Companies begin quest for oil, gas off Florida

updated 6:51 p.m. ET July 4, 2008

PENSACOLA, Fla. - Oil companies once viewed drilling in the deep waters off Florida as cost prohibitive. Politicians feared even the slightest sign of support would be career suicide.

No more. Record crude oil prices are fueling support for oil and natural gas exploration off the nation's shores. In Florida, movement was under way even before President Bush called on Congress last month to lift a federal moratorium that's barred new offshore drilling since 1981.

The early activity here stems from a 2006 Congressional compromise that allows drilling on 8.3 million acres more than 125 miles off the Panhandle — an area that had been covered by the moratorium, which was enacted out of environmental concerns. In exchange, the state got a no-drilling buffer along the rest of its beaches.

Florida may turn out to be a prelude for other coastal states. If oil or natural gas deposits are found in the newly opened region, experts say it could further the push to explore other once-protected areas everywhere. It also could be a rallying point for critics, who say the new exploration isn't a license to expand exploration.

With gas topping $4 a gallon, recent polls show Americans, Floridians included, more supportive of drilling in protected areas. Some politicians — including Gov. Charlie Crist — have switched sides.

"We think the public is way out ahead of the politicians on these issues. People are more open to (offshore drilling) now," said Tom Moskitis, spokesman for the American Gas Association, a trade group.

At the same time, oil companies, driven by the record energy price, are more willing to risk $100 million or more to begin exploring new regions. The Interior Department estimates there could be 18 billion barrels of oil and 77 trillion cubic feet of natural gas beneath the 574 million acres of federal coastal waters that are now off-limits.

On and off
Drilling activity off the Florida Panhandle has started and sputtered for decades. Some companies had leases to drill off the Panhandle before the 1981 moratorium. They were grandfathered in when the moratorium passed because they were already actively exploring in their lease areas. They continued their activity off and on into the early 1990s.

In March, four companies — Australia-based BHP Billiton Petroleum Deepwater Inc., Houston-based Anadarko E&P Co., Shell Offshore Inc. and Italian oil and natural gas company Eni SpA — purchased leases on 36 Gulf of Mexico tracts under the 2006 compromise.

Jeb Bachmann, an analyst with New Orleans energy consultant Howard Wiel, said the four understand the shifting political and financial realities.

"It gives you an indication that some of these companies believe there is some light at the end of the tunnel," Bachmann said. "There is higher pricing and a belief that higher prices are going to ultimately drive some changes."

Independence Hub
Anadarko bought seven of the recently opened tracts south of Pensacola because of their proximity to its Independence Hub, a major natural gas field off Alabama that supplies 1.5 to 2 percent of the natural gas consumed in the U.S. every day, said Stuart Strive, the company's vice president of exploration for the eastern Gulf. The newly leased tracts are between 50 and 75 miles east of the Independence Hub.

But finding and producing natural gas in the new site will be expensive. Three-dimensional mapping of the ocean floor, which must happen before any drilling, could take up to two years, Strive said. If a promising site is found, engineers must drill up to three miles below the ocean surface to extract the oil or natural gas.

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