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	November 29, 2000
		

Announcing Initiatives to Increase Domestic Energy Production
The Director of the Minerals Management Service, Walt Rosenbusch, announced 
today several initiatives to increase domestic natural gas and oil production 
to meet the nation,s energy needs. These initiatives are proposed for the 
next offshore oil and gas lease sale in the Central Gulf of Mexico scheduled 
for March 28, 2001. The announcement came as part of the issuance of a 
proposed notice of sale for Sale 178 in today,s Federal Register.
MMS designed two of these initiatives specifically to spur domestic natural 
gas production during the years 2004-2006. Director Rosenbusch called the 
changes "strong initiatives on the part of the MMS to deal with the large 
projected increase in gas demand for the nation. Several studies, including 
the report issued by the National Petroleum Council, indicate that the 
nation's demand for natural gas will grow from the current 22 trillion cubic 
feet (TCF) of gas to 29 TCF of gas in 2010. These initiatives may contribute 
additional gas production, in the range of 500 billion to 1 TCF per year in 
the period 2004 to 2006."
Rosenbusch noted that "there are predictions of serious shortages of natural 
gas this winter, including the northeast U.S. There have already been several 
brownouts across the country this year because of the demands on electrical 
production."
Included in the proposed notice are two initiatives for increasing natural 
gas production:
? An incentive to drill for deep gas deposits located in the shallow-water 
shelf area of the Gulf of Mexico by providing for royalty suspension for the 
first 20 billion cubic feet (Bcf) of production from a well drilled below 
15,000 feet sea level. 
? An incentive to drill for natural gas below the thick subsalt domes. MMS 
proposes that lessees obtain a 2-year extension of the 5-year primary lease 
term when an operator has drilled a first subsalt well and needs additional 
time to image the subsurface data to determine the appropriate next drilling 
target. This will avoid premature lease expiration and the consequent delay 
in exploration. 
In addition, MMS proposes modified initiatives for deep water royalty relief:
? An incentive to keep exploring and developing oil and gas deposits in the 
ultra deepwater areas to replace the expiring provisions of the 1995 
Deepwater Royalty Relief Act. A royalty suspension volume of nine million 
barrels of oil equivalent (BOE) is proposed for water depths from 800 meters 
to 1,599 meters, and a royalty suspension volume of the first 12 million BOE 
in water depths equal to or greater than 1,600 meters. 
? An opportunity to apply for additional "discretionary" royalty relief, 
pursuant to new proposed rulemaking, if certain conditions are satisfied. 
MMS will conduct public workshops to discuss the new provisions announced in 
the proposed notice of sale, as well as provisions of the proposed rule (65 
FR 69259 published November 16), regarding discretionary royalty relief for 
leases in water depths of 200 meters and greater. Details about the workshops 
that will be held this December in New Orleans and Houston will be released 
today.
Proposed Sale 178 encompasses about 4,366 available blocks in the Central 
Gulf of Mexico Outer Continental Shelf planning area offshore Louisiana, 
Mississippi, and Alabama. This area covers about 23.07 million acres. Blocks 
in this sale are located from three to 200 miles offshore in water depths 
ranging from four to more than 3,425 meters. Estimates of undiscovered 
economically recoverable hydrocarbons expected to be discovered and produced 
as a result of this sale proposal range from 150 to 440 million barrels of 
oil and 1.53 to 4.39 TCF of natural gas.
MMS is the federal agency that manages the nation's natural gas, oil and 
other mineral resources on the Outer Continental Shelf. The agency also 
collects, accounts for and disburses over $5 billion per year in revenues 
from federal offshore mineral leases and from onshore mineral leases on 
federal and Indian lands.

Maurice