Mike Cornyn's January 2010 SWLGS talk.

1. US Atlantic Outer Continental Shelf – Revisited?

2. Talk OutlinePresent World and US Energy Dependence Historical InformationMMS Area OrganizationLeasingPlay ConceptsDrilling ResultsPresent ThoughtsTechnologyPlay ConceptEconomic Reality CheckPublic Policy Reality CheckConclusions

3. World Energy Balance - Introduction Present Consumption :Rich vs Poor: Present Usage US GNP 1.5 X Eur US EC 1.8 X Eur EC = Energy Consumption 60% oil- gas Projected World Energy Consumption Present Energy Sources 2X Rich 24 yrs Poor Source: Wikipedia

4. United States Energy Balance - Introduction 61% Positive Trend Positive Trends: Consumption and Imports Negative Trends: Domestic Production Equal: Hugh Transfer of Wealth (~$331B for 2008) Negative Trends Source: US Energy Information Agency

5. Atlantic Outer Continental Shelf Studied Areas Deep Panuke COST G1 & G2 COST B2 & B3 Manteo Production Unit COST GE1

7. 49 exploration and 5 COST wells drilled

8. 269.49 million acres ( = ~11% of Continental US area)

11. Thirty three thousand plus 1981- 1982 for exploration wells

12. All data shown is 2D multi fold air-gun CDP stack public domain seismic available thru MMS

13. Atlantic Outer Continental ShelfGeorges Bank Deep Panuke COST G1 & G2 COST B2 & B3 Manteo Production Unit COST GE1

17. 1988 Canadian Government joins Georges Bank moratorium until 2012 Georges Bank Area Well Location Map $817MM North Atlantic Planning Area - Georges Bank Area Statistics $817 MM Total Lease Bonus for 63 leases 2- COST wells, 8 Exploration wells

19. drilled purposely off any structure

20. G-1 4/16/76 to 7/26/76

21. G-1 $8.3 MM, 111 days

22. G-1 for Sale 42

23. G-1 31 companies support

24. G-2 $13.9 MM, 236 days

25. G-2 1/6/77 to 8/30/77

26. G-2 for Sale 42

27. G-2 19 companies supportCarbonates MJ Carbonates TD 16050’ C Metamorphics Carbonates EJ/Tr Tr Argo Salt Amato, et al (1980) TD 21874’’

28. Georges Bank Petroleum Exploration – North Atlantic Planning Area Regional Line Through Wells COST#G1 (LC 79), COST #G-2 (LC 141), Tenneco LC187#1 COST G-1 COST G-2 Tenneco LC187#1 Paleocene Cretaceous General Area Prospect Type - 4 way closure & drape, over anticline Jurassic M Jurassic L Jurassic Cambrian Digicon Line d-133 AGC Stack 2D Seismic 1975 vintage SE

29. North Atlantic Planning Area – Georges Bank Petroleum Exploration Tie of COST#G2 and Tenneco LC 187#1 NW-SE Line d-133 Tenneco LC187#1 COST #G2 Tertiary LC LC EC LJ EC MJ Shows LJ Coal EJ MJ Hydrocarbon Evolution Window Shows Triassic 950 unit gas shows Carbonate porosity negligable Hydrocarbon Evolution Window Triassic (?) Jurassic Salt Swell Digicon Line d-133 AGC Stack 2D Seismic 1975 vintage COST Paleo by MMS SE

33. COST B#2 first COST well drilled in Atlantic

34. COST B#3 first Atlantic “Deep” water well (WD 2686’)

35. $1.6B spent for 238 leases over 5 lease sales

36. 32 exploration and 2 COST Wells drilled in 7 years

37. Hydrocarbons found in HC598-642 by Texaco & Tenneco

39. First COST well drilled

40. Similar to Scotian Shelf Wells in lithology, sediment age, & deposition environments Miocene (910 – 3596) Oligocene (3596 – 4082) Eocene (4082 – 4964’) Paleocene (4964 – 5000) Upper Cretaceous (5000 – 8130) Lower Cretaceous (8130 – 16043) Source rocks Peak Oil starts@11300’ Possible L Jurassic (14650- 16043’) Well total cost $8.4 MM, 106 days Peak gas starts@19000’

