DATE: Thursday, October 2, 1997             TAG: 9710020550

SECTION: LOCAL                   PAGE: B1   EDITION: NORTH CAROLINA 

SOURCE: BY CATHERINE KOZAK, STAFF WRITER 

DATELINE: NAGS HEAD                         LENGTH:   96 lines

OIL PRODUCTION LIKELY TO FOLLOW DRILLING CHEVRON INTENDS TO SEEK PERMISSION TO EXPLORE NEAR CAPE POINT.

If Chevron USA gets approval to drill an exploratory well 45 miles off the coast and it discovers oil or natural gas deposits, there's virtually nothing to stop the company from pursuing production, a state attorney told a group of local officials and citizen group leaders Wednesday.

Chevron announced last month that it intends to seek permission to drill in one of the 21-unit blocks of the Manteo Unit oil leases near Cape Point.

``I think the consequence of exploration is if they find something, you have to assume that one day it's going to be developed,'' said Daniel F. McLawhorn, special deputy attorney general for the North Carolina Department of Justice. ``If you find something of significance - yes, it's going to be developed.''

Federal law provides protection to oil companies with active oil leases that prevents states or local governments from blocking access to the resource, McLawhorn said.

State coastal management representatives assured the group, however, that the state will use whatever legal muscle it has in its dealings with Chevron to protect the coast.

``No one's talking about giving in,'' said Richard Whisnant, general counsel for the North Carolina Department of Environment and Natural Resources. ``We're not giving in to anything. We're trying to structure our review.''

Chevron will have to abide by the requirements spelled out in North Carolina's coastal management law, said Kim Crawford, ocean resource specialist for the Division of Coastal Management, the agency that sponsored the meeting at the Nags Head fire station.

Seven years ago, the state denied a Mobil oil company proposal to explore the same Manteo Unit lease area. The state said it did not have enough information about the socio-economic impacts and the possible effects on fisheries in the area, which is near where the Labrador current and the Gulf Stream meet.

Mobil later sued the federal government for upholding the state's determination. The matter is still pending, but Mobil said it is no longer interested in exploration of its blocks.

Crawford said that Chevron has been more forthcoming than Mobil in its approach to the state, saying that it is interested in finding gas and/or oil. Mobil had said it just wanted natural gas, which is not as polluting as oil. Crawford also said that drilling technology has improved since the time of the Mobil proposal, and that drilling muds - which can contain heavy metals and other toxins - are regulated differently today.

But coastal managers said there is still much to learn about Chevron's proposal.

``On our end, what we're doing now is scrambling,'' Whisnant said. ``I guess we're feeling some sense of urgency of talking to Chevron. . . . It's very unpredictable. We just don't know how quickly this is going to unfold.''

Outer Banks residents and officials were almost unanimously opposed to Mobil's plan to drill, and when Mobil withdrew, many thought the battle was won.

``People are confused,'' Crawford said. `` `Didn't this go away? they say. Why is this an issue?' ''

But anti-drilling activists pledged to gear up the forces again.

``This is all so familiar,'' said Mickey Baker, co-vice president of the Outer Banks anti-drilling group LegaSea. ``It's like a nightmare. But we're ready. We're here. We're not going to back down. No way.''

State Sen. Marc Basnight, Senate president pro tem and an Outer Banks resident, also said he is opposed to any drilling off the coast of the barrier islands.

``There's two economies here,'' he said after the meeting. ``One fish. One tourist. Oil doesn't mix with tourism and fisheries if it spills. Fishermen can't take much more damage than they've taken already. We don't have other industries like they do in other coastal areas.''

Andy Hardiman, exploration manager for Chevron, said that the company plans to drill up to 20,000 feet using a diamond bit ``that kind of telescopes down.'' He said the targeted spot would be about three-quarters into the well.

``We don't expect a drop of hydrocarbon or anything above 14,000 feet,'' he said Wednesday from his New Orleans office. ``This is just an absolute standard drilling operation that we have done thousands of times.''

Responding to concerns raised at the Nags Head meeting about strong currents at Cape Point, Hardiman said the currents are at the high end of what the company has dealt with, but they are manageable with a larger rig.

``I'd say the biggest challenge in this operation would be keeping the cost down in terms of the current,'' Hardiman said. ``The rig would be much more expensive than normal. It will probably take longer to drill the well'' - about 90 to 120 days rather than the normal 60 to 90 days.

But he said the water depth - 2,000 feet - and drilling into 14,000 feet of rock is ``nothing.'' And the pressure is lower than most wells dug, he said.

Chevron is expected to submit its application to drill to the state by late 1998 or early 1999.

In the meantime, Crawford said the public will soon be able to keep up on the issue on the division's Web page on the Internet, which should be set up within two months. A newsletter will also be distributed to the public, she said. ILLUSTRATION: Color map

Area shown: Chevron wants to explore for oil and gas here KEYWORDS: OFF SHORE OIL DRILLING NORTH CAROLINA OUTER BANKS

CHEVRON USA

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