Washington (Platts)--15Jan2009

Oil and natural gas drilling in the US Outer Continental Shelf as
part of a comprehensive energy package will likely be supported by the Obama
administration, although some areas will remain off limits to development,
Interior Secretary-designate Ken Salazar told the Senate Energy and Natural
Resources Committee Thursday.

"There are places in the OCS which are appropriate for drilling,"
especially in the Gulf of Mexico, the former Colorado senator told the
committee during his confirmation hearing. "We can develop our oil and natural
gas resources in a responsible way...(and) we will have a balanced approach to
our development of our natural resources," he told senators.

Salazar, a fifth-generation rancher, has been a centrist on energy
development on public lands. While he has not opposed all oil and gas
development, he has aggressively pressed the department under the Bush
administration to take a more considered approach to some of its more
controversial development plans.

Any drilling would be considered as part of President-elect Barack
Obama's broad energy policy and would be measured with respect for the
environment and local communities, he said. "We need to look at OCS [drilling]
in the context of the energy plan. Development is part of that program,"
Salazar said in response to questions from Alaska Republican Senator Lisa
Murkowski who favors more offshore drilling both in the OCS and the Arctic
National Wildlife Refuge.

"We have to make sure [drilling] is done in a environmentally safe way
and involve the needs and concerns of local communities," he said. "There are
other places that are off limits," he said, without specifically including
ANWR, a hot-button political item for both Democrats and Republicans alike.
"I want to make sure that America's treasured landscapes are protected," he
said.

President Bush last July lifted an executive moratorium on offshore oil
drilling after crude oil prices soared to more than $140/barrel. Congress
allowed its own moratorium to lapse in October rather than face an
election-year battle with Republicans over offshore drilling. The OCS is
estimated to hold about 18 billion barrels of oil and more than 700 Tcf of
natural gas.

Salazar, wearing his trademark bolo tie, this time eshewed his
broad-brimmed Stetson, which he wore at his nomination announcement on
December 17. Salazar, a former farmer and lawyer, received a warm welcome from
his former committee colleagues and has broad support from both Democrats and
Republicans and should see an easy confirmation.

Salazar "understands the need to develop our oil and gas resources, but
also the importance of balancing our energy needs with land conservation,
outdoor recreation, and the environment," Senate Energy and Natural Resources
Committee Chairman Jeff Bingaman said in a a statement. "He has been a
forceful advocate for clean, renewable energy technologies, for outdoor
recreation, and for our rural communities," the New Mexico Democrat said.

Salazar said that his first priority as Interior secretary would
be to "fix the mess" in the department, which had seen several notable
scandals under the Bush administration, including questionable land use
decisions made by Julie MacDonald, former director of the Fish and Wildlife
Service, which Senator Ron Wyden, Democrat Oregon, said were "tainted" and
based on political considerations.

"We will make sure that good science will guide us," Salazar said.
"People will make the calls based on the balls and strikes of the science and
not the balls and strikes of politics."

"Our foremost task will bring the integrity back to the Department of
Interior," Salazar told senators.

Interior's inspector general also reported earlier this year that
department officials responsible for collecting oil and gas royalty payments
engaged in illegal drug use and sexual relationships with their industry
contacts. "The ship has gone bad," said Salazar, speaking of the illicit
liasons and fraternization. "Even crime has been something that has happened
within the Interior Department."

Salazar said that he would also support modest efforts to expand oil
shale development in the Western states. Yesterday, the US Bureau of Land
Management took the first steps to expand oil shale research, development and
demonstration leasing, saying it would accept nominations for parcels in
Colorado, Utah and Wyoming that could be opened to 10-year leasing.

"We need to look at [oil shale] as part of a comprehensive energy plan
but not be reckless about it," Salazar said. BLM estimates that oil shale in
western states could hold the equivalent of 800 billion barrels of oil, nearly
100 times larger than oil reserves in the Gulf of Mexico and the Atlantic
Coast.

Salazar also pledged to support Department of Energy efforts to develop
so-called "clean-coal" technology, using carbon capture and sequestration,
which is touted to "scrub" carbon dioxide emissions from fossil-fuel
facilities such as coal-fired electrical plants. "We will move forward with
funding of those projects so that we can burn coal that doesn't contribute to
climate change," he said. "That will be part of our energy package."

He also pledged to advance mining reform, including cleaning up abandoned
mines in the West, of which there are more than 100,000 in Colorado alone, he
noted, along with improving water quality, electricity transmission, solar
power, and new intiatives for land and resource conservation. He also pledged
to work closely with energy secretary-designate Stephen Chu, the former
director of the Lawrence Berkeley Laboratories.

"We will deliver a new energy economy," Salazar said. "If we fail, the
nation fails, and failure is not an option."

--Daniel Goldstein daniel_goldstein@platts.com
--Gerry Karey Gerry_Karey@platts.com