April 6, 2018 / 5:58 PM / 6 months ago

Interior's Zinke sees 'little' demand for new U.S. offshore drilling

PRINCETON, NJ (Reuters) - U.S. Interior Secretary Ryan Zinke said on Friday that he sees little demand from oil and gas companies for new offshore drilling leases, which could pose problems for his plan to ramp up output from federal waters.

FILE PHOTO: U.S. Secretary of the Interior Ryan Zinke testifies in front of the Senate Committee on Energy and Natural Resources on Capitol Hill in Washington, U.S. March 13, 2018. REUTERS/Eric Thayer

The comments come just three months after Zinke had proposed opening nearly all U.S. ocean coastlines to drilling, in a bid to raise domestic oil and gas production. The plan sparked immediate protests from coastal states, environmentalists and the tourism industry.

Zinke said a record-sized U.S. auction of offshore oil leases in the Gulf of Mexico, held in March, showed “modest to little” interest from drillers, and he added the likelihood for strong demand elsewhere is small.

“If you don’t have the infrastructure, it’s more expensive,” Zinke said at an offshore wind power conference in Princeton, New Jersey, responding to a question about the possibility of drilling off the East Coast.

Zinke also noted the strong political opposition to drilling, and said governors have significant leverage in controlling their waters.

California, which has not allowed drilling off its coast since the 1980s, has said it would block any oil from new leases in the Pacific from reaching its shores.

Florida, meanwhile, convinced Zinke to remove its offshore waters from consideration shortly after the drilling proposal was announced over concerns about its tourism industry.

Officials in many other states have also urged Zinke to drop them from the drilling plan. He has said he will meet with them as he finalizes the proposal over the coming months.

Last month’s Gulf of Mexico sale, the largest U.S. offshore lease sale on record, brought in $124.8 million, as just 1 percent of the 77 million acres (31.2 million hectares) offered found bidders.

Reuters examined the acreage offered and leased, and nearly all the purchases show big drillers stuck closest to existing infrastructure, shunning the most far-flung areas.

Reporting By Jarrett Renshaw; editing by Richard Valdmanis and David Gregorio

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