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Senate Panel Votes to Repeal Mandatory Royalty Relief

The Senate Energy and Natural Resources Committee Tuesday narrowly voted to repeal mandatory royalty relief for deepwater oil and natural gas leases, reversing the policy spelled out in the Energy Policy Act of 2005.

By 12-11, the Senate energy panel approved an amendment, proposed by Sen. Debbie Stabenow (D-MI), that would give the Interior Department secretary the discretion to offer producers royalty relief, as opposed to it being mandatory in all cases. The proposal will be included in the omnibus energy bill, which the committee is expected to complete Wednesday.

Democrats have pushed to scale back or eliminate royalty relief for producers for years, while Republicans have countered that it is needed to encourage producers to venture into the deep waters of the Gulf of Mexico. The action by the committee is the latest setback in Congress for producers.

Two other Democratic amendments to the broad energy bill, which a top Republican said could have been a deal breaker, were withdrawn late Monday as the Senate energy panel headed into the homestretch on mark-up.

Sen. Maria Cantwell (D-WA) withdrew her amendments, which would have impacted drilling in the Arctic region, after Sen. Lisa Murkowski of Alaska, the leading Republican on the Senate energy panel, said they would cause her to oppose the entire energy bill, which advances many of President Obama's energy priorities.

The withdrawal of the amendments "removes some of the drama," said Bill Wicker, spokesman for Senate Energy Committee Chairman Jeff Bingaman (D-NM).

One of the proposals would have halted existing drilling in the Arctic until the environmental impacts were determined, while the second amendment would have imposed restrictions on discharges from drilling in Alaska, which Murkowski feared could have included carbon emissions.

Although Senate Republicans are divided over the bill, Murkowski told reporters Monday that, as currently written, she believes it contains a number of good provisions and is a compromise that she can live with.

After months of work, the Senate energy panel is nearing the finish line on the omnibus energy bill. It has about five more amendments by Democrats to consider before voting to report the bill to the full Senate Wednesday. While Murkowski opposes these amendments, none of them are poison pills, her spokesman said.

The sweeping energy legislation contains several hot-button provisions. Sen. Bill Nelson (D-FL), an avowed opponent of drilling near the Florida shoreline, has threatened to filibuster the energy bill if a proposal allowing drilling close to the Florida coast stays in the legislation. The amendment would permit oil and gas activity in the eastern Gulf of Mexico 45 miles off of Florida's west coast and even closer off the Florida Panhandle (10 miles) in the gas-rich Destin Dome.

And few -- Republicans, Democrats and the renewables industry -- seem to like the watered-down renewable electricity standard (RES) of 15% annually by 2021.

The debate on the Senate floor will be fierce and full of twists and turns, with Democrats and Republicans squaring off over the issues. It's not known when the Democratic leadership will bring the bill to the floor.

"There'll be some challenges for the bill because of the delicate political balance that the bill in in right now," said Martin Edwards, vice president of legislative affairs for the Interstate Natural Gas Association of America. With some issues, such as oil and gas development, nuclear and the RES, it "will be very difficult to thread the needle and get sufficient votes to move forward."

The committee bill focuses solely on energy issues -- renewable fuels, electricity transmission siting, increased authority for the Federal Energy Regulatory Commission and greater market oversight. It stays clear of climate change issues.

But Senate Majority Leader Harry Reid (D-NV) ''has indicated that he is interested in [including] climate change in the bill," Wicker said. Bingaman will go along with the majority leader, but that "is not his preferred approach."

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