As has been widely reported in the press, the Bureau of Ocean Energy Management (“BOEM”) has issued a Draft Proposed Program for the 2017-2022 Outer Continental Shelf Oil and Gas Leasing Program. While much has been made in the press of the opening of areas in the Atlantic Ocean to exploration and development, a close reading shows that this “Draft Proposed” program is far from final and may have less impact than anticipated: those Atlantic areas can be withdrawn before the final Leasing Program is issued; the only other change proposed by BOEM in drilling areas from the currently effective 2012-2017 Leasing Program is a diminution in the area open to exploration in the Arctic Ocean offshore Alaska, the size of which may be open to debate; and, the 2017-2022 Program will not be finalized until the new President, whoever he or she might be, takes office.

The major difference between the Draft Proposed Program and the existing 2012-2017 Program is that the existing Program excludes leasing in all of the Atlantic, whereas the Draft Proposed Program would allow leasing in a portion of areas offshore of Virginia, North Carolina, South Carolina, and Georgia in the Mid and South Atlantic. The reduction in the area that can be drilled offshore of Alaska is the removal of the Hanna Shoal in the Chukchi Sea from availability. Otherwise, there are no changes proposed in leasing areas: in the Gulf of Mexico, the same areas are open and the same areas (as mandated by law, certain areas of the Eastern Gulf of Mexico and a portion of the Central Gulf of Mexico) are closed, and all areas off the Pacific coast continue to be excluded.

Next Steps

The Outer Continental Shelf Lands Act (“OCSLA”) requires BOEM to propose a schedule of lease sales every five years, and prescribes a set of steps for BOEM to follow in developing a final leasing program. Issuance of the Draft Proposed Program is the required first step. Comments on the Draft Proposed Program are due by March 30, 2015. After the expiration of that comment period, BOEM will develop a Proposed Program, which will in turn be followed by a Proposed Final Program. The final step, issuance of an Approved Program, may occur no earlier than 60 days after issuance of the Proposed Final Program. As part of this process, BOEM will also prepare a Programmatic Environmental Impact Statement (“PEIS”) for the OCS leasing program. A Draft PEIS will be published with the Proposed Program and the Final PEIS with the Proposed Final Program.

The current Five-Year Program for 2012–2017 expires in August 2017. It can be expected that both the Proposed Final Program and the final Approved Program will be issued after the new President takes office in January 2017.

Areas Open to Leasing May Shrink, but Cannot Grow

The new President will be constrained by the Obama Administration’s actions. If an area is not included in the Draft Proposed Program, it cannot be added before the program is finalized. Conversely, if an area is included in the Draft Proposed Program, it can be removed before the program is finalized. That is, the areas open to leasing can be reduced, but cannot be increased, between the Draft and Final Programs. This same logic will apply during each step of the preparation of the Final Program. For example, if an area was included in the Draft Proposed Program but not in the Proposed Program, in order for that area to be included in a Proposed Final Program, a new Proposed Program including that area would first need to be developed.

The Proposed Atlantic Area

The Draft Proposed Program proposes to open for leasing areas at least 50 miles offshore the coasts of Virginia, North Carolina, South Carolina, and Georgia. BOEM states that the 50-mile coastal buffer was included for the Atlantic sale in response to the Governor of Virginia’s comments and to minimize multiple use conflicts such as those from Department of Defense activities, renewable energy activities, commercial and recreational fishing, critical habitat needs for marine mammals and sea turtles, hard bottom environments, and other environmental concerns. BOEM estimates that the Mid and South Atlantic Program Area offered in the Draft Proposed Program makes available approximately 68 percent of the mean undiscovered technically recoverable resources in the Mid and South Atlantic Planning Areas.

Alaska

In December 2014 and January 2015, President Obama withdrew the North Aleutian Basin, and portions of the Beaufort and Chukchi Seas in the Alaskan Arctic from oil and gas leasing, both for periods without specific expiration. All of these areas are also excluded from the 2012-2017 leasing Program, with the exception, as mentioned above, of the new exclusion of the Hanna Shoal in the Chukchi Sea.

The Proposed GOM Schedule

The proposed schedule of leasing sales in the Gulf of Mexico offers a slight improvement over the schedule of sales in the 2012-2017 Program. BOEM is proposing to hold ten region-wide sales comprised of the entire Western, Central, and Eastern Gulf of Mexico unleased acreage open to leasing. In the current Program, there were also ten sales, but they were fragmented: four separate sales in the Western Gulf, four separate sales in the Central Gulf, and two separate sales in the Eastern Gulf.

Conclusion

While the proposed addition of portions of the Mid and South Atlantic Program Area are a positive development, vast areas of potential development on the OCS remain unavailable for lease. Moreover, those Atlantic areas could be removed or substantially reduced in the final leasing program. Finally, there will not be any further enhancements of areas open to development until the 2022-2027 leasing program, at the earliest.

If you have any questions, please feel free to contact one of the Haynes and Boone team members listed below.