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Tuesday, October 5, 2010

Offshore Oil and Gas Development: Legal Framework

Adam Vann
Legislative Attorney

The development of offshore oil, gas, and other mineral resources in the United States is impacted by a number of interrelated legal regimes, including international, federal, and state laws. International law provides a framework for establishing national ownership or control of offshore areas, and domestic federal law mirrors and supplements these standards.

Governance of offshore minerals and regulation of development activities are bifurcated between state and federal law. Generally, states have primary authority in the three-geographical-mile area extending from their coasts. The federal government and its comprehensive regulatory regime govern those minerals located under federal waters, which extend from the states’ offshore boundaries out to at least 200 nautical miles from the shore. The basis for most federal regulation is the Outer Continental Shelf Lands Act (OCSLA), which provides a system for offshore oil and gas exploration, leasing, and ultimate development. Regulations run the gamut from health, safety, resource conservation, and environmental standards to requirements for production based royalties and, in some cases, royalty relief and other development incentives.

In 2008, both the President and the 110
th Congress removed previously existing moratoria on offshore leasing on most areas of the outer continental shelf. As of the date of this report, the 111th Congress has not reinstated the appropriations-based moratoria that were not renewed by the 110th Congress, and the President has advocated moving forward with oil and natural gas exploration and production in some areas previously under moratoria. However, in response to the recent Deepwater Horizon oil spill, the Secretary of the Interior has suspended some exploration and production activities in the Gulf of Mexico.

Despite the Deepwater Horizon incident and subsequent suspension of some exploration and production activities, other recent legislative and regulatory activity suggests an increased willingness to allow offshore drilling in the U.S. Outer Continental Shelf. In 2006, Congress passed a measure that would allow new offshore drilling in the Gulf of Mexico. Areas of the North Aleutian Basin off the coast of Alaska have also been recently made available for leasing by executive order. The five-year plan for offshore leasing for 2007-2012 adopted by the Minerals Management Service (MMS, now the Bureau of Ocean Energy Management, Regulation, and Enforcement (BOE)) in December of 2007 proposed further expansion of offshore leasing. At the same time, the role of the coastal states in deciding whether to lease in areas adjacent to their shores has also received recent attention.

In addition to these legislative and regulatory efforts, there has also been significant litigation related to offshore oil and gas development. Cases handed down over a number of years have clarified the extent of the Secretary of the Interior’s discretion in deciding how leasing and development are to be conducted. 

Date of Report: September 20, 2010
Number of Pages: 26
Order Number: RL33404
Price: $29.95

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