U.S. House Energy Bill Expands to Include Shale Leasing

WASHINGTON (AFP via Dow Jones Newswires), September 16, 2008

The U.S. House of Representatives is set to vote Tuesday on opening up federal waters and lands to more oil and natural gas leasing, including allowing development of shale areas that are rich in oil reserves.

The vote marks a reversal for Democrats, who until recently had played down the Big Oil agenda. But with gasoline prices exceeding $4 a gallon first over the summer and breaching that price again in some areas following Hurricane Ike, Democrats reversed course. The result is a more comprehensive package that blends renewable energy incentives with a focus on increasing traditional energy supplies.

"Obviously this is a compromise," said Rep. Doris Matsui, D-Calif., late on Monday night.

Democrats have been shaping the legislation since last week, when they first announced a deal to open up some offshore areas, mainly along the Atlantic coast. But the dealmaking has expanded dramatically since then. Last week, House Speaker Nancy Pelosi, D-Calif., signed off on a plan to open up coastal waters starting 50 miles from shore to new drilling, with states having say over drilling between 50 and 100 miles from shore.

Now, House leaders are offering a package that repeals a ban on oil-shale leasing on public lands. Colorado, Utah, and Wyoming, which overlap with the Green River Basin, are considered to have major oil shale resources, but a rider attached to an annual spending bill has effectively blocked development.

Under the bill, shale leasing on federal lands could occur only if states pass laws authorizing the leases. Although Rep. Jim Matheson, D-Utah, wanted the measure, the opening up of federal lands to oil shale leases would also fulfill a key goal of the Republican party.

At their convention in St. Paul, Minnesota, earlier this month, the Republicans adopted a platform that calls for "accelerated exploration in the U.S.," noting that "the Green River Basin in Colorado, Utah, and Wyoming offers recoverable shale oil that is ready for development, and most of it is on federal lands."

Environmentalists oppose the bill, a rare development for a constituency whose agenda has been advanced by Pelosi. The House Speaker has been trying to smooth things over, pointing out that the bill keeps the first 50 miles of coastal waters off-limits.

More recently, she has noted the realities of the political clock: with an annual spending bill set to expire Sept. 30, Democrats have to decide whether to negotiate with President George W. Bush or risk a government shutdown should he veto a spending bill that continues to keep in place moratoria on new oil leases.

"On Sept. 30, areas three miles offshore and beyond will become available for leasing for drilling in states currently covered by the moratorium," Pelosi's office said in a statement late on Monday. "President Bush has overturned 30 years of offshore protections for our beaches and coastal industries, such as tourism and fishing. So Congress must act soon on a reasonable and responsible compromise that balances our energy needs with the economic needs of our coastal economies."

The House bill carries extra weight because it could be used as the framework for a Senate vote as soon as this week. House Majority Leader Harry Reid, D-Nev., is aiming to vote on a package later this week, a spokesman said on Monday. He declined to say what bill would come up for a vote. Under one scenario that lobbyists say is being considered, the Senate would vote on the House bill while allowing an opportunity for amendments.

While giving ground on drilling, Democrats are exacting a price in the form of the repeal of $18 billion of tax breaks enjoyed by oil companies. In the biggest blow, Exxon Mobil, Chevron Corp., ConocoPhillips, Royal Dutch Shell, BP and Citgo, a subsidiary of Venezuela's state-owned oil company, would lose the tax breaks entirely. The deduction would be frozen at 6% for smaller oil and gas companies. That deduction had been scheduled to jump to 9% in 2010.

The money would be used to extend expiring renewable energy tax credits, extending the 30% tax credit for investments on solar-energy equipment for eight years and renewing for one year a tax credit that may be taken by companies that start up wind-power projects. The House earlier this year passed a measure that would have funded in the same way, but it failed to advance amid Senate opposition and a threatened White House veto.

The bill is H.R. 6899.

Copyright (c) 2008 Dow Jones & Company, Inc.