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Passage of Budget Expected Soon; Would Resolve U.S.-Mexico GOM Division

The Senate Tuesday easily side-stepped a filibuster, voting 67-33 to end debate on a two-year bipartisan budget deal, which could be voted out as early as Wednesday. Included in the sequester-averting deal is approval of a treaty that would pave the way for oil and natural gas development along the U.S.-Mexico boundary in the Gulf of Mexico.

A minimum of 60 votes was needed to advance the measure, which was negotiated by Senate Budget Committee Chairman Patty Murray (D-WA) and House Budget Committee Chairman Paul Ryan (R-WI). Clearing the 60-vote hurdle is a good sign that the agreement will pass the Senate.

The budget agreement cleared the House last Thursday by a 332-94 vote, with support coming from both sides of the aisle (see Daily GPI, Dec. 13). President Obama applauded the House passage of the budget deal and will likely sign it into law before the end of the year.

Approval of the U.S-Mexico transboundary agreement, which Mexico has approved and which has been languishing in the U.S. Congress for almost two years, along with other important measures, would lift the existing moratorium on nearly 1.5 million acres of the Western Gap of the Outer Continental Shelf, making them available for development. The Interior Department's Bureau of Ocean Energy Management estimates that those acres could contain up to 172 million bbl of oil and 304 Bcf of natural gas.

The budget deal does not require producers that develop oil and gas resources along the U.S.-Mexico boundary in the Gulf to disclose payments associated with the resource extraction to the United States or foreign governments. The Securities and Exchange Commission (SEC) in 2012 adopted a rule requiring producers to report payments (see Daily GPI, Aug. 23, 2012).

But the U.S. Court for the District of Columbia tossed out the reporting requirement (see Daily GPI, July 5). The SEC has indicated that it may rewrite the rule, but it's not a top priority at this time.

The deadline for ratifying the transboundary agreement in the United States is Jan. 17. The U.S.-Mexico agreement was first signed in February 2012, and Mexico ratified it in April 2012 (see Daily GPI, Feb. 22, 2012).

The Independent Petroleum Association of America (IPAA), which represents independent producers, expressed a sigh of relief that the budget negotiators left their tax breaks intact. The IPAA is "happy and encouraged" that the budget negotiators didn't eliminate the intangible drilling cost deduction for producers, as well as other tax breaks, a spokeswoman for the group said.

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