Drillers begin quest for oil, gas off Florida

Oil companies once viewed drilling in the deep waters off Florida as cost-prohibitive. Politicians feared that even the slightest sign of support would be career suicide.

No more. Record crude oil prices are fueling support for oil and natural gas exploration off the nation’s shores. In Florida, there was movement even before President Bush’s recent call for Congress to lift a federal moratorium that has barred new offshore drilling since 1981.

The early activity here stems from a 2006 congressional compromise that allows drilling on 8.3 million acres more than 125 miles off the Panhandle -- an area that had been covered by the moratorium, which was enacted out of environmental concern. In exchange, the state got a no-drilling buffer along the rest of its beaches.

Florida may turn out to be a prelude for other coastal states. If oil or natural gas deposits are found in the newly opened region, experts say it could further the push to explore once-protected areas everywhere.

It also could be a rallying point for critics, who say the new exploration isn’t a license for expansion.

With gasoline topping $4 a gallon, recent polls show Americans, Floridians included, are more supportive of drilling in protected areas. Some politicians -- including Gov. Charlie Crist -- have switched sides.

“We think the public is way out ahead of the politicians on these issues. People are more open to [offshore drilling] now,” said Tom Moskitis, spokesman for the American Gas Assn., a trade group.

At the same time, oil companies, driven by record energy prices, are more willing to risk $100 million or more to begin exploring new regions. The Interior Department estimates that there could be 18 billion barrels of oil and 77 trillion cubic feet of natural gas beneath the 574 million acres of federal coastal waters that are now off-limits.

Drilling activity off the Florida Panhandle has started and sputtered for decades. Some companies had leases to drill in the area before the 1981 moratorium. They were grandfathered in when the moratorium was passed because they were already actively exploring in their lease areas. They continued their activity off and on into the early 1990s.

In March, four companies -- Australia-based BHP Billiton Petroleum Deepwater Inc., Houston-based Anadarko E&P; Co., Shell Offshore Inc. and Italian oil and natural gas company Eni -- purchased leases on 36 Gulf of Mexico tracts under the 2006 compromise.

Price drives change

Jeb Bachmann, an analyst with New Orleans energy consultant Howard Wiel, says the four companies understand the shifting political and financial realities.

“It gives you an indication that some of these companies believe there is some light at the end of the tunnel,” Bachmann said. “There is higher pricing and a belief that higher prices are going to ultimately drive some changes.”

Anadarko bought seven of the recently opened tracts south of Pensacola because of their proximity to its Independence Hub, a major natural gas field off Alabama that supplies as much as 2% of the natural gas consumed in the U.S. every day, said Stuart Strive, Anadarko’s vice president of exploration for the eastern Gulf of Mexico. The newly leased tracts are 50 to 75 miles east of Independence Hub.

But finding and producing natural gas at the site will be expensive. Three-dimensional mapping of the ocean floor, which must happen before drilling occurs, could take as many as two years, Strive said.

If a promising site is found, engineers must drill as much as three miles below the surface of the ocean to extract the oil or natural gas.

It will take years before the company begins producing anything at the site, and there is no guarantee of success. A company can invest as much as $4 billion and wait as long as five years before seeing any return, Strive said.

“We typically will have $100 [million] to $200 million invested in a project before we know if it is an economic venture or not,” he said. “Then, if you know you have made an economic discovery, you spend $1 billion or more on a facility.”

The 1981 moratorium -- enacted out of concerns stirred by a massive oil spill off the coast of Santa Barbara a decade earlier -- has prevented the Interior Department from spending money on offshore oil or gas leases in virtually all coastal waters outside the western Gulf of Mexico and some areas off Alaska.

But some politicians who once supported the ban are changing their minds.

Sen. John McCain of Arizona, the assumed Republican presidential nominee, supports lifting the ban and allowing states to decide whether to approve drilling off their shores. Crist, Florida’s Republican governor and a potential McCain running mate, reversed his long-standing support of the ban last month.

Holding the line

The ban won’t be lifted without a fight, however.

Sen. Bill Nelson, a Florida Democrat who has led opposition to offshore drilling among the state’s congressional delegation, criticized the governor’s reversal, accusing Crist and McCain of putting oil company profits before protecting the state’s $65-billion-a-year tourism industry.

“Oil companies and their allies are using the shockingly high price of oil and gasoline, which largely is the result not of a supply problem but speculative fever, to scare the public into thinking coastal drilling offers a real solution to our dependency on oil,” Nelson said in an e-mailed statement.

The 2006 Senate compromise opening up the Panhandle tracts made sense and should be honored by the oil companies, said Dan McLaughlin, Nelson’s spokesman. Instead, the companies and congressional Republicans are pushing to open more acreage, he said. Nelson helped broker the compromise.

“It was a compromise allowing them to go where they wanted to go, where there were some proven reserves, while also keeping them at a distance to save the economy, the environment and protect our military training areas,” McLaughlin said.

“That compromise closed the door and kept the moratorium in place. Now you see the governor doing an about-face, but we are confident we are going to fight it back again.”