Bay State suit leads oil firms to shun offshore lease sale

The ink was barely dry on Boston federal Judge David Mazzone's last-minute injunction before word was out that a controversial auction of offshore oil and gas exploration tracts off Cape Cod had already been canceled by the US Department of the Interior.

Massachusetts officials and local environmental groups are claiming victory this week in their battle against what they consider to be environmentally dangerous plans by the Interior Department for leasing of tracts near the productive Georges Bank fishing grounds for test drilling.

''We, of course, are extremely pleased,'' says Emily Bateson of the Conservation Law Foundation, which joined the State of Massachusetts in a lawsuit to block the lease sale that had been scheduled to take place Wednesday.

After months of controversy and negotiation, Interior called off the projected lease sale of up to 6.3 million offshore acres in a surprise move late Tuesday. Department spokesmen they had learned that no oil companies planned to bid for the tracts.

The cancellation came shortly after Judge Mazzone issued an injunction blocking the scheduled lease sale because of environmental concerns raised in the Massachusetts suit.

It means that millions of offshore acres originally included in what has been designated as Part I of the lease sale will not be offered to oil companies for exploration again until at least 1986 or 1987, say Interior Department officials.

They note, however, that roughly 1,400 tracts to the north and east of Georges Bank are still slated for auction in Part II of the lease sale. That sale is expected to be scheduled after the International Court of Justice settles an offshore border dispute between the United States and Canada in the affected area.

The World Court is expected to issue a ruling by the end of the year. Interior officials say Part II of the sale could be held in early 1985. That part of the sale is expected to be just as controversial as Part I.

In moving to block Part I, Massachusetts and environmentalists said the Interior Department had failed to honor a proposal by Bay State Gov. Michael S. Dukakis that all tracts in waters 400 meters in depth or shallower be kept out of the lease sale. The state has maintained that a ban on exploration tracts in 400 meters of water or less would adequately protect the fishing grounds on Georges Bank, the backbone of New England's fishing industry.

Interior adopted part of the Dukakis proposal, but decided to keep 149 of the shallower tracts in the lease sale, explaining that they were of high interest to the oil industry. Roughly 50 percent of the area slated for auction in Part II is in waters of 400 meters or less.

One of the major questions raised by Interior's cancellation of Part I of the sale was why the oil companies decided not to bid. Industry sources say it was the first time a lease sale has ever been held in which no one showed up to bid. (The environmental activist group Greenpeace submitted 149 unofficial, symbolic bids that were returned unopened by Interior.)

William Bettenberg, director of the federal Minerals Management Service, which overseas the oil exploration program, says the Massachusetts lawsuit may have contributed to the apparent lack of industry interest in the offshore tracts. He says that oil companies may have balked at participating in the lease sale because of concern that their down payments on exploration tracts (roughly legal challenge.

He noted that during a similar lawsuit in California, oil company down payments were held without action by the Interior Department for more than 11/2 years.

Charles D. Matthews, president of the National Ocean Industries Association, which represents 450 companies specializing in offshore oil work, says he feels the apparent lack of industry interest was in part because of the lawsuit and in part because many of the more attractive exploration tracts were taken out of the lease sale in an effort to accommodate Massachusetts officials.