Rep. Paul Stam Republican Leader North Carolina House of Representatives
613 Legislative Office Building, Raleigh, NC 27803-5925 (919) 733-2962 - Pauls@ncleg.net
Wednesday, July 16, 2008
OFF SHORE DRILLING COMMON MISCONCEPTIONS & FREQUENTLY ASKED QUESTIONS The State of North Carolina has full control over offshore exploration. False. North Carolina controls the first three miles oceanward of Mean Lower Low Water (MLLW) from which point the US territorial sea extends to 12 miles. Federal submerged lands also extend beyond the territorial limit out to 200 nautical miles in what is considered the Exclusive Economic Zone (EEZ). The State of North Carolina has limited control over offshore exploration. True. Although the geologic targets that have been identified to date occur on the Outer Continental Shelf in federal waters, the US Coastal Zone Management Act of 1972, as amended, requires all federally permitted coastal energy activity on the Offshore Continental Shelf to be consistent with the adjacent State’s federally approved coastal management program to the maximum extent practicable. For North Carolina activities, the North Carolina Division of Coastal Management, as authorized under the State’s Coastal Area Management Act of 1974 (CAMA), is responsible for determining whether federal, or federally permitted, activities are consistent with this coastal program. The State of North Carolina coastal program would not allow offshore energy production. False. The North Carolina Coastal Resources commission (CRC), established under the State’s Coastal Area Management Act (CAMA), currently has policies in place for coastal energy production in the North Carolina Administrative Code (specifically, T15A NCAC 07M.0400). Based on recommendations from an Ocean Task Force that had been appointed by the Division of Coastal Management (DCM) and the CRC (which is staffed by DCM) to examine ocean resource issues, these policies were adopted by the CRC in 1996 and approved under Executive Order from Governor Hunt. There have never been any active leases from the US Minerals Management Service in North Carolina’s Federal waters (offshore continental shelf). False. A total of 55 tracts were leased in federal waters offshore North Carolina between 1981 and 1983. Exploratory drilling had been proposed within the 21 units of the Manteo Prospect by both Mobil and Chevron. On November 17, 2000, the interests in the last remaining 8 natural gas and oil leases in the Manteo Unit were relinquished by Conoco, Shell Offshore and OXY USA.
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Drill rigs will clutter the horizon and spoil the vista from the Outer Banks beaches. False. The Manteo Prospect (the nearest to shore of all historic federal leases), the unit that held the last active leases on the North Carolina Outer Continental Shelf (OCS) through November 17, 2000, is 44.8 miles east-northeast of Cape Hatteras and 38.7 miles due east of Rodanthe. Even from atop the Cape Hatteras light, the tallest lighthouse tower in the United States (elevation = 210’ above sea level), the distance to the horizon based on the curvature of the earth is less than 20 miles. Oil spills from offshore drilling will destroy marine life and end up on the pristine beaches of the Outer Banks. False. Geochemical analyses of Atlantic (non-North Carolina) OCS exploratory wells indicate that hydrocarbon source rock for the Manteo Prospect would be more likely to generate natural gas rather than oil. Mobil estimated that the Manteo Prospect could contain as much as 5 trillion cubic feet of natural gas (833 billion barrels of oil equivalent), a volume that the US Minerals Management Service concluded could be present given the size and reservoir characteristics of the prospect. There is not enough oil and gas offshore North Carolina to make a dent in global demand. False. The hydrocarbon potential of just the Manteo Prospect alone has been estimated to be between 5 trillion cubic feet (tcf) of natural gas, or 833 billion barrels of oil equivalent (Mobil) and nearly 1.5 billion barrels of oil (9 trillion cubic feet of equivalent gas), which would make it one of the largest domestic hydrocarbon discoveries since Prudhoe Bay, Alaska. To put this into perspective, US natural gas consumption in 2007 of 23 billion cubic feet represents less than 2% of the lower reserve estimate of 5 tcf. How long until hydrocarbons can be produced after the moratorium is lifted? The rule of thumb is ten years from concept to production. For example, if ANWR had been opened to drilling a decade ago when it was being considered, those reserves would now be contributing to global supply and affecting pricing. If the moratorium is lifted, are hydrocarbon reserves guaranteed? No. The prospects in NC’s OCS are true wildcat prospects. (A wildcat well is the first well drilled on a new, clearly defined geological structure.) Chevron estimated that there was a 7% chance of finding hydrocarbons and only a 2% chance of their being commercial. That said, it should be noted that, relative to the Manteo Unit, the highest bid in the 1983 Atlantic OCS lease sale (the last year for which Atlantic OCS leases were offered) was $2,015,000 for one block (Block 115) and that Mobil had submitted plans for a seven-well exploration program in Block 467. Both of these activities illustrate a justifiable economic risk. Today, advances in geophysical imaging such as 3D seismic have increased the ability to better define geological structures while new drilling technologies (e.g., deepwater drilling, steer-able bits, directional drilling) lower the environmental and economic risk.
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Is it dangerous or impossible to drill in water depths such as those found under the Manteo Prospect? No. The blocks under the Manteo Unit that had been proposed for exploratory drilling are at depths of 2,700 feet (Block 467) and 2,100 feet (Block 510). A decade ago, it was common that 20-25 wells were being drilled during any given week in the Gulf of Mexico in water depths greater than 1,000 feet. Discoveries have been made in water depths greater than 9,000 feet (Chevron’s Tiger and Shell Offshore Tobago discoveries made in 2004). North Carolina will benefit economically from offshore hydrocarbon production. True. Revenue for the following states was generated from offshore hydrocarbon production during 2007 (federal fiscal year October to September): CA ($48 million), AL ($50 million), TX ($65 million), and LA ($158 million). Additional positive economic impact of energy and energy-related industries within the hydrocarbon-producing coastal States contributes is also realized through jobs, taxes, and investment.
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