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US offshore oil and gas plan on pause, potentially for years

Highlights

Proposal for 47 lease sales likely to be scrapped

Court ruling, opposition complicates path forward

Work likely on hold until after 2020 election

Washington — In January 2018, the Interior Department unveiled a draft proposed leasing plan to open nearly all federal waters to oil and gas drilling, but a federal judge's ruling and opposition from coastal lawmakers may have doomed the plan before it reached the formal, proposed phase.

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"I've paused it until I figure out the pathway," Interior Secretary David Bernhardt said Wednesday during a Senate Appropriations subcommittee hearing.

As originally unveiled in its draft form, from 2019 through 2024, Interior planned to hold 19 sales in federal waters offshore Alaska, 12 in the Gulf of Mexico, nine in the Atlantic and seven in Pacific waters offshore the West Coast.

Related story: With US offshore plan likely scrapped, industry pursues changes to federal lease terms

Shortly after the draft proposal was unveiled, then-Interior Secretary Ryan Zinke announced that Florida waters would be left out of the plan, although he never offered any specifics on this and Interior officials repeatedly claimed that Florida waters technically remained in the proposal.

The proposal would have replaced the Obama administration's final program lease sale, which includes only 10 sales in the Gulf of Mexico and one in Cook Inlet.

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In March, Judge Sharon Gleason of the US District Court for the District of Alaska ruled that a permanent ban on drilling in about 115 million acres of the US Arctic Ocean and 3.8 million acres in the north and mid-Atlantic Ocean off the East Coast "will remain in full force and effect unless and until revoked by Congress."

The ban had been put in place by President Barack Obama in his final days in office, but President Donald Trump had attempted to reverse the order as part of his plan to open more federal waters to drilling. Obama had withdrawn the entire US Chukchi Sea and most of the Beaufort Sea from future oil and gas drilling.

The ruling complicated the administration's path forward on its draft proposal and Bernhardt said the plan remains on pause as an appeal is considered.

Randall Luthi, president of the National Ocean Industries Association, said Interior is unlikely to publicly release much on the plan until after the 2020 federal elections are over.

With so much opposition in coastal states to expanding drilling beyond the Gulf of Mexico, President Trump is unlikely to push forward a plan which could hurt his re-election chances, Luthi said.

"They are looking at anything that might tip the scales one way or the other," he said.

North Carolina, South Carolina, Georgia, Florida and Alaska all voted for Trump in his 2016 presidential election.

Bernhardt, who became Interior's acting secretary in January after Zinke left and was confirmed as secretary in April, is unlikely to try and replace the current 2017-2022 plan and, instead, will develop a 2022-2027 offshore plan after the election, sources said. It remains unclear if Bernhardt plans to use portions of the plan pitched under Zinke last year.

"They're re-looking at the whole program with a fresh set of eyes now that there's a new secretary in place," said Erik Milito, the American Petroleum Institute's vice president of upstream and industry operations.

-- Brian Scheid, brian.scheid@spglobal.com

-- Edited by Richard Rubin, newsdesk@spglobal.com