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House OKs U.S.-Mexico Transboundary Agreement

The Republican-led House on Thursday passed legislation that would enact the terms of a U.S.-Mexico transboundary agreement governing the development of shared oil and gas resources along the two countries' maritime boundary in the Gulf of Mexico. President Obama last week said he opposed the bill, but he stopped short of saying he would veto it.

The bill (HR 1613), which cleared the House 256 to 171, would implement the terms of the exploration and production agreement that was signed by the two nations in February 2012, assuming it is approved by the Senate and signed into law by Obama. Mexico approved the agreement last yea (see NGI, Feb. 27, 2012).

The Obama administration said it supports the overarching goal of the transboundary agreement, but it said it cannot support the bill, as reported by the House Natural Resources Committee in mid-May, because it violates a requirement under the Dodd-Frank law (see NGI, May 20). Former Secretary of State Hillary Clinton was one of the signatories to the agreement.

The administration specifically took issue with a provision in the House bill that would exempt companies participating in the transboundary development from complying with a Dodd-Frank requirement to report payments associated with resource extraction to the United States or foreign governments. "The provision directly and negatively impacts U.S. efforts to increase transparency and accountability, particularly in the oil, gas and minerals sector," stated the Office of Management Budget (OMB)

The administration said it looked forward to working with Congress on legislation that excludes the provision.

The leaders of the Senate Energy and Natural Resources Committee have proposed legislation to enact the transboundary agreement, but unlike the House measure, it does not give companies a pass on reporting their extraction payments to the Securities and Exchange Commission.

The House Friday also passed legislation that would open open up more federal waters for oil and natural gas exploration and production, but the bill has next to no chance of advancing in the Senate and being signed into law by Obama.

The measure (H.R. 2231) cleared the House by 235-186, with the vote primarily breaking down along party lines. It calls for the Obama administration to open heretofore closed areas, such as the West and East Coasts, to energy production by requiring the admdinistration to submit a new leasing plan by 2015 -- two years before the existing plan expires.

"If the president were presented with H.R. 2231, his senior advisors would recommend that he veto the bill," the OMB said in a statement. "The administration strongly opposes H.R. 2231."

The legislation is sponsored by Rep. Doc Hastings (R-WA), chairman of the House Natural Resources Committee, which approved the bill earlier this month (see Daily GPI, June 13).

The bill requires that the new leasing plan, and subsequent five-year offshore leasing plans, include lease sales in areas containing the greatest known oil and gas reserves. Areas with the greatest known reserves are estimated to contain 2.5 billion bbl of oil and 7.5 Tcf of gas. It proposes leases sales off the coast of Virginia, earlier canceled by the Obama administration; off the coast of South Carolina; and off the coast of California using existing offshore infrastructure or onshore extended-reach drilling. Both Virginia and South Carolina are in favor of developing the Outer Continental Shelf off their coasts, according to congressional officials representing the states.

The legislation also opposes 37.5% revenue-sharing for other coastal states with energy production off their shores. Currently only the Gulf Coast states receive 37.5% of the revenue from new leases, with the remainder going to the U.S. Treasury.

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