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Houses Passes Eastern Gulf Drilling Bill by Wide Margin

It came down to the wire, but the House Friday passed omnibus legislation to open up parts of the eastern Gulf of Mexico to oil and natural gas drilling. The Senate was expected to take up the measure over the weekend .

By 367 to 45, lawmakers voted out the 297-page bill that gives oil and natural gas producers access to more than 8 million acres in the Lease Sale 181 area in the eastern Gulf. The offshore language was attached to a broader package of popular tax and and health provisions (HR 6111) to help improve the odds of passage in the House.

The House action was a major victory for the oil and gas industry, energy consumers and President Bush, who is expected to sign the bill if it clears the Senate. The Senate approved Lease 181 drilling in August, but it has to vote on it again as part of the comprehensive tax package. The bill, if passed by the Senate, will be the most significant piece of energy legislation to emerge from Congress this year.

By a vote of 208 to 205, House lawmakers rejected a Democratic amendment, sponsored by Reps. Edward Markey of Massachusetts and Maurice Hinchey of New York, that would have barred holders of leases issued in 1998 and 1999 from bidding on future leases unless producers agreed to renegotiate the terms of the flawed leases with the federal government. The leases in those two years failed to include price triggers for royalty payment. The Government Accountability Office has estimated that the defective leases could cost the federal government up to $10 billion over the life of the leases if they are not renegotiated.

The defeat of the Markey-Hinchey amendment improved the chances for the Lease 181 bill in the Senate. Key Senate Democrats, including Democratic Leader Harry Reid of Nevada, had vowed to block the bill if the House made any changes to it.

The House bill makes 8.3 million acres in the Lease Sale 181 area in the eastern Gulf and in a tract south of Lease Sale 181 available for oil and gas leasing. It would require the first lease sale to be held within one year of enactment of the bill. The mostly Republican-crafted bill also provides protections (a minimum of a 125-mile, no-drill buffer zone) for Florida and gives four Gulf coastal states a major share (37.5%) of the federal royalties from leasing to be used in restoring their receding coastal areas. The Gulf Coast states will get a total of $170 billion in revenues from drilling in 181 over a 60-year period, according to Markey.

House and Senate Republican leaders saw the lame-duck session as their best opportunity to pass offshore legislation. "The prospects for OCS [Outer Continental Shelf] legislation in the next Congress are currently very dim, and that's driving the pressure now," said energy analyst Christine Tezak of Stanford Group.

The past week was full of false starts. The House had scheduled a vote on the eastern Gulf drilling bill on Tuesday, but then abruptly scrubbed its plans because it didn't have the two-thirds majority support for the bill that is required under the suspension rules. Republicans then indicated that the offshore bill would be attached to a larger measure on tax extenders, and that a vote would be held Thursday. However, that was pushed back to Friday because House and Senate negotiators needed more time to reach a compromise on the portion of the bill dealing with the tax break extensions.

The prospects for expanded offshore legislation looked bleak until very recently, when House Republicans abandoned efforts to reconcile their more comprehensive OCS bill with the Senate's limited Lease 181 bill. The House GOP, in a concession to the Senate, agreed to take the Lease 181 measure to the House floor for a vote.

House and Senate GOP negotiators tried for months, although unsuccessfully, to reconcile the vastly different drilling bills. Senate leaders wanted the House to accept their narrower Lease Sale 181 bill in place of the more expansive House offshore measure, but House leaders repeatedly resisted the overture. The House appeared more willing to negotiate following the mid-term elections.

Many in the energy industry and major gas consumers initially backed the more comprehensive House OCS version, but they subsequently placed their support behind the Senate offshore measure, realizing that it either was going to be the Senate version or nothing in 2006.

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