the Southern California Planning Area, in deciding the next steps in the 5-year program preparation, should MMS include a requirement for mandatory unitization to potentially limit the number of structures in one or more of these areas?

Q12: Who may provide comments on the Draft Proposed Program?

A12: The MMS welcomes comments from all interested and affected parties, including individuals, organizations, and government entities.

Q13: How can I provide comments?

A13: You can submit comments to the Minerals Management Service either by mail or by an online commenting system. Mail comments and information to:

Q14: How will Minerals Management Service use the comments?

A14: The MMS invites comments from anyone who would like to submit information for us to consider in determining the appropriate size, timing, and location of Outer Continental Shelf (OCS) oil and gas leasing for the new 5-year period. In addition to assessing oil and gas industry respondents’ information, MMS will consider the economic, social, and environmental values of all of the resources of the OCS and the potential impact of oil and gas exploration and development on the environment. MMS will then provide recommendations to the Secretary of the  Interior so that the Secretary can approve a 5-year program that balances national interests, and meets the nation’s needs. All respondents are welcome to comment on any aspect of program preparation and to submit any type of pertinent information.

Q15: Has MMS ever done an out-of-cycle 5-year program before? When? Why?

A15: Yes. The first program for 1980-1985 was issued as the Reagan Administration took office. They wanted to consider more areas and eventually another program was approved for 1982-1987.

The last Administration initiated the 5-year process two years early following former President Bush's lifting of the executive withdrawal on much of the OCS.  As of October 1, 2008, the long-standing annual congressional moratoria also were discontinued.  With the exception of the area off Virginia in the Mid-Atlantic Planning Area, none of these newly-available areas were on the current 5-year program and could not be considered for leasing unless and until they were included on an approved lease sale schedule.  For much the same reason as the out-of-cycle 1982-1987 program, the Bush Administration provided the incoming Administration with the opportunity, if they chose to do so, to consider more areas earlier than would be otherwise possible.  The Secretary's February 10 announcement extended the comment period on the DPP for 180 days to allow states, stakeholders, and affected communities the opportunity to provide input into the role of the offshore as part of the comprehensive energy program.

Q16: Does an out-of-cycle program require any action from Congress?

A16: No. The OCS Lands Act allows the Secretary to prepare, and periodically revise, and maintain an oil and gas leasing program to implement the policies set forth in the Act. The Act does not prohibit the Secretary from preparing and issuing an out-of-cycle program.

Q17: When will the new 5-year program take effect?

A17: The new program, if MMS decides to proceed, is expected to take effect in 2010. However, there may be time frame changes in a final program in order to complete all the remaining program preparation steps required under the OCS Lands Act.

Q18: Do the states have any input to the 5-year program?

A18: The states have several opportunities to submit comments during this process. In addition, the MMS sent letters to the Governors of all 50 states requesting input on issues unique to each state. At the Proposed Final Program stage, the Department of Interior must tell a state (and the President and Congress) if MMS didn't accept a state’s recommendation and why. The Secretary also called for four meetings to be held on the three coasts and in Alaska to provide additional opportunities for input from states, stakeholders, and affected communities.

Q19: Will the states share in revenues?

A19: States will share in OCS revenues in specified areas according to laws currently in effect or that may be passed by Congress in the future. The 5-Year Program is only a schedule of sales and does not authorize revenue sharing. However, respondents were specifically asked for their views on what policies and programs MMS, Congress, and the Administration should consider relative to OCS revenue sharing.

Q20: Will MMS stop holding lease sales under the current program while this new program is being developed?

A20: Lease sales approved in the current 2007-2012 5-Year Program will continue as scheduled.

Q21: Will MMS prepare an Environmental Impact Statement (EIS) as part of the process to develop a new 5-Year program?

A21: Yes. The Notice of Intent (NOI) for a draft EIS is part of the DPP notice. With the Secretary’s announcement extending the comment period on the DPP and the NOI, MMS is re-looking at when during the extended period to hold scoping meetings during the extended period. Throughout the scoping process, Federal, state, and local government agencies and other interested parties will have the opportunity to aid MMS in determining the significant issues and alternatives for analysis in the EIS. The public will have an additional opportunity to comment on the Draft EIS. All comments received on the Draft EIS will be addressed in the Final EIS. Subsequent NEPA documents may be prepared with additional comment periods.

