Uncertain Landscape Awaits New Offshore Drilling Efforts

Backers of wider offshore drilling, stymied in 2005, are planning new legislative efforts this year to tap more oil and gas on the outer continental shelf as lawmakers, industry and activists brace for renewed battle on the issue.

Supporters of new access will likely argue that high winter heating bills bolster their case, especially with respect to natural gas. But several sources say moving offshore drilling legislation and other controversial bills this year will be complicated by the Jack Abramoff corruption scandal in the House, the House leadership shake-up and the approaching midterm congressional elections.

The major goals are providing states the ability to "opt out" of leasing bans that now cover most areas outside the western Gulf of Mexico, opening the Gulf of Mexico's Lease Sale 181 area, in addition to creating state-federal revenue sharing. Also, an even more aggressive effort to lift offshore bans for natural gas drilling -- spearheaded by Rep. John Peterson (R-Pa.) -- has attracted nearly 120 cosponsors so far.

One lobbyist who works on natural gas issues predicts the leadership race and lobbying reform issues will occupy the House early in the new session, calling the effects uncertain. At the very least, the lobbyist said, the state of flux "has the potential to slow everything down across the board in terms of scheduling." Timing could be key, because if offshore access legislation does not move early, its chances could diminish as the weather warms.

Dan Naatz of the Independent Petroleum Association of America said there is a chance for legislation to succeed this year, but he added it gets tougher as the midterm races draw closer. He said there will be increasing reluctance to tackle controversial issues.

"As time goes on it will be more of a challenge, certainly," said Naatz, the group's vice president for federal resources. "But also with the price of natural gas [high] and our continued work with the industrial end users, I think there is a very strong realization that there is a need to look at domestic offshore natural gas resources."

Outside analysts say the corruption scandal, the leadership change and the upcoming races could hinder efforts to pass controversial bills, including energy matters. "No matter what, you are going to have a weaker Republican leadership in Congress that cannot simply impose its will on its members," said Norman Ornstein, a resident scholar at the American Enterprise Institute.

And Frank O'Donnell, the head of the group Clean Air Watch, said the Abramoff scandal will likely affect issues including energy measures.

"I think the Abramoff affair could prompt many members of Congress to take a deep breath before plunging ahead with legislation that could invite scrutiny about lobbying, campaign contributions and various potential quids-pro-quo," he said in an e-mail exchange yesterday.

The National Petroleum Council estimates nearly 80 trillion cubic feet of natural gas lies in restricted offshore areas. Current U.S. consumption is about 22 trillion cubic feet yearly and expected to rise.

Plans in play

Senate Energy and Natural Resources Committee Chairman Pete Domenici (R-N.M.) has said he plans to take up legislation to expand access on the OCS this year, perhaps marrying production provisions with climate change or fuel efficiency language (Greenwire, Dec. 22).

Domenici last year voiced support for wider access, especially opening the Gulf of Mexico's Lease Sale 181 area. A spokeswoman confirmed yesterday that Domenici is still planning new OCS efforts this year.

Sen. Mark Pryor (D-Ark.) is planning separate OCS legislation that includes an opt-out with revenue sharing. Pryor's office said yesterday that he expects to offer the measure some time in the coming weeks. Pryor is working with Sen. John Warner (R-Va.) on the plan, industry sources tracking the issue say. Virginia's senators both support offshore access there and Warner introduced one version of the opt-out plan last year, but any Senate effort will eventually go through Domenici.

On another track, Sen. Bill Nelson (D-Fla.) is reportedly readying legislation that would provide long-term protection for the eastern Gulf of Mexico. He and Sen. Mel Martinez (R-Fla.) both oppose allowing exploration and production any closer to Florida's shores.

House Resources Committee Chairman Richard Pombo (R-Calif.) may revive his plan to allow states to opt-out of leasing bans, share in offshore revenues, and open much of the Gulf of Mexico's coveted Lease Sale 181 area, which is not part of formal restrictions. The Pombo measure had been attached to budget reconciliation legislation in the House but was jettisoned along with Arctic National Wildlife Refuge drilling provisions to help win majority support.

Jennifer Zuccarelli, a spokeswoman for Pombo, said he is gauging how to proceed with the measure. "We are not sure when and if it will happen," she said. Peterson's effort is more aggressive -- it terminates executive and congressional leasing bans for natural gas drilling up to 20 miles from state shores. States could petition to allow leasing closer in, and it also has a revenue sharing provision.

Peterson spokesman Chris Tucker said the current House leadership has told him the bill will be brought to the floor if it clears the House Resources Committee. But the plan would face tough sledding on the House floor and is untenable in the Senate.

Industry renews access push

Several industry groups are reviving efforts to win new access. The Industrial Energy Consumers of America is planning a February "fly-in" to bring its membership into Washington to press the case. The group last month called Congress' adjournment for the year amid near record natural gas prices without addressing the issue "irresponsible."

Paul Cicio, the group's president, backs an opt-out option that would include revenue sharing. He remains optimistic. "We do believe that there is sufficient momentum early in this Congress for them to act appropriately to increase domestic supply of natural gas, and provide all consumers with relief," he said late last week.

The National Association of Manufacturers and other industry groups pushed hard for new access at the end of last session. The U.S. Chamber of Commerce is also expected to press the issue again (Greenwire, Jan. 4).

Several industry groups expressed their continued interest in expanded offshore access in recent comments to the Department of Energy, which is preparing a study of natural gas supply and demand mandated by the recently enacted energy law.

"These moratoria -- both legislative and executive branch -- are unreasonable. They rely on antiquated and inaccurate assessments of the risks of developing offshore resources," stated comments submitted by the Independent Petroleum Association of America.

Environmentalists say they are bracing for more battles. "The issue of coastal drilling is not off the table. We are definitely preparing to continue to make the argument to Americans that there is a better way," said the Sierra Club's Debbie Boger.

MMS roils the waters

The Bush administration has the power to open the Lease Sale 181 area administratively. The Minerals Management Service, an arm of the Interior Department, is expected to release its draft 2007-2012 OCS leasing plan later this month, MMS spokesman Gary Strasburg said. The service has been under pressure to open the wide swath of the 181 area to leasing, and the Interior Department has indicated support for development in that area.

The "stovepipe" section that juts up toward the Florida panhandle is not expected to be offered -- the administration has committed itself to preventing leasing within 100 miles of the Florida coast.

Interior Secretary Gale Norton has indicated she wants the new 181 leasing to be handled through legislation that also includes a revenue-sharing mechanism, an idea batted about but never acted on during the energy bill discussions over the summer. The administration plan floated would have leased the wide section of the 181 area and a deepwater area south of that, according to an Interior Department release last July.

"A legislative approach addresses the issue in a more comprehensive way, it includes helping define what the boundaries are between the states, it addresses revenue sharing, it resolves some issues that are really beyond what we would be addressing in our purely administrative approach," Norton said last October.

Using its administrative power, MMS defined state lateral seaward boundaries last week. The boundaries MMS issued place regions including much of the 181 area in Louisiana seaward boundaries. The move drew a harsh response from Nelson's office. Nelson spokesman Dan McLaughlin said in a prepared statement that the boundaries would allow "pro-drilling Louisiana to decide the fate of millions of gulf acres where drilling is currently banned."

Nelson will do "everything possible, including specific new legislation," to block the move, the spokesman said.

MMS said the boundaries will help address both alternative and traditional energy development. Strasburg said yesterday that it is not yet clear whether the lines will be used in the 2007-2012 leasing plan.

Reprinted from Greenwire with permission from Environment & Energy Publishing, LLC. www.eenews.net 202/628-6500.

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