41. SWLGS Atlantic Offshore Review – Mid -Atlantic Planning Area – COST B#2 Well US Canada Baltimore Canyon Trough Baltimore Canyon Trough A A’ Scotian Shelf COST B#2 1 2 3 COST B#2 x 1 3 x x 2 A’ Cross-section Shore to COST B#2 x x A

43. Rig on location 10/8/78 – 1/25/79, 108 days

44. Dynamically positioned drill ship

45. Significant gas shows 15744-15752’

46. For Lease Sale 49 (2/28/79)

47. Highest mud weight 11.7ppg

48. Eleven companies participate

49. Total cost $12 MME LC B#3 Scotia Shelf B#2 EC Oil moderate maturation Gas good – v good maturation LJ Shows TD 15,820’

50. SWLGS Atlantic Offshore Review – Baltimore Canyon COST Well B2 and COST Well B3 North Atlantic Planning Area Hudson Canyon Wilmington Canyon B-3 B-2 B-2 Miocene B-3 Oiigocene Eocene UC LC Thermal Maturation Depth New Jersey Coal lenses UJ Shows Spud Oct. 9, 1978 TD Jan. 25, 19769 WD 2686’ TD 15,820’ SW NE Spud Dec 14, 1976 TD Mar 18, 1976 WD 298’ TD 16,043’ COST B-2 and Sale 40

51. North Atlantic Planning Area – Hudson Canyon 598, 599, 642, 643 Structure Selected Well Test Results 9.4 MMCFPD 119’ net pay- log analyst 157’ additional - calculated A 7.9 MMCFPD 18.9 MMCFPD 18.5 MMCFPD 630 bbls/day @8300’ 5.9 MMCFGPD Mature A’ Test results of select wells on HC598,599, 642, & 643 Structure

52. North Atlantic Planning Area – Hudson Canyon 598, 599, 642, 643 Structure Selected Well Test Results SE NE A-117a A-156 A-156 A-117a Texaco HC642#1 Tenneco HC642#3 Texaco HC598#4 Texaco HC642#1 Texaco HC598#1 Tenneco HC642#2 LC LC Test EC EC immature Test mature LJ Test Test LJ Test Test A-156 A-117a Test Test MJ MJ N Wells projected to Line a-117a Wells projected to Line a-156

53. Atlantic Outer Continental ShelfMid Atlantic Planning Area Deep Panuke COST G1 & G2 COST B2 & B3 Manteo Production Unit COST GE1

54. SWLGS Atlantic Offshore Review – Mid -Atlantic Planning Area Shell BR93 #1 Proposed Federal Sale 220 Manteo Production Unit

55. SWLGS Atlantic Offshore Review – Mid -Atlantic Planning Area – Shell BR93#1 Well Facts: Only well in Mid Atlantic Planning Area TD 17740 feet WD 5017 feet Rig on Location 120 days Used drillship Highest mud Weight 10.4 ppg Hurricane Diana 41 hours and Josephine 87 hours Hydrocarbons Start Evolving Hydrocarbons Start Evolving

57. MMS estimates potential at 130MMBbls of oil and 1.14 TCF of gas

58. Sale 220 is scheduled for 2011 under OCS Leasing Program 2007-2012

61. Mobil POE for Block 467 was “deemed approval” by MMS in 1990, N Carolina denied approval

62. Total lease winning bids $248MM (21 blocks), ~$235MM for 5 of blocks,

63. Mobil appealed Secretary of Commerce (1994) and lost, appealed to Federal District Court (1996) got no decision

64. 2000 US Supreme Court ruling in favor of Mobil/Marathon (8 to 1 ruling) returns $156MM in lease fees

66. Water depth varies from 300’ to 3800’ plus

67. Water depth on line ~2100’

68. Pg 7%, Pc 2%

69. Potential reserves estimated at 1.5 Bbbls, or 5TCF Vigil (1998)

70. Atlantic Outer Continental ShelfSouth Atlantic Planning Area Deep Panuke COST G1 & G2 COST B2 & B3 Manteo Production Unit COST GE1

