manpower, and equipment, particularly with re- 
spect to exploration and development activity, and 
would permit the gathering of more data to 
evaluate the property to be leased. 
Recommendation: 
Federal lease sales for oil and gas development 
rights on the outer Continental Shelf should be 
announced further in advance than is current 
practice. 
2. Federal Lease Sales for Deep Water 
In 1968, there was a $600 million lease sale in 
the Santa Barbara channel. Thus, several oil 
companies ventured into very deep water—over 60 
per cent of the acreage is below 600 feet and the 
corner of one lease is in water more than 1,800 
feet deep. The Santa Barbara sale involved special 
circumstances that compensated somewhat for the 
disadvantages inherent in greater depths. The 
tracts are very near the shore; the oceanographic 
and meteorological conditions are mild when 
compared to the Gulf of Mexico; oil is in short 
supply along the densely populated coast of 
Southern California; and there are no restrictions 
on rates of production. The degree to which the 
deeper Santa Barbara leases will allow economical 
production will depend greatly on technology yet 
to be developed or perfected and on finding large 
petroleum accumulations. 
The OCS Lands Act now limits the primary 
term for exploration and development to a maxi- 
mum of five years. Continuing the trend toward 
exploration and development in deep water, as 
well as hostile areas such as Cook Inlet, Alaska, 
may make it desirable to lengthen the primary 
lease term. 
3. Production Rate Restrictions 
The Gulf region produces most of the domestic 
offshore oil and has the most proven U.S. offshore 
reserves. Texas and Louisiana have set limits on 
the production rate of each well in accordance 
with a percentage allowable. In order to offset 
costs of operations over water, both States use the 
equity allowable ratio to permit companies to 
produce oil from nearshore and offshore areas at a 
more rapid rate than on land. State ratios tradi- 
tionally have been followed closely by the U.S. 
Government for application to offshore areas in 
the Gulf beyond State jurisdiction. 
Removal of restrictions on production from 
Federal leases might well make Federal tracts, 
deeper and further offshore, more attractive to oil 
companies. However, this would result in loss of 
severance tax revenue to Texas and Louisiana 
because of reduced onshore output and might 
cause the States to respond in kind, thus upsetting 
the existing economic and political stability. Past 
arguments in support of restrictions have included: 
—Restrictions are useful to balance supply and 
demand and to improve conservation. 
—Fields with marginal economics would be unable 
to compete with large efficient fields if the supply 
were not prorated. Thus, it has been reasoned that 
restrictions help maintain a standby production 
capability that could be mobilized quickly in times 
of need such as the Middle East crisis. 
The subject of prorationing involves political 
and economic ramifications related to the varying 
interests of large companies, small companies, and 
consumers. These extremely complex issues pres- 
ently are being reviewed by the Public Land Law 
Review Commission. 
The percentage allowable is continuing to rise 
due to ever increasing demand for petroleum. 
This increase will probably continue until the 
capacity of all wells is attained. Many expect this 
point to be reached in the next 5 to 10 years. 
4. Environmental Prediction 
The offshore oil industry operates in a hostile 
environment, particularly in hurricane areas. For 
operations under normal climatic conditions, the 
oil companies and their offshore contractors 
receive adequate environmental forecasts from the 
U.S. Weather Bureau and many private meteoro- 
logical companies. Nevertheless, improved data 
and forecasting techniques would provide im- 
mediate cost savings. In view of substantial added 
costs during the hurricane season in the Gulf of 
Mexico, better hurricane data and prediction 
would be beneficial. 
The cost of shutting down during a hurricane 
threat in the Gulf of Mexico can be considerable. 
Offshore operations are shut down to varying 
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