Tough Conference Ahead Overshadows Senate OCS Vote

The Senate easily cleared a limited Gulf of Mexico drilling measure yesterday, on a 71-25 count, as Majority Leader Bill Frist (R-Tenn.) sent a stern warning to the House that the legislation represents the broadest measure his chamber can pass.

A competing House plan approved in June is more aggressive, and with GOP leaders claiming they intend to back their version, all signs point to difficult talks ahead.

Passage of the Senate bill was all but assured Monday when the measure coasted through a cloture vote with a similar margin. The bill would open the eastern Gulf's Lease Sale 181 area and a tract to its south to new development. It contains a plan to share production royalties with the the four Gulf Coast states that have offshore leasing -- Alabama, Louisiana, Mississippi and Texas.

It also advances a no-drilling buffer through mid-2022, extending 125 miles south off the Florida panhandle and 235 miles west of the Tampa Bay area, protections included to win the support of Florida's senators. Eighteen Democrats voted for the bill, while Sen. Olympia Snowe (Maine) cast the lone GOP vote against.

The Senate bill would provide access to an estimated 1.26 billion barrels of oil and 5.8 trillion cubic feet of natural gas, and advocates called it a key way to increase domestic supply. "It will move us one step closer to lower prices for all Americans," said Frist just before the vote for passage.

But reaching a final House-Senate conference agreement to expand offshore drilling this year could prove very difficult.

The measure could lose significant support -- especially among Democrats -- if there are any significant changes in talks with the House. Senate Minority Leader Harry Reid (D-Nev.) has pledged to Sen. Bill Nelson (D-Fla.) to rally votes to sustain a filibuster of there are any changes made.

The Senate GOP leadership has also said the measure is the broadest bill that can attract 60 votes in the Senate, a point Frist strongly reaffirmed yesterday after the vote. "We have got the most expansive bill I am going to be able to get through the Senate," he told reporters. "I am going to make my case to the House that that is the reality, and then we will see.

"This is carefully crafted, very delicate," he said of the OCS bill, adding that he does not want to "pre-judge" the conference process.

The House passed a far more expansive bill in June that lifts drilling bans that now cover most coastal areas outside the Gulf of Mexico. It allows drilling in all areas beyond 100 miles from state shores, while giving states discretion to opt for drilling closer to shore. It also shares revenues with producing states.

House GOP leaders have resisted the idea of simply adopting the Senate plan, calling instead for negotiations between the chambers, a point they reiterated last night. The House speaker and majority leader issued a joint statement yesterday calling the Senate bill a good "first step" toward increasing domestic supply, arguing that both chambers are now on record supporting wider offshore production.

An aggressive advocate of OCS development, House Resources Committee Chairman Richard Pombo (R-Calif.), will lead the House effort, the leaders added. "Once we move to conference, I am confident that Chairman Pombo will work with leaders in both chambers and both parties to produce a responsible and environmentally safe bill," said Speaker Dennis Hastert (R-Ill.) and Majority Leader John Boehner (R-Ohio) in the statement.

Pombo also released a statement on the issue that directly cited U.S. consumer anxiety about high gas prices.

"Both the House and the Senate are now in agreement: America must produce more deep sea energy to provide relief for consumers. The only remaining question is, just how much relief will Congress grant," Pombo said. "I look forward to hearing from my colleagues in the House about how they wish to proceed after they have heard from their voters about energy prices during August."

An industry lobbyist said Pombo has pushed industry to press for a real conference process to seek a compromise bill, rather than just acquiescing to the more narrow Senate measure.

Several industry groups -- ranging from manufacturers to natural gas utilities to independent oil and gas producers -- applauded the bill's passage last night, but most industry groups have also expressed support for legislation allowing leasing in more offshore areas than the Senate plan provides. For their part, many environmental groups have blasted the Senate effort on the grounds it endangers coastal protections.

Energy Secretary Samuel Bodman issued a statement last night praising passage of the bill, saying it will help strengthen the nation's energy security. The White House says it wants wider offshore production, but has expressed deep reservations about the potential costs of the House measure's revenue sharing system in particular.

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

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