Q22: Will this shorten, or eliminate the requirement for the environmental reviews since MMS just went through that process in 2007?

A22: A new program will require additional environmental reviews in compliance with the National Environmental Policy Act as well as numerous other environmental laws affecting OCS

Q23: Where on the OCS does oil and gas come from?

A23: Most U.S. offshore oil and gas production is from the Gulf of Mexico OCS. Today, 3820 platforms are producing nearly 1.3 million barrels of oil per day and almost 8 billion cubic feet of natural gas per day. Since 1992, leasing, drilling, and production activities in the Gulf of Mexico have moved steadily into deeper waters. About 54 percent of active leases are in deep water (>1000 feet). Deepwater oil production rose about 820 percent from 1992 to 2006, and deepwater gas production increased about 1,155 percent.

Q24: When will production start in these new areas?

A24: Once a lease is awarded, it would take between 5 – 10 years to see production actually occur. Some areas could move a little faster, while others would take longer. A lot depends on the specific area, existing infrastructure, etc.

Q25: The MMS has already been criticized for not accurately accounting for royalty revenue, and you had the price threshold / royalty relief issue from the leases back in 1998. Is MMS the best agency to continue managing the offshore energy program, especially an expanded program?

A25: The MMS has been the subject of intense public scrutiny, and we continue to welcome recommendations for improvement. The various reviews, audits, and investigations have shown that MMS is effectively carrying out its responsibilities as stewards of the nation’s offshore energy resources and revenues generated from energy production on Federal and American Indian lands. The Secretary’s announcement is intended to “change the way the Interior Department does business...”

Q26: What is MMS doing to make companies produce on the leases they already have?

A26: The MMS encourages due diligence by establishing primary terms of leases that allow only the minimum length of time a company should need to explore a lease. At the end of the primary term, the lease must produce in paying quantities or the operator must conduct continuous operations in order to keep the lease in effect unless MMS grants an extension. If an extension is granted, the MMS monitors activity closely and ensures that approved milestones are timely met.

In addition, for recent lease sales, MMS has employed escalating rentals to encourage early lease development.

Q27: According to recent reports, MMS doesn't have a consistent definition for “due diligence,” and companies routinely get extensions on their leases without conducting any activity. Shouldn't that be fixed before new areas are offered?

A27: The MMS does not grant extensions on leases unless companies meet strict guidelines. See answer above.

Q28: Is offshore energy exploration considered safe?

A28: The MMS has an excellent safety record, one that has improved over time. Only about 2 percent of the oil spilled in our North American oceans comes from OCS production. In contrast, over 150 times more oil in our North American oceans comes from natural seeps in the ocean floor.

Q29: The MMS has an extensive regulatory program and daily inspections; can you describe this a bit more?

A29: The oil industry cannot just begin operations once they obtain a lease. Many regulatory approvals are required. A company must file an exploration plan before drilling any wells and that is subject to a technical and environmental review by MMS. Once a discovery is made the company has to file a development plan for MMS to again conduct a technical and environmental review before production could begin. For major facilities, MMS conducts an onsite inspection before allowing production to begin. Often this is a joint inspection with the US Coast Guard. Air emissions permits and water discharge permits must also be obtained as required by law. The MMS has over 60 inspectors that daily fly offshore to conduct both announced and unannounced safety and environmental inspections.

Q30: What is the history of the congressional moratoria for the planning areas?

A30: The first congressional moratorium was enacted in fiscal year (FY) 1982, prohibiting leasing off the Central and Northern California coast.

	In 1984, Southern California, the North Atlantic, and part of the Eastern Gulf of Mexico, basically south of 26 degrees North latitude, were placed under moratoria.
	In FY 1990, the North Aleutian Basin, Alaska, and the Mid-Atlantic came under moratoria. Washington/Oregon and the Florida Panhandle area of the Eastern Gulf of Mexico were added to the moratoria list in FY 1991.
	The South Atlantic was added in 1992.
	These areas continued to be subject to yearly Congressional moratoria, with the exception of the North Aleutian Basin, Alaska, which was not included in the annual Congressional moratoria after FY 2003.
	The Gulf of Mexico Energy Security Act of 2006 (GOMESA) lifted the Congressional moratorium in December 2006 for prelease and leasing activity for the “181 South Area” in the Eastern Gulf of Mexico. However, in GOMESA, Congress placed off limits until 2022 the Eastern Gulf of Mexico within 125 miles of Florida, off the coast of Alabama, and a portion of the Central Gulf within 100 miles of Florida.

