Subject: Request for Information and Comments on the Preparation of the Outer Continental Shelf (OCS) Oil and Gas Leasing Program

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1 730 NORTH BOULEVARD, BATON ROUGE, LOUISIANA TELEPHONE (225) FAX (225) August 14, 2014 Ms. Kelly Hammerle Five Year Program Manager BOEM (HM 3120) 381 Elden Street Herndon, Virginia Submitted via regulations.gov Subject: Request for Information and Comments on the Preparation of the Outer Continental Shelf (OCS) Oil and Gas Leasing Program Dear Ms. Hammerle: The Louisiana Mid Continent Oil and Gas Association (LMOGA) appreciates the opportunity to participate in the Bureau of Ocean Energy Management s (BOEM) request for information and comments on the preparation of the Outer Continental Shelf Oil and Gas Leasing Program published in the Federal Register on June 16, LMOGA is Louisiana s longest standing trade association, exclusively representing all aspects of the oil and gas industry onshore and offshore, including exploration, production, mid stream activities, pipeline, refining and marketing. Since the beginning, the Gulf has produced 90% of domestic US crude oil from all of the OCS territories, with approximately 20% of our nation s oil and gas currently coming from the Gulf of Mexico. LMOGA members are on the forefront of developing Gulf energy resources; therefore, the development of this five year plan is of keen interest to LMOGA. Louisiana has a long and successful history in offshore oil and gas production and operators here offer an on the ground, real world perspective as to the positive impacts of a safe and responsible oil and gas industry on our economy and our environment. LMOGA believes it is prudent for the Year OCS Leasing Plan to include areas of existing exploration and development activities (Western, Central, and a small portion of the Eastern Gulf of Mexico, and Alaska), as well as new areas where there has been little to no activity (Mid and South Atlantic, other areas in the Eastern Gulf of Mexico, and the Pacific). It is important to consider all areas of the OCS to strengthen our country s energy security, meet our nation s energy demands, and provide a much needed boost to our nation s economy. Energy Demand Global population is on the rise, and as such, worldwide energy demand is projected to grow substantially. Some forecasts suggest an increase of 56 percent in global energy demands by Here at home, the United States is currently meeting 84 percent of its energy needs with domestic

2 production. The Gulf of Mexico (GOM) has played a significant role in meeting our nation s energy demands and it will continue to do so well into the future. From , Gulf offshore oil production rose 35 percent to 1.66 million barrels a day. A production decline in recent years is due in large part to the federal government s 2010 deepwater moratorium, which delayed some large scale production projects. However, projections indicate that by 2016, up to 1.8 million barrels of oil per day could be produced in the Gulf. This increased activity is no surprise to those of us in Louisiana who work on the frontlines servicing the Gulf s oil and gas industry. Louisiana is first in OCS oil and gas production and first in revenues generated offshore with an estimated $5 $8 Billion deposited into the federal treasury each year from activity off of the Louisiana coast. BOEM estimates 88.6 billion barrels of oil and trillion cubic feet of gas have yet to be discovered on the OCS. A 2011 study by Wood Mackenzie suggests developing all of the current off limit areas in the OCS would add an additional $127 Billion in new government revenue by Additionally, expansion of territories in the lease program would make significant inroads on meeting projected energy demands, while providing the additional benefits of increased dollars to the federal treasury, reduction in our net oil and gas imports, and a reduced bill for imports. We urge BOEM to consider these factors when developing the Plan. Economic Impact Louisiana is a perfect example of how a robust offshore oil and gas industry can provide significant benefits to our local, state and national economies. While the recession of 2010 severely impacted many local and state economies, Louisiana s economy maintained its resiliency due to a strong oil and gas industry. The offshore industry has a $44 Billion economic impact on the State of Louisiana. Combining the offshore sector with related pipeline and refining activities, the oil and gas industry has a $70 Billion total annual impact to Louisiana. According to the Department of Interior, it is believed that over $1 trillion in net economic value is associated with development of the Gulf of Mexico over the past 20 years and the federal government has collected over $150 billion in revenues. A Wood Mackenzie report indicates that there will be $10 $20 Billon per year of capital expenditures on Gulf exploration through Expansion of OCS areas eligible for energy exploration and production would exponentially increase capital expenditures and provide a much needed boost to local and state economies throughout the country as well as our national economic security. Employment Impact The economic recession has negatively impacted our nation s employment numbers for the past few years. The national average of unemployment has been around 6.7 percent. However in Terrebonne and Lafourche Parishes, which are the epicenter of the Louisiana offshore industry, the unemployment rate is about 3 percent. In Terrebonne Parish alone, the unemployment rate dropped to the lowest in the nation at 2.8 percent in February The offshore oil and gas industry provides stable, highpaying American jobs to residents of these parishes, as well as to workers who travel to these parishes from across the country to work 7 day, 14 day, and 30 day shifts supporting the vibrant energy industry along the Louisiana coast.

