# Presentation: 049603

## Minerals Management ServiceOffshore Minerals and Energy ManagementA Leasing Program Overview

***Renee Orr***
***Chief, Leasing Division***
***Minerals Management Service***
***November 2008***

## Who is MMS?

*The Minerals Management Service manages Federal mineral resources on the Outer Continental Shelf and Federal and Indian mineral revenues to enhance public and trust benefit, promote responsible use, and realize fair value.*

## Mission

- Core balancing objectives:
_**Safe Offshore Operations**_Promote incident-free operations during exploration, development, and production in Federal offshore waters.
_**Environmental Protection **_
- 	       Ensure that all Federal offshore activities are conducted with 	appropriate environmental safeguards.
_**Fair Market Value**_
- 	Assure receipt of fair market value to the public.

## From Outer Continental Shelf Lands Act, as Amended

- "It is hereby declared to be the policy of the United States that . . . ***the Outer Continental Shelf is a vital national resource*** held by the Federal Government for the public, which should be made ***available for expeditious and orderly development, subject to environmental safeguards***, in a manner which is ***consistent with ******the maintenance of competition*** and other national needs . . . . "

## An OEMM Snapshot

**Alaska OCS Region**
-        (Anchorage, AK)

**Pacific OCS Region**
- (Camarillo, CA)
- 1 District

**Gulf of Mexico OCS Region**
- (New Orleans, LA  and 5 District Offices)

**       ****Headquarters**
-       (Washington, DC -  ADOMM)
- (Herndon, VA)

**Ohmsett Test Facility**
-         (Leonardo, NJ)
-                 Contract

**Offshore Technology**
**   ****Research Center**
-     (College Station, TX)
-               Contract

- Coastal States with OCS Production

**Office:****	**
**HQ****	****199**
**GOMR****	****581**
**Pacific****	****51**
**Alaska****	**_**78 **_
**TOTAL****	****909**

## MMS Overview

- Created in 1982
- Responsible for 1.76 billion OCS acres
- Lease issuance to decommission
- Day-to-Day
- ~8,000 leases
- ~43 million acres leased
- ~27% of oil;~15% natural gas
- ~4,000 production platforms
- ~33,000 miles of pipeline
- ~42,000 OCS personnel
- ~125 operating companies
- ~$13 billion annual revenue (based on 5-year average)

## Slide 7

## Minerals Management ServiceOCS 5-Year Plan (2007-2012)

- The lease sale process begins with the 5 – Year Program.
- The 5-year program specifies the size, timing and location of areas proposed for Federal offshore oil and gas leasing.
- The 5-Year Plan:
-     Responds to national energy needs while addressing economic, social and 	environmental concerns of the public; and
-     Reduces dependence on foreign oil and stimulates the domestic economy.
- Anticipated 40-year benefits from the 5-Year Plan approximately:
-    Additional 10 billion barrels of oil;
-    Additional 45 trillion cubic feet of natural gas; and
-    Additional $170 billion in net benefits to the Nation.
- Request for Information on potentially new 5-Year plan for 2010-2015 under review.

**Minerals Management Service****OCS 5-Year Plan (2007-2012)**

## Offshore Restrictions Lifted –Presidential Withdrawal/Congressional Moratoria

- July 14, 2008 -  President George W. Bush announced a modification of the Presidential Withdrawal.
- September 30 , 2008 - the Congress let expire the previous Department of the Interior Appropriations measures that had imposed an Atlantic drilling ban that lasted over 25 years.
- As of October 1, 2008, the MMS is not prohibited from OCS oil and gas activities related to leasing and pre-leasing activities in these areas that are permitted under the OCSLA, NEPA, and other laws addressing OCS matters.
- MMS may only lease in areas that are in the current 5-year plan.  (Requests for Information on developing a new 5-Year Plan from 2010-2015 was published August 2008). But the only area that is now available in the 5-year plan that was previously unavailable because of the Withdrawal and Moratoria is the area off the coast of Virginia.  The current 5-year plan has a sale scheduled for that area for 2011.
-  With no ban in place, MMS could start the pre-leasing activities associated with the sale, including the Call for Information and Notice of Intent to prepare and Environmental Impact Statement (EIS).