73. Drilled in Brunswick Block 387

74. Supported by 25 companies

75. Total well cost $7.53 MM (1980 $s)

76. Rig was on location 112 days

77. Heaviest drill mud #10.0 ~3000’ above TD GA FL

78. SWLGS Atlantic Offshore Review – South -Atlantic Planning Area – COST GE-#1 Canadian Scotia Shelf B-2 B-3 Esso#1 COST GE#1 Tertiary UC Deep Marine Shallow Marine LC Continental Basement Paleozoic Canada United States Baltimore Canyon Trough Esso#1 COST GE#1 Thermally Immature Thermally Mature Gas

80. Seismic amplitude and prospect models of the time did not work

82. Last Atlantic Coast Leases (Manteo Area) were relinquished in November, 2000 after lengthy legal battle without opportunity to drill prospect But there was a wealth of information…….

83. SWLGS Atlantic Offshore Review – Result #1 Depth of Hydrocarbon Thermal Maturation MA CN 9 13 NJ NJ DE 11 15 VA 18 CI: 1000’

84. SWLGS Atlantic Offshore Review – Result #2 Type of Hydrocarbon Expected A Shell BR93#1 A’ COST B-3 Shell WC587#1 Thermally immature source Thermally mature gas source Baltimore Canyon Area Georges Bank Area A’ Shell LC410#1 Exxon CC#975-1 A Thermally mature gas source

85. SWLGS Atlantic Offshore Review – Result #3 High Risk Elephant Targets Carbonate Buildup off New Jersey Coast Chevron assigned a 1 out of 15 chance (Pg 7%) of finding hydrocarbons, (2% Pc) with a reserve potential of 1.5 Bbbls oil or 5 TCF Virgil (1998) Manteo Prospect (off North Carolina Coast) Shell’s J Carbonate Buildup Tests: WC587#1 WC372#1

86. Then in 1998 Deep Panuke found on the CanadianScotia Shelf…….

87. Atlantic Outer Continental ShelfDeep Panuke Analogy Deep Panuke COST G1 & G2 COST B2 & B3 Manteo Production Unit COST GE1

88. Canadian Atlantic Analog Cohasset-Panuke FieldProduced 44.5 MMbbls Deep Panuke Reservoir Deep Panuke Field EUR 892 BCF Canada USA Kidston, A., et al (2005)

89. Canadian Atlantic Analog – Deep Panuke Field Deep Panuke Field 1-2 km wide, ~11 km long EUR 892 BCF Show N-S seismic line Abenaki 5 Depth Map Stratigraphic trap of dolomitized, leached carbonates along Jurassic paleo shelf edge Seven delineation wells, 5 wells with 11 – 108 m pay and tests of 51 – 63 mmcfpd

90. Canadian Atlantic Analog - Models Cohasset-Panuke Deep Panuke Deep Panuke Deep Panuke

91. SWLGS Atlantic ReviewUS Jurassic Play - Deep Panuke US Canada Baltimore Canyon Georges Bank Scotian Shelf Northeast Channel G#1 G#2 B#3 B#2 Yarmouth Arch Thermally mature gas source Deep Panuke Pay Jurassic Basement High

94. MMS calculates up to 27 pools with an unrisked mean size range of <1 to 179MMBOE and unrisked mean of 14 MMBOE 2000 Assessment @www.gomr.mms.gov

95. Where Are We Now???Technology?Economic??Public Policy ?

97. Some of present 2D grids are very useable and could be re-processed but public ownership and quality issues with old seismic tape could be big issues

98. Need new migrated seismic volumes, either 2D or reconnaisance type 3D.

99. Biggest acquisition problems are size of area needed to be shot in given time, and number of sponsors needed to under write survey(s)

102. Seven delineation wells with tests of 51 – 63 MMCFPD, assume 50 MMCFPD

104. SWLGS Atlantic Offshore Review – Shell’s E Cretaceous- L Jurassic Paleo Shelf Edge Carbonate Buildup Tests Shell WC587#1 WD 6448 TD 14500 Argillacceous facies tight in blanket lime facies some, in shelf-edge cap some porosity but low permeability, no hydrocarbons penetration on seaward edge Shell WC373#1 WD 6952’ TD 11631’ Argillacceous facies tight in shelf-edge cap some porosity but low permeability, no hydrocarbons penetration on seaward edge Kerogen Optical Thermal Maturity

