Tough OCS Conference Still in Play as Congress Returns

Among the higher profile fights still to play out as Congress returns for an abbreviated fall session are the competing offshore drilling bills, an issue complicated by the widespread belief that only the Senate-passed measure has broad enough support to become law this year.

The Senate passed legislation last month that opens roughly 8 million acres in the Gulf of Mexico to new oil and gas exploration. The 71-25 vote came with a message from Senate leaders to the House to accept the Senate bill lest the issue die for the session (Greenwire, Aug. 2).

But legislation the House passed in June is far different and more expansive. It would scrap current offshore leasing bans and replace them with a system under which drilling would be allowed in all areas beyond 100 miles from state shores. Leasing would take place between 50 and 100 miles unless states block it, while leasing closer than 50 miles from shore would remain banned unless states seek it.

To date, House leaders have said they will not simply accept the Senate plan as they demand true negotiations with the other chamber. An aide to Resources Committee Chairman Richard Pombo (R-Calif.), the bill's lead proponent, said he has seen no sign of wavering within the House leadership.

"Everything we have heard out of leadership to date leads us to believe they will fight for something better than the Senate bill," said Brian Kennedy, a Pombo aide.

Proponents of the House measure say the Senate bill -– which would provide access to an estimated 1.26 billion barrels of oil and 5.8 trillion cubic feet of natural gas -– does too little to expand domestic production. Advocates of the Senate measure counter that their bill provides access to substantial resources. Also, Senate Energy Committee Chairman Pete Domenici (R-N.M.) has said the Senate bill should be viewed as the first step toward subsequent congressional approval of wider offshore production in other areas.

Current leasing bans cover both coasts and the eastern Gulf of Mexico. The Senate plan would require leasing in part of the eastern-central gulf's Lease Sale 181 area -- which has largely been withheld from leasing but is not covered by formal bans -- and an area south of it that is covered by the bans.

Domenici's comments underscore dueling points of view on the issue as many close to the process wonder whether the Senate plan is the first step toward overhauling decades of offshore leasing policy or the last time Congress is likely to seriously address the issue for some time.

The looming midterm elections could also affect the debate. The Republican Party could lose control of the House, analysts say, and GOP control of the Senate is also threatened. If Republican control of the House appears to be coming to an end, observers say this could increase pressure on House leaders to accept a measure that expands offshore leasing even on a more limited basis.

Manufacturers and other natural gas consumers are lobbying heavily for greater domestic gas production. They want Congress to provide access to as many offshore areas as possible -- in other words, more than the Senate bill provides -- but above all want a final deal.

"CAES supports all efforts to produce a bill that results in the production of natural gas from domestic offshore sources. At the end of the day, however, we do want a bill," said a recent statement from the Consumer Alliance for Energy Security, a group that includes the National Alliance of Manufacturers and the American Chemistry Council.

But one lobbyist who represents oil and gas companies said there are concerns that a final passage of legislation akin to the Senate plan would be the end of serious congressional efforts to expand coastal drilling for years -- without providing enough new access in return.

Environmentalists oppose both measures and hence would prefer to see the standoff remain unsolved. "We will continue educating members and the general public that there are faster, cheaper and cleaner alternatives to drilling," said Jim Presswood, an energy advocate with the Natural Resources Defense Council.

Another question is how the White House is approaching the issue. Rep. John Peterson (R-Pa.), a sponsor of the House plan, last week told the Wall Street Journal the Bush administration has done little to advance his legislation. "It just floors me that I've gotten no help out of this White House," he said.

Yet the White House has criticized provisions in the House bill that share leasing revenues with coastal states that have offshore leasing, claiming they could cost the Treasury "hundreds of billions" of dollars over six decades. The Senate plan contains more narrow coastal revenue sharing provisions than the House bill and has not attracted the same criticism from the White House.

The Senate bill steers 37.5 percent of production revenues from newly opened areas to the Gulf Coast states that have offshore drilling -- Alabama, Louisiana, Mississippi and Texas. In a decade, the revenue sharing expands, and these states begin receiving the same share from leases in other gulf areas entered into after enactment of the bill.

One lobbyist said there is a "squeeze play being arranged by the White House and Senate leadership" against the House measure, and that advocates of a more aggressive bill are exploring options to counter this.

The White House could not be reached for comment. President Bush, touring Gulf Coast states on the one-year anniversary of Hurricane Katrina, called for Congress to reach an agreement. "One thing that the American people have got to understand is that in order to make sure the levee system works, there has to be a barrier system to protect the state of Louisiana," he said. "I strongly urge the United States Congress to pass energy legislation that will give the state of Louisiana more revenues from offshore leases so they can restore the levee.

The administration is concurrently moving ahead with an administrative plan that opens around 2 million acres of the Lease Sale 181 area in the eastern-central region of the Gulf of Mexico. It also contains provisional plans for leasing now-restricted areas off the Virginia coast and in more areas in offshore Alaska (E&ENews PM, August 24).

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

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