On July 14, 2008, the President modified the executive withdrawal for the above areas and requested that Congress lift the Congressional restrictions to allow increased domestic oil exploration and production in the remaining OCS areas. The Congressional moratoria expired on September 30, 2008 and the only remaining OCS area off-limits is currently the Eastern Gulf of Mexico within 125 miles of Florida, off the coast of Alabama, and a portion of the Central Gulf within 100 miles of Florida.

Q31: What has changed since the current 5-Year program was approved?

A31: In short, the tremendous escalation and the following decrease in energy prices since the implementation of the current 5-year program has changed the assumptions upon which many of our decisions for that program were based. Areas that, just over a year ago, were considered too expensive to develop, are no longer necessarily out of reach based on improvements to technology and safety.

The MMS initiated the 5-Year program development approximately 2 years ahead of schedule, as part of the Federal Government’s actions to address the domestic energy situation. Currently, America consumes more oil than we produce. In fact, oil and natural gas are expected to remain, by far, our primary sources of energy for decades to come, even with aggressive efforts and government policies to encourage the development of alternative fuels, more efficient engines, and increasingly effective conservation measures.

Additionally, our international neighbors are examining OCS development and are considering lifting existing domestic moratoria. Canada is one example of this activity.

Q32: What are some of the benefits Outer Continental Shelf (OCS) oil and gas provides to our Nation?

A32: The OCS is a significant source of oil and gas for the Nation’s energy supply. On a per day basis, the OCS currently produces about 1.3 million barrels of oil and almost 8 billion cubic feet of natural gas. This represents approximately 27 percent of domestic oil production and 15 percent of natural gas production.

Additionally, the MMS is developing a program to produce electricity from alternative energy resources on the OCS. Under the Energy Policy Act of 2005, the Secretary, acting through MMS, has established a program to develop renewable energy resources on the OCS. Secretary Salazar’s announcement stressed the importance of an offshore energy plan that includes conventional and renewable energy resources. The Department will issue a final rule for renewable offshore energy in the coming months.

Q33: What is the Department of the Interior/Minerals Management Service doing to improve the safety of offshore energy development?

A33: The MMS regulatory program is a globally-recognized system consisting of three key elements; prescriptive regulations, industry standards and performance measures. These elements form the foundation for achieving safe and environmentally sound OCS operations. The system requires a variety of plans and permits to be completed by lessees at key stages of the exploration and development process. Once activities are approved, MMS inspectors perform onsite evaluations of equipment and operational practices to assure field activities are conducted in accordance with approved documents.

If infractions are identified, MMS has a variety of enforcement tools available including; issuing incidents of noncompliance, pursuing civil or criminal penalties, and initiating disqualification procedures. In an effort to continually improve the program MMS develops and issues updated regulations, industry Safety Alerts, and Notices to Lessees on a regular basis. The agency participates in the development of industry standards both nationally and internationally to assure developed documents reflect agency concerns, policies and updated technologies.

Q34: Is the demand for energy growing?

A34: Yes. Energy is the lifeblood of our modern existence.

Over the past fifteen years the consumption of natural gas has increased almost 15 percent while the consumption of oil increased over 20 percent.

While U.S. and worldwide consumption of oil has slowed in the worldwide economic crisis, prices and demand will be expected to rise as the global economies recover. The increase in world demand was a major cause of the quadrupling of oil prices over the past 5 years.

Q35: Is energy production keeping up with the demand for energy?

A35: No. Today we import over 58 percent of the oil that we use, because domestic production has not kept pace with the rising demand for energy.

Q36: What has changed since these moratoria were adopted by Congress in the 1980's that makes the program any safer?

A36: Congress has passed several new statutes that have provided new environmental and other requirements to improve the process. At least 5 major statutes have been enacted since the first moratoria were enacted. These have expanded several environmental protection measures on offshore drilling and production. In addition MMS has substantially rewritten its regulations several times since the early 1980’s to address even more carefully drilling and production operations and increased the safety measures required. In addition, MMS has conducted nearly $800 million in environmental research, and this has increased our knowledge about what needs to be protected and how to protect it.