BP Pipeline Problem Could Affect Debate on Offshore Drilling

The shutdown of BP's Prudhoe Bay field quickly spilled into the Capitol Hill debate over offshore oil and gas drilling yesterday as a key Republican lawmaker and the Energy secretary said the disruption provided evidence of the need for wider coastal access.

The shutdown of the Alaskan field that represents 8 percent of domestic oil production (see related story) comes as House and Senate lawmakers try to reach agreement on legislation expanding outer continental shelf drilling in the waning weeks of the 109th Congress.

Sen. Pete Domenici (R-N.M.), chairman of the Senate Energy and Natural Resources Committee, released a statement on the shutdown yesterday saying he was troubled that BP allowed pipeline corrosion and worried about the effects on families' pocketbooks. He also said it shows the need for an OCS agreement between the chambers.

"This problem, like the hurricanes last fall, underscores the pressing need to expand domestic oil and gas production," Domenici said. "We are living too close to the supply margins and have been for too long."

Energy Secretary Samuel Bodman, meanwhile, cited the BP shutdown when asked yesterday if the Bush administration is trying to help the House and Senate work out differences between their offshore drilling plans.

"Just based on the conversation this morning where we look at BP shutting in their production on the North Slope for an unknown period of time, we have need of additional supplies," Bodman told reporters. "I am very hopeful and certainly would encourage the Congress to mediate their differences, and to arrive at a workable solution that would adopt as many principles from both sides of this as possible."

The chambers face a difficult task reconciling two very different offshore drilling plans.

Senate-passed legislation would open an 8.3 million acre area of the Gulf of Mexico to new oil and gas leasing, providing access to an estimated 1.26 billion barrels of oil and 5.8 trillion cubic feet of natural gas.

But a competing House plan that passed in June is more expansive. It lifts drilling moratoria that cover both coasts and part of the Gulf of Mexico, replacing them with a system that allows drilling in all areas beyond 100 miles from state shores, while states have discretion to block or allow drilling within 100 miles.

Key senators -- including Majority Leader Bill Frist (R-Tenn.) -- have called the Senate plan the broadest measure that can win the votes needed for passage in that chamber. But House leaders have called for negotiations between the chambers, balking at the notion of simply acquiescing to the Senate-passed plan.

One industry official yesterday said the BP shutdown could affect the debate.

"We have said consistently that our policy of arbitrarily locking up very significant oil and natural gas resources offshore makes no sense," said Bill Whitsitt, president of the Domestic Petroleum Council. "Here is another example of the need for more domestic supply diversity."

But it is unclear whether -- or to what degree -- the BP problem will influence lawmakers' ability to complete an OCS agreement.

"It certainly draws more attention to it, but I don't think it is is going to cause a sea change in people's perceptions one way or the other on the bill," a Senate aide close to the issue said.

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