Facing Double Trouble

The oil and gas industry was jolted last week by bad legal news that involved drilling below two widely separated stretches of water. The Government voiced deep suspicion that major companies are not producing as much natural gas as they could from beneath the Gulf of Mexico, and a federal judge issued an order that will in effect forestall drilling for oil off the coasts of Long Island and New Jersey.

In the gas matter, Interior Secretary Cecil Andrus announced that an eleven-day probe of allegations that companies were hoarding gas on fields leased from the Government had raised enough questions to warrant a full-scale investigation of the industry's production practices. The study found that output in four of the five fields examined was 36% below the maximum production rate, and that many readily drillable gas reservoirs remained untapped. If the investigation uncovers evidence of illegality--for example, deliberate falsification of records of reserves--the case could be turned over to the Justice Department for possible action.

Dismaying Delay. Though Andrus said that the untapped gas in the fields would have helped ease the winter's gas shortage, he declined to judge the producers. Still, he vowed to push them to boost output. Noting that his department has the power to cancel leases, Andrus said: "I am prepared to order production." The major leaseholders, such as Texaco and Continental Oil, denied any wrongdoing and promised to cooperate fully with the investigators.

In Brooklyn, Federal Judge Jack B. Weinstein voided the Government's sale last August of 93 oil-drilling leases on the Atlantic shelf to private companies for $1.1 billion. In response to a suit by local politicians and conservationists, Weinstein ruled that the statements on environmental impact issued by former Secretary of Interior Thomas Kleppe were a "charade." According to the judge, the statements failed to discuss adequately such considerations as whether tankers or pipelines would be used to bring oil ashore or where onshore storage depots and processing plants would be located.

The oil firms holding the leases expressed dismay. Shell Oil charged that the delay "further jeopardizes the economic security of the nation." What happens next is unclear. The Interior Department can either appeal the ruling, possibly rewrite the impact statement, or call the deal off and return the money to the companies. Whatever it does, last week's decision is certain to delay production in the Atlantic for at least several years.

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