105. Public Policy – Moratoria – Presidential Withdrawal Until June 30, 2012

107. MMS estimates potential at 130MMBbls of oil and 1.14 TCF of gas

108. Sale 220 is scheduled for 2011 under OCS Leasing Program 2007-2012

110. Public Policy – State News Items – South Carolina Our U.S. Rep. Henry Brown and U.S. Sen. Lindsey Graham have been, and remain, avid supporters of offshore drilling. The Charleston Regional Business Journal reports: “We’ve been leading the charge on this for years and years,” said Brown’s chief of staff, Chris Berardini. “The congressman has always stood his ground and thought it was the right thing to do for coastal communities.” The Greenville News, Editorial. “Gas exploration would help state … South Carolina would benefit if the federal government includes this state among those that will be allowed to conduct exploratory natural gas and oil drilling off the Atlantic Coast. … If harvestable natural gas is found off the coast of South Carolina, it would mark a further step toward energy independence for the United States. Second, such work could provide much-needed revenue to the state and create jobs for some state residents..” (9/28/09) Jackson Daily News, Editorial. “Offshore drilling now a necessity … Studies and recent history have shown that it’s safe to drill offshore for oil and natural gas. It’s safe for the workers. It’s safe for the economy. And it’s safe for the environment. … Both industry and some federal government officials have said that modern technology has made the chances of offshore exploration causing significant ecological or environmental damage quite remote. … 9/27/09

111. Public Policy – News Items – New Jersey Wind vs Petroleum at First Offshore Energy Hearing Environmental News Service, April 7, 2009 Off-shore wind supporters and proponents of off-shore oil and gas development battled for power Monday at the first of four regional public meetings held by the Interior Department on a comprehensive energy strategy for the Outer Continental Shelf. "Our reliance on fossil fuel is directly linked to the economic, foreign and environmental crises surrounding us," testified David Pringle of the New Jersey Environmental Federation.." In October, Governor Jon Corzine, a Democrat, introduced an Energy Master Plan for the state, including a strategy to harness offshore energy resources. The plan sets a goal for the state to have 3,000 megawatts of offshore wind constructed off of the New Jersey coast by 2020, and 1,000 megawatts by the end of 2012. Website: Clean Water Action, published Apr 4, 2009 NJ Senator Menendez Opposes Offshore Drilling Aug 23, 2008 10:53 am US/Eastern MONROE, N.J. (AP)- Sen. Bob Menendez said his opposition to offshore drilling is like his original vote against the Iraq war: unpopular at the time but nonetheless the right thing to do.Two polls taken this month show a majority of New Jerseyans may not agree.A Quinnipiac University poll showed New Jerseyans support drilling for oil in currently protected offshore areas by a margin of nearly 2 to 1. More than half (53 percent) support drilling in the Alaskan National Wildlife Refuge, with 41 percent opposed.The Monmouth University/Gannett New Jersey Poll found 59 percent back drilling for oil off the coast of Virginia and 56 percent support drilling off the New Jersey coast. N.J. Senator Menendez Opposes Offshore Drilling MONROE, N.J. (AP) ― . Senator Menendez Opposes Offshore Drilling MONROE, N.J. (AP) ― Click to enlarge Sen. Bob Menendez said his opposition to offshore drilling is like his original vote against the Iraq war: unpopular at the time but nonetheless the right thing to do.Menendez reiterated his opposition to oil exploration off the Atlantic Coast this week while in the Garden State promoting new federal property tax relief, which he helped shepherd through Congress as part of a housing foreclosure rescue bill.The Democratic senator from New Jersey, -- who is sponsoring legislation to permanently bar drilling in the outer continental shelf -- said his opposition to drilling has not wavered despite two recent polls showing New Jerseyans open to the prospect of new drilling, perhaps even in their own back yards."The bottom line is there is real risk here," Menendez said. "Unless we want to lose the $20 billion economy of the shore and do it for a lot less energy than we'd get for pursuing the renewable energy tax credits, then I think drilling doesn't make a lot of sense."Two polls taken this month show a majority of New Jerseyans may not agree.A Quinnipiac University poll showed New Jerseyans support drilling for oil in currently protected offshore areas by a margin of nearly 2 to 1. More than half (53 percent) support drilling in the Alaskan National Wildlife Refuge, with 41 percent oppo Sen. Bob Menendez said his opposition to offshore drilling is like his original vote against the Iraq war: unpopular at the time but nonetheless the right thing to do.Menendez reiterated his opposition to oil exploration off the Atlantic Coast this week while in the Garden State promoting new federal property tax relief, which he helped shepherd through Congress as part of a housing foreclosure rescue bill.The Democratic senator from New Jersey, -- who is sponsoring legislation to permanently bar drilling in the outer continental shelf -- said his opposition to drilling has not wavered despite two recent polls showing New Jerseyans open to the prospect of new drilling, perhaps even in their own back yards."The bottom line is there is real risk here," Menendez said. "Unless we want to lose the $20 billion economy of the shore and do it for a lot less energy than we'd get for pursuing the renewable energy tax credits, then I think drilling doesn't make a lot of sense."Two polls taken this month show a majority of New Jerseyans may not agree.A Quinnipiac University poll showed New Jerseyans support drilling for oil in currently protected offshore areas by a margin of nearly 2 to 1. More than half (53 percent) support drilling in the Alaskan National Wildlife Refuge, with 41 percent opposed

