MMS Deepwater Lease Sales to BP and Other Companies Continue Lax Oversight, say Groups

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 1600 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.

See how Defenders is responding to the Gulf oil disaster.