## Leasing, Exploration, & Development Process

- Solicit
- Comments

- 45-day
- Comment
- Period

- Draft
- Proposed
- Program
- Published

- 60-Day
- Comment
- Period

- Proposed
- Program

- Draft EIS
- Published

- 90-Day
- Comment
- Period

- Proposed
- Final
- Program

- Final EIS

- 60-Day
- Period
- with
- Congress

- 5-Year
- Program
- Announced

**Leasing, Exploration, & Development Process**

- Call for
- Information
- Published

- 45-day
- Comment
- Period

- Define
- Sale
- Area

- Draft EIS
- Proposed
- Notice
- Distributed

- 90-Day
- Comment
- Period

- Final EIS
- Published

- CD to Governors

- 30-Day
- Comment
- Period

- 90-Day
- Comment
- Period

- Notice
- of
- Sale

- 30-Day
- Period

- Sale

- Leases
- Issued

**Pre-lease**

**Develop 5-Year Program**

**Planning for Specific Sale**

- Exploration
- Plan
- Submitted

- Environmental
- Assessment

- CZM Review
- Starts

- Exploration
- Plan
- Approved

- 90-Day
- CZM
- Review
- Approved

- APD
- Approved

- Permits
- Granted

- Exploration
- Drilling
- Starts

- First
- Exploration
- Well
- Completed

- Delineation
- Drilling

**Post Lease**

**Exploration Plan Approval**

- Development
- and
- Production
- Plan

- CZM
- Consistency
- Review
- Starts

- Draft
- EIS
- Published

- 90-Day
- Comment
- Period

- Final
- EIS
- Published

- CZM Consistency
- Obtained

- Development and
- Production Plan
- Approved

- Production
- Well
- Application

- First
- Oil/Gas
- Production

- Abbreviations:  ADP, Application for Permit to Drill; CD, Consistency Determination; CZM, Coastal Zone Management; EIS, Environmental Impact Statement

**Development & Production Plan Approval**

**Notes:**
As you can see from the processes covering OCS leasing from the broad perspective of developing the 5-Year Program through planning for a specific sale included in the 5-Year program and approving site specific plans of Exploration and development/production, the processes are ripe with coordination with stakeholders.

## Environmental Laws Affect Program

**Regulates air emissions from industrial **
**activities**

- National Environmental Policy Act

- Federal Water Pollution Control
- Act (Clean Water Act)

- Clean Air Act

- Coastal Zone Management Act

- Endangered Species Act

- Marine Mammal Protection Act

- Fishery Conservation &
- Management Act

- National Historic Preservation Act

**Includes environmental analysis & **
**protection in project planning**

**Regulates discharges from oil & gas **
**activities into marine waters**

**Assures compliance with State coastal **
**area protection plans**

**Protects threatened & endangered **
**species**

**Protects marine mammals**

**Protects essential fish habitat**

**Protects archaeological resources **
**including those on the ocean floor**

- Oil Pollution Act

**Oil Spill Financial Responsibility**

## MMS-Funded Research

**Environmental**
** ****Studies**

- Pollutant Transport (air & water)
- Biological Resource Characterization (habitat & behavior)
- Marine Environmental Monitoring
- Fates and Effects
- Socioeconomic Effects
- Biotechnology
- Invasive Species

**Technology Assessment **
**& Research**

- Reduce Emissions
- Blowout Prevention
- Structural Removal
- Corrosion Prevention
- Oil Spill Response
- Leak Detection
- Marine Risers
- Composite Materials

**Leasing**
**Exploration**
** ****Production**
**Decommissioning**

**MMS-Funded Research**
**$800 million in environmental studies**
**$100 million on technical research**

**Notes:**
MMS research is driven by a thorough assessment of the myriad industry activities taking place offshore.  State of the art engineering and environmental sciences are applied to issues identified at the earliest stages of pre-leasing activity through the final stages of platform decommissioning, providing turnkey coverage.  This full spectrum analysis promotes safe offshore operations that protect the environment.  These same principles are now being incorporated as we initiate activities for renewable energy and alternative use of the OCS platforms.

## Multiple Agencies Involved

- U.S. Coast Guard
- Oil-spill response, port and vessel security and inspections (MOU)
- Environmental Protection Agency
- Air and water quality (MOU)
- National Oceanic and Atmospheric Administration
- Coastal programs
- Marine mammals/endangered species
- Fish and Wildlife Service
- Marine mammals/endangered species

## State and Local Involvement

- Coastal Commissions
- Departments of Fish & Wildlife
- Air Resource Boards
- Departments of Water Resources
- Departments of Conservation & Natural Resources
- Departments of Environmental Regulations
- Departments of Culture, Recreation, & Tourism

## Lease Sale Process

- Call for Information and Nominations/ Notice of Intent to Prepare EIS
- Area Identification
- Hold Public Hearing
- Conduct Environmental Analyses/EIS
- Solicit Governor’s Comments
- Publish Proposed Notice of Sale/ Public Comment Period
- Publish Final Notice of Sale
- Hold Lease Sale

## Call for Information and Nominations(45-day comment period)

- From potential bidders:
- Industry interest
- Industry ranking of areas
- From other interested parties:
- Environmental effects
- Use conflicts
- Coastal Zone Consistency Concerns
- Issues of Concern

## Information Sources

- Geological and geophysical records
- Environmental and socioeconomic data
- MMS Environmental Studies Program
- Other Sources
- Experience in area, including past sales
- Early discussions with affected State representatives

