In a markup of the comprehensive energy bill Wednesday, the Senate Energy Committee approved a large number of gas measures designed to speed up the production process and smooth the way for permitting and approvals.

The committee approved loan guarantees for the Alaska gas pipeline, provisions for additional royalty relief, a pilot program to improve lease and project permit coordination and a streamlined permitting process for electric transmission facilities (see Daily GPI, March 24). The latter two measures also call for the creation of an office of Federal Energy Permit Coordination.

Chairman Pete Domenici (R-NM) offered two new amendments on the Alaska natural gas pipeline on behalf of Sen. Lisa Murkowski (R-AK). The first provides pipeline loan guarantees for up to 80% of the capital costs, not to exceed $18 billion. The second “expressed the sense of Congress” that demand for natural gas is expected to increase sharply over the next several decades and both the Alaska pipeline and the Mackenzie Delta natural gas pipeline project in Canada are necessary to help meet gas demands in North America. The committee adopted both amendments without objection.

Sen. Mary Landrieu (D-LA) offered an amendment to provide royalty incentives aimed at accelerating natural gas exploration and production from wells drilled to 20,000 feet or deeper (total vertical depth, or TVD) on existing shallow water lease tracts on the Outer Continental Shelf (OCS) in the Gulf of Mexico (GOM). The Minerals Managment Service (MMS) already is proposing a plan to provide royalty suspension on the first 15 Bcf of gas produced from a well drilled and completed between 15,000 feet and 18,000 feet (TVD), or on the first 25 Bcf from a well drilled and completed 18,000 feet or deeper. MMS estimates that the incentives would save about $280 million a year over the next 15 years. Production from deep wells on existing leases in the shallow water of the GOM may yield up to 20 Tcf of yet undiscovered reserves, according to the agency.

Senator Jeff Bingaman (D-NM) expressed concern that the Landrieu amendment duplicates the MMS measure, but Landrieu said it goes further than what MMS has proposed. The committee adopted the amendment by voice vote, but Domenici instructed committee staff to address Bingaman’s concerns.

Another portion of the bill calls for a comprehensive inventory of OCS oil and gas resources. Domenici noted that a comprehensive 3-D seismic resource assessment has not been conducted since the mid-1970s. But Sens. Bob Graham (D-FL), Dianne Feinstein (D-CA), Maria Cantwell (D-WA) and Ron Wyden (D-OR) offered an amendment to exempt from the inventory areas off the West Coast, East Coast and parts of Alaska that currently are under moratoria on drilling and exploration.

Domenici entered into the record a letter from the Department of Interior stating that the proposed OCS inventory would not impact existing moratoria or the Interior Department’s commitment to honoring that moratoria. However, the committee rejected the entire amendment 6-17.

Murkowski offered another amendment to provide specific royalty relief for onshore production of oil, natural gas, coalbed methane, natural gas liquids and other hydrocarbon developed in Alaska Frontier Areas not yet in production, but the amendment was withdrawn without prejudice to address technical concerns raised by committee members and staff.

Other provisions of the legislation were passed without modification, including a request for a study on the lower limits of natural gas and petroleum storage inventories, permanent authorization for the Strategic Petroleum Reserve, a 10-year royalty in-kind program for the MMS and marginal well incentives.

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