McDonnell urges lease sale for offshore energy exploration

RICHMOND, Va. -- Gov.-elect Bob McDonnell is urging President Barack Obama’s administration to proceed with a lease sale in 2011 that would prompt offshore energy exploration and development in Virginia.

"It is time to develop our offshore energy resources to create new jobs and provide necessary new revenue for schools, roads, public safety and alternative energy research and development in Virginia," McDonnell wrote to Secretary of the Interior Ken Salazar.

In his letter to Salazar, McDonnell notes that more than 15 months have passed since Congress allowed the federal moratorium on exploration and development of oil and natural gas resources off the Atlantic Coast to expire.

President Bush repealed a similar executive order banning such action.

"This cleared the way for Virginia to be the first state on the Atlantic seaboard to explore and drill beginning in 2011," McDonnell writes. "Virginia is eager to get started."

McDonnell, who takes office Jan. 16, becomes governor as Virginia faces continued revenue shortages. Gov. Timothy M. Kaine recently proposed budget cuts and tax increases to close a shortfall that he projects to hit $4.2 billion by 2012.

Kaine and lawmakers already have slashed the state budget by $7 billion since April 2007.

McDonnell, who opposes tax increases for transportation, has offered 12 funding mechanisms for road and rails. His plan calls calls for dedicating a portion of new revenue growth to transportation, including future revenue from offshore drilling.

In his letter to Salazar, McDonnell notes that nearly a year ago the public comment period for the potential lease sale ended.

"Unfortunately it appears that virtually no progress has been made at the federal level to get this process rolling," McDonnell writes. "I am requesting that Virginia remain in the current five-year plan and that the federal administrative process move forward."

McDonnell says a 2005 study by a former president at Old Dominion University forecast that offshore natural gas production alone off of the Atlantic coast near Virginia would, over a 10-year period, likely create at least 2,578 new jobs, induce capital investment of $7.84 billion, yield $644 million in direct and indirect payroll, and result in $271 million in state and local taxes.

The study also estimated that there could be up to 500 million barrels of oil in this lease area – enough to fuel all four million cars in Virginia for more than four years.

"I am aware of several major energy companies that are ready to bid for the leasehold rights, generating hundreds of millions of dollars for the state and federal governments," McDonnell said.

In April 2007, the Interior Department proposed to allow oil and natural gas drilling off Virginia’s coast for the first time.

Drilling could occur in 2011 only if Congress were to end its ban affecting most waters except the western Gulf of Mexico and if the president modified a drilling freeze.

Only then could the government solicit industry interest to see whether bidding would occur for a sale of potential energy resources. And exploration plans would have to undergo a federal environmental review.

Then-Secretary Dirk Kempthorne, in announcing the proposal for development in 2.9 million acres off Virginia, couched it as an interest of Virginia’s governor and lawmakers and an "option that they’d like to keep viable."

The proposal identified a wedge-shaped area for development that starts about 50 miles off the coast of Virginia and extends to a point about 170 miles off the coast. To protect navigation into the Chesapeake Bay, a smaller wedge-shaped area there would be off limits to drilling.

In 2006, Virginia’s General Assembly passed a bill that supported lifting existing drilling bans and implementing offshore energy production. Gov. Timothy M. Kaine modified it to support exploration for natural gas but not production, in an area 50 miles or more from the coast. ¶

In 2007, Kaine greeted the federal proposal cautiously while noting concerns that must be met, from threats to the environment to interference with military operations to the state’s interest in natural gas exploration only.