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Bush Makes Producers' Christmas, Signs Eastern Gulf Drilling Bill

Flanked by House and Senate leaders and administration officials, President Bush signed into law Wednesday long-awaited legislation to open up part of the eastern Gulf of Mexico to oil and natural gas leasing.

"This bill will allow access to key portions of America's Outer Continental Shelf [OCS] so we can reach more than 1 billion additional barrels of oil and nearly 6 trillion cubic feet of natural gas," Bush said during the signing ceremony, which took place in the Old Executive Office Building. "We will help address high energy costs, we'll protect American jobs and we'll reduce our dependence on foreign [energy]."

The measure providing producers with access to the gas-rich Lease Sale 181 area of the eastern Gulf was tucked into a $40 billion tax and heath package (HR 6111) that Congress approved earlier this month (see Daily GPI, Dec. 12).

In addition to expanding access to the offshore, the bill extends tax credits for investment in renewable electricity resources, including wind, solar, biomass and geothermal energy. It encourages the development of clean-coal technology and renewable fuels, such as ethanol, as well. And the measure promotes new energy-efficient technologies that will allow the U.S. to do more with less.

Echoing the sentiments of others in the gas industry, the American Gas Association (AGA) said opening the Lease Sale 181 area should be viewed as a first step. "With enactment of 'The Gulf of Mexico Energy Security Act,' the president has ensured an increasing share of domestic natural gas supplies will be available for use by all Americans. This is an important step in the right direction, but there is still much work to be done" by the Bush administration and Congress to make other areas of the federal OCS accessible for drilling, said AGA President David Parker.

HR 6111's provision on OCS drilling is the most significant action on energy taken by Congress this year. It 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, but actual drilling in the Lease Sale 181 area is not expected to occur for several years.

The 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. It's been estimated that the Gulf Coast states (Texas, Louisiana, Mississippi and Alabama) will get a total of $170 billion in revenues from drilling in the Lease Sale 181 area over a 60-year period.

"This is really an important piece of legislation for Louisiana for a lot of reasons, not the least of which is it will help provide money so that we can help restore the wetlands in [the state]," Bush said.

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