House Clears Gulf of Mexico Leasing Plan in Tax Bill, 367-45

The House today approved tax legislation that includes an expansion of Gulf of Mexico oil and gas drilling, clearing the way for the 109th Congress to boost offshore energy development in its waning hours if the Senate follows suit.

The broad $45 billion package also extends several energy-related tax incentives. It was approved in a 367-45 vote.

Several provisions in the bill have raised concerns in the Senate, making its fate and timing unclear across the Hill. The Senate already approved the oil and gas provision that expands gulf leasing by 8.3 million acres as a stand-alone bill in August.

The leasing legislation would also share 37.5 percent of gulf production royalties with Louisiana, Mississippi, Texas and Alabama, initially from the acreage the bill opens to development and in a decade from other gulf areas where leasing is already allowed.

Gulf Coast lawmakers have long argued that revenue sharing is needed to help protect and restore wetlands and address other needs. Sen. Mary Landrieu (D-La.) has estimated the bill could bring her state $650 million per year when fully phased in. Rep. Charles Melancon (D-La.) today called it a "historic day" during the debate.

House offshore drilling advocates had pressed this year for a more expansive drilling package, but the Senate would not go along. "This starts, for the first time, opening up some energy in America," said Rep. John Peterson (R-Pa.), who has urged far wider drilling but backed the gulf-centered measure as an incremental step.

The carefully crafted leasing plan also includes provisions to appease Florida lawmakers that oppose offshore drilling, fearing its effect on the state's lucrative tourism industry. It creates a 125-mile no-drill buffer south of the Florida Panhandle and over 235 miles from Tampa until mid-2022.

The House also turned back, in a close 205-207 vote, an amendment by Rep. Ed Markey (D-Mass.) and other Democrats aimed at addressing the flaws with the royalty relief program for deepwater gulf oil and gas producers. The amendment would have barred companies from obtaining new gulf leases, unless they renegotiate late 1990s leases that currently allow royalty waivers regardless of energy prices.

The Interior Department's mistaken omission of "price thresholds" in deep water gulf leases issued in 1998 and 1999 could allow companies to forgo $10 billion in royalty payments.

Energy companies and industries that rely on natural gas -- such as chemical companies and other manufacturers -- have lobbied ferociously for expanded offshore energy production. Sponsors of the Senate plan say it provides access to an estimated 1.26 billion barrels of oil and 5.8 trillion cubic feet of natural gas.

Industry groups had favored more sweeping legislation the House passed in June that would have weakened leasing bans covering most coastal areas. But when compromise proved impossible and with the Democrats set to take control, they pushed for House approval of the more modest Senate package.

Elsewhere, the bill extends through 2008 several energy tax incentives that were to expire at the end of next year, including the wind energy tax credit and credits for biomass and geothermal facilities.

The bill also extends for one year the 30 percent tax credit for the purchase of residential solar water heating, solar electric equipment and fuel cell property, as well as the 30 percent business tax credit for the purchase of fuel cell power plants and solar equipment. Several other energy tax provisions are also included.

The bill also includes a reauthorization of the Abandoned Mine Land Act, which pays for the cleanup of old mine sites. The bill would also prevent the Forest Service and Bureau of Land Management from offering new oil and gas drilling or hard rock mining leases in a region along the Rocky Mountain Front in Montana.

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

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