States Seek to Tap Offshore Oil, Natural Gas

Published December 1, 2005

With the recent rise in energy prices, state government officials are increasingly seeking to develop natural resources on state lands or just offshore.

Congress Debates Offshore Recovery

The federal moratorium on new offshore oil and natural gas development, imposed by former President Bill Clinton in a 1998 executive order and currently scheduled to expire in 2012, is coming under fire from state officials who see a silver lining in rising natural gas and oil prices. With modern technology making it possible to tap government-owned land in an environmentally responsible manner, officials in some states are hoping to supplement their budgets with royalty payments from rich offshore reserves. Others note tapping offshore resources may help bring down consumer energy bills.

“We have put ourselves in this situation of strain on oil and gas supply,” said Dan Simmons, director of the Natural Resources Task Force for the American Legislative Exchange Council.

“Ninety-three percent of new electric generation in recent years has been produced with natural gas because it’s a clean-burning fuel, and we’ve relied on cheap natural gas, but there is now greatly increased demand for natural gas,” Simmons said.

The federal government owns more than 900 million acres of land–about 40 percent of the total property in the United States. State governments own about 200 million additional acres. Vast tracts of this government-owned land are seen by energy users and energy producers as important additional sources of gas and oil.

House Action Possible

An energy bill supported by the House Resources Committee would have given states the option of allowing offshore drilling in their coastal waters. The bill, which would have effectively ended the federal moratorium on offshore drilling, was approved by the House Resources Committee on October 26 by a vote of 24-16.

However, the moratorium remained in effect after House leaders deleted from their 2006 budget bill the language that would have ended it. The move was designed to reduce controversy regarding the proposed budget, while allowing the moratorium to be debated on its own merits later in the congressional year.

Pennsylvania Rep. John Peterson (R) subsequently offered the “Outer Continental Shelf Energy Relief Act,” which would immediately end the moratorium.

Virginia Shows Support

The Virginia gubernatorial race illustrated bipartisan support for lifting the moratorium.

Governor-elect Tim Kaine, a Democrat, said during the fall campaign that oil and gas production off the Virginia coast could benefit the state. “We need to do some exploration to determine what is there, and if it’s worth our pursuing it further, recognizing there may be some environmental consequences. Exploration is a good thing,” Kaine said, according to the October 11 Greenwire.

States that permitted offshore drilling, as well as the federal government, would receive royalties based on oil and gas leases. The Congressional Budget Office estimates Atlantic seaboard states alone could receive $1.5 billion in total royalty payments over the next 10 years.

“The United States has the sixth largest reserves of natural gas, but hasn’t tapped those reserves because they have been hamstrung by the federal government,” Simmons said.

Local governments also own land in the United States, and citizen/government partnerships are on the rise at the local level. According to the October 29 Pittsburgh Tribune-Review, a business owner in Westmoreland County, Pennsylvania would like to drill for natural gas on a nine-acre plot of property in a county-controlled industrial park. With the mineral rights in the industrial park retained by the county, the business owner has offered to split all royalties with the county in exchange for permission to extract the minerals.

Michael Coulter ([email protected]) teaches political science at Grove City College in Pennsylvania.