Issues » Comments on Rules and Regulations

IPAA's Comments to the Minerals Management Service

March 26, 1999

Mr. Hammond Eve
Regional Supervisor
Leasing and Environment (MS 5400)
Gulf of Mexico OCS Region
1201 Elmwood Park Boulevard
New Orleans, LA 70123-2394

Re: Comments on MMS Call for Interest and Information and Notice of Intent to Prepare an Environmental Impact Statement on OCS Lease Sale 181

Dear Mr. Eve:

The Independent Petroleum Association of America (IPAA) submits these comments to the Minerals Management Service in response to its January 25, 1999 notice in the Federal Register regarding a Call for Information on the OCS Eastern Gulf of Mexico Oil and Gas Lease Sale 181. We very much appreciate being afforded an opportunity to express our views on this very important sale early in the process.

IPAA represents over 5000 independent oil and gas producers in the United States. Through the IPAA Offshore Committee, member companies of the association discuss issues of importance to oil and gas producers offshore. In recent years, independents have become increasingly active in the OCS. Independents account for 31 percent of the crude oil production on the OCS and 48 percent of the natural gas production from the most recent data (1995). According to Platt's Oilgram News (March 18, 1999), "Independents made up about 90% of 58 companies participating" in the US Gulf of Mexico Lease Sale 172.

We have worked with other trade associations in connection with this and other offshore issues. Many times, we work collaboratively with the American Petroleum Association, the National Ocean Industries Association, the Domestic Petroleum Council, the Offshore Operators Committee, and the U.S. Oil and Gas Association. The views expressed in comments filed by these trade associations are very consistent with those of the IPAA with the exception of the timing of OCS Sale 181. As we will explain later, we believe the sale should be held in December 2001, if not earlier, while others have expressed support for holding the sale in March 2002. Although we differ with others as to the timing of the sale, we endorse the other comments submitted in the inter-association submission of the trade associations listed above.

IPAA member companies are strongly encouraged by the prospect of OCS Sale 181 occurring as scheduled in the Eastern Gulf of Mexico in December 2001. We believe that holding the sale as originally contemplated, is consistent with our national energy strategy and would maximize the revenues from the sale. A number of our members have begun the evaluative process to identify blocks that might warrant further investigation. Though still early in our process, independent producers are engaged in the process and have begun to spend time and money preparing for the sale. It is, therefore, important that the MMS move forward with other pre-sale activities in order to ensure that the sale occurs on time and without tract deletions.

The IPAA believes that it is important that tracts not be deleted from the sale area. With only 1033 tracts under consideration at this point, any deletions would make an already modest sale a very small sale by almost any standard. We have followed closely the developments with regard to potential withdrawals as a result of the Defense Department’s Theater Missile Defense System requirements for portion of the proposed sale area. We remain opposed to such withdrawals and encourage the MMS to resist them as well.

Now, as to the timing of the sale, we believe strongly that the sale should occur in December 2001 as currently called for in the Five Year OCS Leasing Schedule. In its January notice, the MMS cited reasons for a delay until March 2002, specifically to coincide with the Central Gulf Sale. While we appreciate the MMS’ attempts to streamline the sale process for both the industry and itself, most of our member companies do not see a significant benefit of holding these two sales on the same day. On the contrary, because of limited manpower and the requirement to focus technical efforts in an area to coincide with specified bid deadlines, the combination of two different lease areas into one sale works against the abilities of independents to adequately evaluate each area. Ultimately this would work against the goal of both the companies and the government of optimizing sale results. IPAA companies are far more concerned that delays, even a three month delay, will give way to more delay. Sale postponements beyond March 2002 would unacceptable to all of us.

At a recent meeting of the IPAA Offshore Committee with Carolita Kallaur, Offshore MMS Associate Director and MMS Regional Director Chris Oynes, we discussed OCS Sale 181. Some thought was given to actually accelerating the sale so that it avoids the year-end conflicts of holiday and vacations. IPAA would support such an acceleration should the schedule prove workable.

Thank you for the opportunity to comment on OCS Sale 181 at this early date. We look forward to working with you toward a successful sale.

Sincerely,

Robert Boswell
Chairman, IPAA Offshore Committee