NGI The Weekly Gas Market Report / NGI All News Access

Virginia Senate Upholds Governor's Veto of Offshore Drilling Bill

The Virginia Senate last Wednesday failed to override Gov. Mark Warner's veto of a bill that advocated removing the ban on natural gas exploration and production (E&P) off of the state's coastline.

By a vote of 20-16, the Senate ended a drive in the current session by Sen. Frank Wagner, R-Virginia Beach, who sponsored the bill, to open up the gas-rich areas of the state's offshore region to producers.

It would have been a "huge embarrassment for the sitting governor" to have his veto overridden, Wagner said. A number of colleagues supported his measure, but said "I'm not going to embarrass the governor."

The chances for a Senate override were slim, sources noted. "I believe that in all history, governors' vetoes [in Virginia] have been overridden only twice," said a legislative expert in Richmond, VA.

This is not the end of the road for the legislation, Wagner told NGI. If Congress fails to pass legislation this year to make more offshore areas accessible, "I will be back next year with this bill," he said.

In the U.S. Senate last Wednesday, Sen. Lamar Alexander (R-TN) introduced stand-alone legislation that would allow coastal states, such as Virginia, to opt out of the federal moratorium on oil and gas leasing (see related story). Although he had not seen the complete bill yet, Wagner said he was encouraged by news reports about the measure.

"I plan to spend my personal time advocating for this" while the Virginia General Assembly is out of session, Wagner said. "This is too...important to be partisan."

Even though his bill was vetoed by Warner, Wagner said he did not consider it a defeat. "I think the bill has accomplished a lot of what I wanted to get done," and that is to put the spotlight on natural gas and initiate an "open discussion," he said.

"I think it would be a mistake for people to assume the debate is over because the bill has been vetoed [in Virginia]. In my view, the debate has only begun," agreed Jim Kibler, vice president of government relations for AGL Resources.

Warner, in his veto message, indicated that he would keep an open mind on drilling off the Eastern Seaboard. In fact, the state's secretary of Commerce and Trade has been directed to conduct a study of the possibility for exploring for natural gas in coastal areas of Virginia. The secretary is scheduled to complete the report by Nov. 30 of this year, and submit it (along with recommended legislation) to the General Assembly.

Wagner's bill (SB 1054) supported congressional passage of the proposed federal State Enhanced Authority for Coastal and Offshore Resources Act (SEACOR), which would give states more control over their offshore oil and gas resources, and a greater share of the revenues from leasing activities.

Proponents of the legislation pointed out that the governor's veto was based primarily on separation of powers' concerns rather than on merit. They claim the governor's position on offshore gas E&P was pretty closely linked to that of the General Assembly, where the bill passed handily in February (see NGI, Feb. 28).

In vetoing the measure, Warner said the Virginia bill had two "fundamental deficiencies" -- it encroached on the governor's oversight of the Virginia Liaison Office, and it directed the state to advocate federal legislation that has yet to be formally introduced in Congress.

In a related development, a resolution (HJR 289) was introduced in the Tennessee General Assembly last week by State Rep. Eddie Yokley urging Congress to enact comprehensive energy legislation, including measures that are contained in the federal SEACOR proposal or similar legislation that "enhance states' authority over coastal and offshore resources, [provide] an exemption to the moratorium that prevents until 2012 any surveying, exploration, development or production of potential natural gas deposits in areas off the Atlantic shore that are under federal jurisdiction, and incorporate revenue sharing between the federal and state governments for leasing activity."

The resolution is expected to be forwarded to House Speaker Dennis Hastert (R-IL), the president of the U.S. Senate (Vice President Dick Cheney) and the members of the Tennessee congressional delegation, "so that they may be apprised of the sense of the General Assembly of Tennessee in this matter."

Several members of the U.S. Senate Energy and Natural Resources Committee are reported to have taken a keen interest in the SEACOR proposal, including Sens. George Allen (R-VA), James Talent (R-MO) and James Inhofe (R-OK), as well as senators representing the Gulf coastal states. SEACOR is the brainchild of House Resources Committee staffer Jack Coleman, who spent more than a decade in developing the proposal.

Thomas Moskitis, managing director of external affairs for the American Gas Association, estimates that the SEACOR bill could mean upwards of $50 billion of potential royalty revenues going to all states, with the coastal states getting the lion's share.

He believes the natural gas potential of the Atlantic Coast area is tremendous. The Interior Department has estimated that potential gas resources off the coast of Virginia alone could range from 30 Tcf to 50 Tcf, Moskitis said.

©Copyright 2005 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.