U.S. House Votes to Lift Coastal Leasing Bans, 232-187

The House last night approved a sweeping overhaul of offshore oil and gas drilling policy that lifts longstanding bans on coastal leasing, replacing them with more limited protections that states would have the right to preserve or dismantle.

The bill also requires the federal government to steer billions of dollars in royalties from production in federal waters to coastal states where offshore drilling occurs. The bill was approved in a 232 to 187 vote, with 40 Democrats joining 192 Republicans in backing the bill. Thirty-one GOP members opposed it.

The vote reflects increased Capitol Hill interest in expanding coastal production amid high energy prices and concerns about energy security. But the bill faces highly uncertain Senate prospects. Senators are working on a less sweeping plan focused on opening a wide swath of the eastern Gulf of Mexico.

The House measure drew a mixed reaction from the Bush administration. The White House applauded the measure for accessing new resources but also issued a candid statement opposing the revenue-sharing provision that would cost, according to the administration, several hundreds of billions of dollars over 60 years.

The bill lifts all leasing bans beyond 100 miles from state shores. Between 50 and 100 miles, leasing would be allowed unless states seek to block it. And all leasing would be permanently banned within 50 miles of state shores unless states opt-out of the restrictions. Current congressional bans in place for 25 years cover most of both coasts and much of the eastern Gulf of Mexico, with executive branch bans providing similar protections.

The House turned back, in a 65-353 vote, an amendment by several Florida lawmakers that would give states the right to decide whether leasing will occur within 125 miles of their shores. The vote on final passage of the bill split the Florida delegation.

Supporters of the overall bill said it would allow states to set policy within 100 miles of shore while providing access to more oil and gas on the outer continental shelf. "The balance struck in this bill will save and create American jobs, lower prices for consumers, and deliver to coastal states unprecedented power to protect 100 miles of their seas," said House Resources Committee Chairman Richard Pombo (R-Calif.) in a statement after passage.

But opponents said the bill could damage coastal areas and cost too much, arguing the oil industry has sufficient access already in areas where production is authorized. They also said it inappropriately hands control over federal resources over to states. "It would be like letting California decide what goes on in Yosemite," said Rep. Lois Capps (D-Calif.).

A managers' amendment completed late Wednesday night made several changes to shore up votes for the measure. The changes reduced the revenue sharing slightly and extended the time before it reaches its full cost.

In one change, the revenue share for current leases less than 12 miles from shore is reduced from 75 percent in the original bill to a maximum of about 64 percent and is now phased in over a decade. The 64 percent also applies to new leases within that distance but is immediate. The bill also shares major revenue amounts from leases in areas further from shore, feeding concerns about its effects on federal revenues.

Senate on different path

Whether House passage can lead to an offshore drilling conference report is highly uncertain, especially with time dwindling in this legislative session.

Not only are Senate measures not as broad, but the House bill has yielded a filibuster threat from Sen. Bill Nelson (D-Fla.), who is fighting for re-election in his home state. Florida's senators want a buffer zone greater than the 100 miles the House measure provides.

Senate drilling advocates hope to pass Sens. Pete Domenici (R-N.M.) and Jeff Bingaman's (D-N.M.) plan to open the Gulf of Mexico's Lease Sale 181 area to oil and gas leasing. Senate lawmakers may be nearing a deal to open part of the 181 tract and a region to its south.

An industry lobbyist concedes that the House bill "as of today is probably a non-starter in the Senate." But this source added that backers are hopeful it will increase pressure on Florida's senators to reach a deal on the Senate's less-sweeping 181 measure.

The source called the House vote a "historic and precedent setting" step toward wider leasing, even if getting an offshore drilling agreement between the chambers this year is an uphill climb. "The approach to take is long term. This is the first major change to this law in 25 years," the source said.

Environmentalists also believe the House plan cannot proceed in the Senate.

"We think this fairly close vote will help fend off any action in the Senate. I think Domenici and Bingaman and others believe the only thing they can get through is their rifle shot targeting of the Gulf Coast," said the Sierra Club's Melinda Pierce. She added there is not nearly sufficient interest in the Senate for broadly rolling back the coastal moratoria that the House bill achieves.

Domenici, for his part, had urged passage of the House measure yesterday, and said he remained hopeful of further Senate action on the issue this year. "I continue the work to get my Lease Sale 181 bill to the floor this summer. I remain optimistic that Congress can do something this year to increase environmentally sound energy production on the OCS," he said in a prepared statement yesterday.

White House faults costs, royalty waiver fix

A Statement of Administration Policy yesterday supported passage of the bill, saying it agrees with the goal of wider leasing and backs approval to "advance the legislative process."

But the SAP attacked the revenue-sharing provision, stating it could have a "long-term impact" on the deficit. "The administration's preliminary estimate is that the revenue-sharing provisions of H.R. 4761 would reduce federal receipts by several hundred billion dollars over 60 years," the SAP states.

The administration therefore would like to pursue a dialogue on revenue sharing with Congress. The White House statement reiterates administration support for sharing revenues from new leases in newly opened areas but not for production where drilling is already allowed.

The SAP attacks several provisions of the bill. It says language authorizing Interior to issue natural gas-only leases could be "impractical." The SAP also criticizes a method in the bill for recouping lost royalties from flawed late 1990s deep water leases that allow royalty waivers regardless of energy prices.

The bill authorizes Interior to negotiate with companies to insert price thresholds into these 1998 and 1999 contracts, and companies that do not come to the table are assessed a new fee on their production. The SAP opposes this language. "The federal government must be a reliable business partner and must honor its contractual obligations, even when in retrospect the terms of those contracts appear unfavorable," the White House said.

Industry applauds, environmentalists criticize

The oil industry cheered passage of the bill, even though producers have criticized provisions calling for revisiting lease contacts that allow royalty relief regardless of price.

"While concerns with the bill remain, we believe the provisions offering the possibility of exploration and development in areas currently off limits are encouraging, and we support allowing states with valuable production to share a portion of the royalty paid to the federal government," said the American Petroleum Institute in a statement.

Industries heavily reliant on natural gas, such as chemical companies and manufacturers, also supported passage of the measure. Restricted areas on the Outer Continental Shelf are estimated to contain undiscovered, technically recoverable reserves of 86 trillion cubic feet of natural gas, and 19 billion barrels of oil, according to Interior's Minerals Management Service.

Environmentalists cast the vote as a gift to oil companies. "Americans already believe that their Congress lacks the guts to stand up to Big Oil. Today's vote proves they are absolutely right," said Carl Pope, the Sierra Club's executive director.

Rural schools

The bill includes language diverting $250 million from OCS drilling revenues as past of an effort by Western lawmakers to find money to reauthorize the Secure Rural Schools program.

Congress passed the Secure Rural Schools bill in 2000 to make up for the decline in timber sales on federal lands in the 1990s. The law has paid out over $2 billion since first approved but is set to expire at the end of September.

Senior reporter Dan Berman contributed to this story

Copyright 2006 E&E Daily. All Rights Reserved. Visit E&E Publishing for a free trial.

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