## Notice of Intent to Prepare an Environmental Impact Statement

- Public Notice
- Announces beginning of the environmental analysis process
- Invites public help to determine elements of analysis
- Significant issues
- Alternatives

## Area Identification

- Sent to Governors and interested publics
- Announces the leasing proposal
- Geographic area under consideration
- Mitigating measures
- Based on responses to Call and other coordination
- Not a decision to hold a sale or end consultation

## Environmental Impact Statement-- Draft -- (60 day comment period)

- 1 to 1 1/2 years after Call
- Describes planning area
- Analyzes potential environmental effects of oil and gas activities
- in area proposed for leasing (“proposal”)
- for alternatives
- Public notice of availability

## Environmental Impact Statement-- Final --

- Considers comments on draft EIS
- Basis for analysis of leasing options
- Basis of “Consistency Determination”

## Proposed Notice of Sale

- Public Notice
- Proposed area, terms, conditions of offering
- Basis of Governor’s comments on size, timing, location of offering (OCSLA)

## Final Notice of Sale(about 90 days after proposed Notice published; must be at least 30 days before sale)

- Public Notice
- Date, timing, location, blocks to be offered, terms and conditions of sale
- Illustrates balancing of national interest and well-being of citizens of affected State

## Lease Terms

- Every OCS lease has a primary term – how long the lease is granted.
- Statute sets a 5 year minimum and 10 year maximum.
- MMS uses 5, 8, and 10 year terms.

## Fiscal Terms and Bid Adequacy

- Fiscal Terms in Every Lease:
- Bonus Bid – winning highest $ amount paid at time of lease auction.
- Rental – holding cost per acre during primary term.
- Royalty - $ amount paid based on % of production volume.
- Bid Adequacy:
- Each bid evaluated by our resource bid adequacy procedures for fair market value to the taxpayer.

## Submission of Bids

- A bidder must be a U.S. citizen or a company incorporated in the U.S.
- Companies submit a separate sealed bid for each block they wish to obtain
- With each bid, the company must send in 20% of the bid value
- Transparent Process – Bids are opened and read publically at time of sale

## Awarding the Lease

- MMS accepts or rejects bids within 90 days of the lease sale.
- If a bid is rejected, MMS returns the 20% of the bonus that the company had submitted.
- If MMS accepts the bid, the company has 11 days to:
- Submit remaining 80% of the bonus
- Sign the lease document, and
- Submit the first year’s rental

## What the lease conveys

- The right to explore for, develop, and produce the oil and gas contained within the lease area.
- Lease area – 5760 acres – 3 square miles
- Initial terms of 5 - 10 years, extended for as long as production or drilling operations continue
- Subject to specified financial and operational terms and conditions (lease and operational bonds)

## Environmental Stipulations

- Lease may contain detailed requirements designed to eliminate, alleviate, or mitigate adverse environmental effects

## Offshore Safety

- Regulations
- Design
- Operations
- Maintenance
- Technology Assessment & Research Program
- Training
- Audits
- Drills/Exercises
- Inspections

**Notes:**
The underlying driver for all of the operations previously discussed is Offshore Safety. The Nation's record for safe and clean offshore natural gas and oil operations is excellent. And to maintain and improve upon this excellent record, MMS continually seeks operational improvements that will reduce the risks to offshore personnel and to the environment. MMS constantly re-evaluates its procedures and regulations to stay abreast of technological advances that will ensure safe and clean operations, as well as to increase awareness of their importance. 
The GOM Region is responsible for administering more than 7,400 active leases covering more than 39 million offshore acres, where some 30,000 personnel work offshore at a given time. The Region regards the safety of personnel, of the environment, and of operations as top priorities. 

## Mid-Atlantic Program Area Offshore Virginia

- Sale 220 Program Area
- Offshore Virginia (50 statute miles)

## History of the Atlantic OCS 

- 10 oil and gas lease sales were held between 1976 and 1983
- 32 exploratory wells were drilled in the mid-Atlantic
- 5 wells discovered hydrocarbons
- 		offshore New Jersey and
- 		abandoned as non-commercial
- Only 1 block was leased offshore Virginia;  	never drilled

**Notes:**
-49 wells (47 exploratory and 2 COST wells) were drilled in the Atlantic in the ‘70’s and ‘80’s 
-natural gas was discovered about 100 miles offshore Atlantic City, New Jersey ( Baltimore Canyon)
-and comprehensive monitoring programs showed no impact.

## Resource Potential

- Based on the 2006 National Assessment, we estimate the mean Undiscovered Technically Recoverable Resources contained in the Sale 220 area to be 130 million barrels of oil and 1,140 billion cubic feet of gas.
- Lack of Updated Resource Data

## Other Issues

- Currently, no revenue-sharing authority exists with Atlantic coastal states, unlike other states with GOMESA and CIAP.