MMS deepwater lease sales to BP and other companies continue lax oversight, say groups

Leases financially obligate U.S. government, creating incentive to allow drilling

ATLANTA (06/11/2010) -

The Minerals Management Service (MMS) continues to approve new leases after the Deepwater Horizon explosion that give British Petroleum and other companies the right to drill even more deepwater wells in the Gulf of Mexico under the same inadequate oversight that led to the current oil spill, according to a new legal challenge filed by the Southern Environmental Law Center and Defenders of Wildlife. The groups say current policies create an incentive to allow drilling even in the face of evident risks because once a lease is issued by MMS, the U.S. government is obligated to pay the lessee either the fair market value of the lease or the amount spent to obtain the bid plus costs and interest if the government cancels the lease or refuses to allow drilling. MMS approved new leases for deepwater tracts as recently as June 10 under the same lax oversight complicit in the current Gulf spill.

"MMS quietly granted oil companies the right to drill 198 more deepwater wells as if the spill wasn't devastating the Gulf," said Derb Carter, senior attorney and director, Carolinas Office, Southern Environmental Law Center. "If it's too deep to stop a spill, it's too deep to drill. BP is under criminal investigation for its explosion and dumping millions of gallons of oil into the Gulf, yet MMS approved 13 new leases for BP to drill in deepwater without any better oversight."

The groups' lawsuit challenges MMS approval of leases, including 198 deepwater leases, in the Central Gulf of Mexico after the Deepwater Horizon explosion on April 20 and ongoing spill. In a legal claim added on June 10 to an ongoing lawsuit in federal court, the groups allege that MMS failed its legal responsibility after the explosion and spill to reconsider its 2008 conclusions that the sale of the deepwater leases and future oil drilling would have no potential significant impact to the environment and no detailed environmental review was required.

"Clueless and inept is really the only way to describe the ongoing situation at MMS," said Mike Senatore, vice president for Conservation Law at Defenders of Wildlife.  "This agency is at the epicenter of the worst environmental disaster in our nation's history and yet it's still going about business as usual.  How else do you explain MMS's approval of the right to drill hundreds of new wells in the Gulf, including 13 for BP, based on the same fundamentally flawed and patently illegal environmental documents used to green-light the Deepwater Horizon operation?"

Despite President Obama's moratorium on new deepwater wells, MMS approved the leases as it did the Deepwater Horizon rig -- under the same inadequate environmental review, requiring no failsafe spill preventions, and with insufficient spill response plans -- all of which led to the ongoing Gulf oil spill. Now news reports say the President is considering cutting short his moratorium on new deepwater wells due to increasing pressure from oil companies.

"The public needs to understand that we are subsidizing the oil companies for risky deepwater drilling," added Catherine Wannamaker, senior attorney, Southern Environmental Law Center. "It's the public that pays the cost of lax oversight. It's clear BP was in over its head drilling in deep waters and now the Gulf is mired in oil."

Although oil companies must obtain approved exploration plans and a permit before drilling a well, MMS routinely grants these authorizations through a "categorical exclusion" or waiver of additional environmental review. Thirteen new leases for BP -- including four leases in the Mississippi Canyon near the site of the uncontrolled well -- are among 198 new deepwater (over 200 meters or about 656 feet deep) oil drilling leases approved by MMS as past of Lease Sale Number 213 in the Central Gulf of Mexico. At least 92 lease tracts are at deeper depths than the Deepwater Horizon well, with the deepest ones nearly two miles deep or almost twice the depth of the Deepwater Horizon well.

One hundred forty-nine leases in Lease Sale Number 213 are over 400 meters deep. If wells over 400 meters (about a quarter mile) deep from this sale produce oil, the federal government will also subsidize those wells through the "royalty relief" program under which oil companies are relieved from paying the normal 18.5 percent royalty on the volume of the oil produced from risky deep water wells.  The deeper the drilling, the more oil the company can recover royalty free.  

Four of the tracts MMS approved for BP to lease are over a mile deep (between 1700 and 2000 meters) and will receive a royalty suspension of 12 million barrels of oil; six tracts MMS approved for BP are over a mile and a quarter (2000 meters) deep and will receive a royalty suspension for 16 million barrels.  At $71 a barrel of oil, the royalty relief program would provide what amounts to a public subsidy up to $210 million for deepwater leases at that depth (2000 meters).

The Southern Environmental Law Center and Defenders of Wildlife filed suit in federal court in Alabama on May 17 challenging MMS's approval of oil drilling exploration plans, including BP's Deepwater Horizon, with categorical exclusions or waivers of environmental review.

### Links:

See how Defenders is responding to the Gulf oil disaster.

Note to Editors:

• MS Leasing Activities Information document for Lease Sale 213 in the Central Gulf of Mexico
• MMS Final Notice of Sale (NOS) 213
• 2008 Environmental Assessment for Lease Sale 213
• Summary of Royalty Procedures

Contact(s):

Mike Senatore, attorney, Defenders of Wildlife, (202) 772-3221
Caitlin Leutwiler, communications, Defenders of Wildlife, (202) 772-3226
Derb Carter, senior attorney, SELC, (919) 967-1450
Catherine Wannamaker, senior attorney, SELC, (404) 521-9900
Kathleen Sullivan, communications, SELC, (919) 945-7106

The Southern Environmental Law Center is the only regional nonprofit using the power of the law to protect the health and environment of the Southeast (Virginia, Tennessee, North and South Carolina, Georgia, and Alabama). Founded in 1986, SELC's team of 40 legal experts represent more than 100 partner groups on issues of climate change and energy, air and water quality, forests, the coast and wetlands, transportation, and land use. WEB: www.SouthernEnvironment.org

Defenders of Wildlife is dedicated to the protection of all native animals and plants in their natural communities. With more than one million members and activists, Defenders of Wildlife is a leading advocate for innovative solutions to safeguard our wildlife heritage for generations to come. For more information, visit www.defenders.org.