113. VA, NC, SC, GA can allow between 50 & 100 mile drilling limit~100 miles ~50

114. Conclusions The United States consumption of hydrocarbons increases each year and it spends large sums of money to import oil each year ($335B in 2008) The US Atlantic Outer Continental Shelf does have the potential for large natural gas production from the Late Cretaceous through Triassic The technology to extract this gas in a safe, and environmentally friendly way is available A Deep Panuke size Field could make money at $4/MCF, but reserves under $5/MCF must > 500 BCF The future of Atlantic Outer Continental Shelf exploration depends upon US citizen involvement.

115. References Amato, R. V. and Simonis, E.X., editors, 1979: Geologic and Operational Summary, COST No. B-3 Well, Baltimore Canyon Trough Area, Mid-Atlantic OCS, United States Department of Interior , Geological Survey, Open-file Report 79-1159. Amato, R. V., and Bebout, J. W., Editors, 1980: Geologic and Operational Summary, COST No. G-1 Well, Georges Bank Area, North Atlantic OCS, United States Department of the Interior, Geological Survey, Open-file Report 80-268. Amato, R. V., and Simonis,E. K., Editors, 1980: Geologic and Operational Summary, COST No. G-2 Well, Georges Bank Area, North Atlantic OCS, United States Department of the Interior, Geological Survey, Open-file Report 80-269. Amato, R. V., Editor, 1987: Shell Baltimore Rise 93-1 Well Geological & Operational Summary, U.S. Department of the Interior, Minerals Management Service, Atlantic OCS Region, OCS Report MMS 86-0128. Bielak, L. E., Editors, 2000: Tenneco Hudson Canyon Block 642 -2 Well, Geological and Operational Summary, U S Department of the Interior, Minerals Management Service, Atlantic OCS Region, OCS Report MMS 86-077. Edison, G.M., Donald, L. O., and Petty, A. J., Editors, 2000: Exxon Corsair Canyon Block 975 No. 1 Well, Geological and Operational Summary, U S Department of the Interior, Minerals Management Service, Atlantic OCS Region, OCS Report MMS 2000-032.