3 Port Fourchon, our nation s only inter modal port serving the offshore oil and gas industry, is an impressive example of the tremendous economic impacts of offshore oil and gas development. Port Fourchon is located on the Gulf of Mexico, near the mouth of Bayou Lafourche in Lafourche Parish, Louisiana. It is the only Louisiana port directly on the Gulf of Mexico with 600 platforms within a 40 mile radius. More than 250 companies utilize Port Fourchon in servicing offshore rigs in the Gulf of Mexico, carrying equipment, supplies and personnel to offshore locations. Port Fourchon s tenants provide services to 90 percent of all deepwater GOM rigs. Port Fourchon supports more than 8,000 direct jobs. These are good paying jobs where a high school graduate can begin making $50,000 a year and, within five years, earn a six figure salary. With the expansion of OCS development and production, other ports along the West and East Coasts could experience similar rates of growth, produce positive economic opportunities for communities that currently struggle for jobs and economic development. Safety and Environment On April 20, 2010, Louisiana was on the front lines of the Macondo incident, which resulted in the tragic loss of life and our nation s largest oil spill. The incident galvanized a grassroots effort by Louisiana residents who began to work respectfully and diligently with the industry, community leaders, national trade associations, and the federal government to strengthening safety and environmental regulations while maintaining the economic opportunity provided by offshore production. In the weeks and months following the incident, new regulations were put in place. New and revised industry standards were developed. Industry made a concerted effort to further enhance safe and environmentally responsible operations through prevention, intervention and response with industry driven initiatives such as the formation of the Marine Well Containment Company, the Helix Well Containment Company, and the Center for Offshore Safety. All of these new and renewed policies and programs resulted in safer drilling practices like enhanced spill response capability, improved well containment and intervention capabilities, and enhanced drilling standards. The offshore oil and gas companies have made and will continue to make safety and environmental protection their highest priority. Louisiana has a long history of producing American energy while balancing the protection of our bountiful natural resources, lending to the state s reputation as Sportsman s Paradise. We often witness industry working harmoniously with the environment. For example, the Rigs to Reefs program has been a success story as operators convert decommissioned rigs to artificial reefs resulting in some of the best fishing spots in the country. Additionally, the Louisiana commercial fisheries industry and wildlife habitat have long thrived alongside the energy industry in our state. Louisiana produces nearly one fourth of the fisheries catch in the United States, and the same coastal areas that support offshore energy production also provide habitat for approximately 1.8 million migratory fowl. Louisiana has proven itself to be the Energy State as well as a Sportsman s Paradise. Revenue Sharing As a result of the 2006 Gulf of Mexico Energy Security Act (GOMESA), Louisiana, Texas, Mississippi and Alabama are currently eligible to receive 37.5 percent of royalties received from new oil and gas developments in federal waters adjacent to their states, and in 2017, that will expand to include a

4 portion of all lease sale receipts since December Further, proposed legislation is aimed at lifting the $500 Million cap on GOMESA revenue for participating states and raising that cap to $2 Billion. GOMESA was designed to ensure that states have adequate resources for coastal restoration, conservation, and hurricane protection projects. Indeed, revenue sharing is a critical tool in helping local and state governments build and maintain these projects, as well as fund other critical human services, particularly as many state budgets are strained. Here in Louisiana, revenue sharing is particularly important for funding the state s coastal restoration and protection initiatives as well as protecting critical energy infrastructure such as Louisiana Hwy 1, which is the only highway to Port Fourchon, America s energy port. While LMOGA strongly suggests expanding federal waters for energy production and lifting the revenue sharing cap for Gulf states, we also strongly believe that an updated distribution formula for energy producing states linked to historic and current production is a necessary component of any GOMESA revisions. Waters along Gulf states like Louisiana, which has long supported offshore energy activity, have some of the highest lease sale activity, and as such, bear the cost of maintaining infrastructure and coastal environment that serve producers and the support industry. These impacts and mitigating investments must be considered and valued in an updated distribution formula should expansion of GOMESA win approval. Conclusion LMOGA appreciates the opportunity to comment on the RFI in the preparation of the Outer Continental Shelf Oil and Gas Leasing Program. Our organization strongly recommends that the Five Year Plan provides leasing opportunities in not only traditional OCS areas in the Western, Central, and limited Eastern Gulf of Mexico regions, but also the expansion into other promising OCS regions currently off limits to energy production such as the Midand Southern Atlantic, the Pacific, and the rest of the Eastern Gulf. Such expansion would help meet America s ever growing energy needs with our own domestic energy while the rest of the world clamors to meet energy demands of their own. More domestic energy also reduces our reliance on energy from other regions of the world where conflict can abruptly impact energy markets. It would also produce significant and high paying jobs to Americans in communities still reeling from the recent recession, and significantly boost royalties paid to the federal treasury, not to mention the tremendous sales that could be realized by local businesses supporting the energy industry. Further, oil and gas companies have demonstrated their deep commitment to safety and environmental protection throughout the history of the industry, and particularly in the aftermath of the Macondo incident with innovative initiatives that further strengthen safety and environmental protection programs. The vibrant offshore oil and gas industry in the Gulf of Mexico has proven to provide long lasting and undisputable economic and energy security benefits not only to Louisiana, but also to the entire nation. These are direct benefits that states across our country could experience with the opening of additional

5 OCS territories for energy development. With expansion of the lease program, however, LMOGA also recommend updates to the revenue sharing formula in GOMESA that would fairly compensate longstanding energy states like Louisiana, whose coast generate a substantial portion OCS revenues, for the impacts they have experienced and investments they have made in order to support the industry that, in turn, generates billions of dollars for the federal government. LMOGA looks forward to further participating in this important plan development process and stand ready to assist in anyway needed. If you have any questions, please don t hesitate to contact Lori LeBlanc at Lori.LeBlanc@LMOGA.com or at Sincerely, Chris John President Louisiana Mid Continent Oil & Gas Association Lori LeBlanc Director, Offshore Committee Louisiana Mid Continent Oil & Gas Association