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Petroleum News: White House confirms Bristol Bay oil and gas leasing ban might be lifted

EXTRACT: Leasing was stopped nearly two decades ago following the 1989 Exxon Valdez oil spill offshore Alaska in Prince William Sound. …Royal Dutch Shell PLC and other oil companies… have lobbied the White House to lift the offshore drilling ban.

Week of December 10, 2006

President Bush is considering lifting a ban on oil and gas leasing in federal waters off Alaska’s Bristol Bay in the North Aleutian basin.

Leasing was stopped nearly two decades ago following the 1989 Exxon Valdez oil spill offshore Alaska in Prince William Sound.

But with natural gas prices higher, the U.S. Interior Department’s Minerals Management Service earlier this year proposed reopening the North Aleutian basin, which includes Bristol Bay and part of the southeastern Bering Sea.

White House spokesman Scott Stanzel confirmed Dec. 2 that the president is considering it.

In recent days, national environmental groups issued a flurry of e-mails and press releases urging their supporters to lobby Congress, the White House, Alaska officials and others against the proposal. They have speculated in recent days that Bush might allow such drilling before Democrats regain control of Congress in January.

Supporters of offshore drilling propose limiting lease sales to a small area in the southwest corner of the basin starting near Port Moller.

Gov. Frank Murkowski, in a Nov. 22 letter to MMS director Johnnie Burton, said local communities in that area supported offshore drilling as long as they were closely involved in oil and gas development.

“Any oil and gas activity in the region must minimize conflicts with fishing activities, minimize negative impacts to fish and wildlife resources and must be done with significant stakeholder consultation,” Murkowski wrote.

Murkowski, who left office Dec. 4, also proposed changing federal law to allow the state and coastal communities to get more revenue from the offshore leases, and he reiterated his request that the president lift the leasing ban.

Though she hadn’t been briefed on the proposal, Gov. Sarah Palin in the past has said that Cook Inlet “was an excellent model for how offshore development and a delicate marine environment can co-exist,” her spokesman Curtis Smith said in early December.

The MMS said in its August proposal that reopening oil and gas development in the basin’s federal waters, extending between three miles and 200 miles offshore, could produce $7.7 billion in oil and gas production and up to 11,500 jobs. If the president lifts the ban, lease sales could start as soon as 2010, MMS said.

MMS estimates the area holds some 200 million barrels of oil and 5 trillion cubic feet of natural gas.

Fourteen companies are said to be interested. The agency cited support among more than a dozen local and tribal governments nearby that believe the drilling would boost their economy.

The Bristol Bay region’s fishing economy has been depressed over the past decade, partly because of competition from less expensive farmed salmon. The depressed fisheries have given more support to Royal Dutch Shell PLC and other oil companies that have lobbied the White House to lift the offshore drilling ban.

The southwest segment of Bristol Bay was last open for lease sales in 1988 when the federal government collected more than $95 million, which it has since paid back to the successful bidders.

Congressional protections put on the area in 1989 were lifted in 2003 at the behest of Sen. Ted Stevens, R-Alaska, who said he had been acting at the request of constituents in the region.

—This story was reported and written by The Associated Press, reporter Richard Richtmyer of the Daily News and edited by Petroleum News.

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