116. References Edson, G.M., Donald, L. O., and Petty, A. J., Editors, 2000: Mobil Lydonia Canyon Block 273 No. 1 Well, Geological and Operational Summary, U S Department of the Interior, Minerals Management Service, Atlantic OCS Region, OCS Report MMS 2000-036. Edson, G.M., Donald, L. O., and Petty, A. J., Editors, 2000: Mobil Lydonia Canyon Block 312 No. 1 Well, Geological and Operational Summary, U S Department of the Interior, Minerals Management Service, Atlantic OCS Region, OCS Report MMS 2000-037. Edson, G.M., Donald, L. O., and Petty, A. J., Editors, 2000: Shell Lydonia Canyon Block 357 No. 1 Well, Geological and Operational Summary, U S Department of the Interior, Minerals Management Service, Atlantic OCS Region, OCS Report MMS 2000-038 Edson, G.M., Donald, L. O., and Petty, A. J., Editors, 2000: Shell Lydonia Canyon Block 410 No. 1R Well, Geological and Operational Summary, U S Department of the Interior, Minerals Management Service, Atlantic OCS Region, OCS Report MMS 2000-039. Edson, G.M., editor, 1987: Shell Wilmington Canyon 372-1, Geological and Operational Summary, US Department of the Interior, Minerals Management Service, Atlantic OCS Region OCS Reports MMS 87-0118.

117. References Edson, G.M., Olson, L. D., and Petty, A. J., Editors, 2000: Tenneco Lydonia Canyon Block 187 No. 1 Well, Geological and Operational Summary, U S Department of the Interior, Minerals Management Service, Atlantic OCS Region, OCS Report MMS 2000-035. Kobelski, B. J., Editors, 1987: Texaco Hudson Canyon Block 598 No. 3 Well, Geological and Operational Summary, U S Department of the Interior, Minerals Management Service, Atlantic OCS Region, OCS Report MMS 86-0129. Edson, G.M., Donald, L. O., and Petty, A. J., Editors, 2000: Shell Lydonia Canyon Block 357 No. 1 Well, Geological and Operational Summary, U S Department of the Interior, Minerals Management Service, Atlantic OCS Region, OCS Report MMS 2000-038 Edson, G.M., Donald, L. O., and Petty, A. J., Editors, 2000: Shell Lydonia Canyon Block 410 No. 1R Well, Geological and Operational Summary, U S Department of the Interior, Minerals Management Service, Atlantic OCS Region, OCS Report MMS 2000-039. Edson, G.M., editor, 1987: Shell Wilmington Canyon 372-1, Geological and Operational Summary, US Department of the Interior, Minerals Management Service, Atlantic OCS Region OCS Reports MMS 87-0118.

118. References Edson, G.M., editor, 1988: Shell Wilmington Canyon 372-1, Geological and Operational Summary, US Department of the Interior, Minerals Management Service, Atlantic OCS Region OCS Reports MMS 87-0118. Edson, G.M., editor, 1986: Shell Wilmington Canyon 586-1, Geological and Operational Summary, US Department of the Interior, Minerals Management Service, Atlantic OCS Region OCS Reports MMS 86-0099 Edson, G.M., editor, 1987: Shell Wilmington Canyon 587-1, Geological and Operational Summary, US Department of the Interior, Minerals Management Service, Atlantic OCS Region OCS Reports MMS 87-0087. Edson, G.M., editor, 1987: Shell Wilmington Canyon 372-1, Geological and Operational Summary, US Department of the Interior, Minerals Management Service, Atlantic OCS Region OCS Reports MMS 87-0118

119. References Kidston, A.G., Smith, B., Brown, D.E., Makrides, C. and Altheim, B., 2007: Nova Scotia Deep Water Offshore Post-Drill Analysis – 1982-2004. Canada-Nova Scotia Offshore Petroleum Board, Halifax, Nova Scotia, 181p Evans, I., Kendall, C.G. St. C., and Warme, J.E. 1974: Jurassic sedimentation in the High Atlas Mountains of Moroccoc during early rifting of Africa and North America: Geology, v. 2, p 295-96. Scotese, C. R. , 2002, http://www.scotese.com. Smith, M. A., Amato, R. V., Furbush, M. A., Port, D. M., Nelson, M. E., Hendrix, J. S., Tom, L. C., Wood, G., and Shaw, D. R., 1976: Geological and Operational Summary, COST No. B-2 Well, Baltimore Canyon Trough Area, Mid-Atlantic OCS, United States Department of the Interior Geological Survey, Open-file Report 76-774.