As Cuba Plans Offshore Wells, Some Want U.S. to Follow Suit

WASHINGTON
May 8
In 1977, the United States and Cuba signed a treaty that evenly divided the Florida Straits to preserve each country's economic rights. They included access to vast underwater oil and gas fields on both sides of the line.

Now, with energy costs soaring, plans are under way to drill this year — but all on the Cuban side.

With only modest energy needs and no ability of its own to drill, Cuba has negotiated lease agreements with China and other energy-hungry countries to extract resources for themselves and for Cuba.

Cuba's drilling plans have been in place for several years, but now that China, India and others are involved and fuel prices are unusually high, a growing number of lawmakers and business leaders in the United States are starting to complain. They argue that the United States' decades-old ban against drilling in coastal waters is driving up domestic energy costs and, in this case, is giving two of America's chief economic competitors access to energy at the United States' expense.

"This is the irony of ironies," Charles T. Drevna, executive vice president of the National Petrochemical and Refiners Association, said of Cuba's collaboration with China and India. "We have chosen to lock up our resources and stand by to be spectators while these two come in and benefit from things right in our own backyard."

The United States Geological Survey estimates that the energy field on Cuba's side alone may have 4.6 billion barrels of oil and 9.8 trillion cubic feet of natural gas. That much energy is equivalent to just a few months of the United States' total energy consumption.

The survey does not specify how much of an energy reserve is on the United States' side of the Florida Straits, just north of Cuba. But almost all of the country's Outer Continental Shelf, waters within 200 miles of shorelines, has been off limits to drilling since the early 1980's because of Congressional bans and executive orders.

President Bush, who renewed the 1977 treaty last December for two years, has cited China's growing demand for oil and international efforts to obtain it as prime reasons for high gasoline prices. The latest version of the administration's national security strategy, issued in March, warned that China's leaders were "acting as if they can somehow 'lock up' energy supplies around the world."

To Mr. Drevna and others who are lobbying Congress to end the prohibition, energy exploration in coastal waters represents a strong step toward energy independence and lower prices.

The Interior Department estimates that the Outer Continental Shelf has more than 115 billion barrels of oil and 633 trillion cubic feet of natural gas available for extraction. At current levels of consumption, that would satisfy the nation's oil needs for about 16 years and its natural gas needs for about 25 years.

Opponents of drilling in United States waters are equally passionate in their arguments, saying that drilling for oil off the coast poses environmental risks and that drilling for finite supplies undermines long-term conservation solutions. They also say modest supplies of additional oil would not necessarily lower gasoline prices in the United States because oil is traded on a world market.

But drilling proponents say the time has come to end the bans, especially with plans by China and India to capture oil and gas so close to the United States shoreline.

"My fear is for the future of America," said Representative John E. Peterson, Republican of Pennsylvania, who has collected more than 160 co-sponsors for a bipartisan bill that would open coastal waters for development of natural gas. "We have a natural gas crisis, and it's the biggest threat we have to the American economy."

Senator Larry E. Craig, Republican of Idaho, took narrow aim at the activities planned for the Florida Straits and recently complained on the Senate floor, "Red China should not be left to drill for oil within spitting distance of our shores without competition from U.S. industries."

Cuba has divided its side of the Florida Straits into 59 lease areas. As of the end of February, foreign countries had secured the rights or were negotiating the rights to 16 of them, according to Cuban government documents provided by the Cuban Interests Section in Washington.

Kirby Jones, founder and president of the U.S. Cuba Trade Association, a group that promotes United States business interests in Cuba, said Cuba had signed agreements with companies from China, India, Spain and Canada.

At a recent trade conference in Mexico City arranged by Mr. Jones, Cuban officials invited American oil companies to bid for the other leases on the Cuban side of the Florida Straits even though drilling in Cuban waters would violate the United States' longstanding trade embargo against Cuba.

The purpose, Mr. Jones said, "was to let the American oil executives know what is happening in Cuba."

United States oil companies would have a right to bid for Cuban leases under legislation Mr. Craig is drafting. Dan Whiting, his spokesman, said the measure would seek an exemption like the one created several years ago for United States companies to sell food and medicine to Cuba. But an exemption for drilling seems uncertain, given the large number of lawmakers staunchly opposed to any economic relationship with Cuba as long as Fidel Castro is president.

Mr. Craig's measure would be one of several Senate bills aimed at drilling in coastal waters. Two pending measures would approve operations in a small tract of the Gulf of Mexico, one of the few coastal areas where drilling is allowed. And a measure introduced two weeks ago by Senator Bill Nelson, Democrat of Florida, who opposes drilling within 150 miles of Florida's coastline, would block renewal of the 1977 treaty and then deny foreign companies access to United States markets if they continued to drill in waters close to Cuba.

Mr. Peterson said his bill focused only on natural gas because of its importance to the American manufacturing industry, particularly chemical companies, which spend huge amounts on natural gas to make their products.

The average price of a gallon of gasoline has increased by 126 percent since early 2000, to a current average of $2.96 per gallon, according to the Energy Information Administration. Natural gas prices have jumped by 152 percent in the same period, to $6.56 per thousand cubic feet. It is a rate the National Association of Manufacturers says has contributed to the loss of more than 3.1 million jobs since 2000 through plant closings and relocations offshore.

Mr. Peterson's bill is one of several proposing to open coastal waters that House lawmakers are expected to consider before long. Brian Kennedy, a spokesman for Representative Richard W. Pombo, Republican of California and chairman of the House Resources Committee, said Mr. Pombo planned to introduce a bill that would give states control of the first 125 miles of waters beyond their shorelines.

Last week, American business executives visited lawmakers on Capitol Hill to lobby for any change in policy that would open up coastal waters, particularly those near Cuba.

"It's such an easy fix," said John Paro, president and chief executive of the CPH Holding Corporation, a chemical company in Chicago. "We have the supply, and it's close. I just wish the public would recognize how easy this problem is to deal with."