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Florida Senators Block Efforts to Relax OCS Moratorium

The Senate had barely begun debate on the omnibus energy bill last week when Florida senators won assurances from the leaders of the Senate Energy and Natural Resources Committee that they would oppose all efforts to relax the congressional moratorium on oil and natural gas drilling in the Outer Continental Shelf (OCS) or open up Lease 181 in the eastern Gulf of Mexico.

After applying intense pressure, Sen. Bill Nelson (D-FL) and Florida's junior senator, Mel Martinez, negotiated the deal last Tuesday with Sen. Pete Domenici (R-NM), chairman of the Senate energy panel, and Sen. Jeff Bingaman of New Mexico, the ranking Democrat on the committee. The Florida senators had threatened to filibuster the omnibus Senate energy bill unless Domenici and Bingaman assured them in writing that the ban on drilling off Florida's shores would remain intact.

Later in the week, the Senate narrowly approved as part of the omnibus energy bill a renewable portfolio standard (RPS) that mandates the increased use of renewable energy in the production of electricity, a move that could eventually reduce the amount of natural gas consumed by the generation sector and cause gas prices to taper off somewhat.

The Senate Finance Committee last week approved a $10.65 billion package of energy tax incentives, which will be incorporated into the broad energy legislation on the Senate floor. The tax incentives were primarily earmarked for renewable energy, conservation and efficiency, with very few aimed at fossil fuels like natural gas. Senate leaders have signaled that they want to wrap up the energy bill by the end of this week.

The agreement brokered between the Florida delegation and Senate energy leaders "lessens the threat to the moratorium" protecting the Sunshine State's coastline, said Bridget Walsh, deputy legislative director for Nelson.

Even though it applies only to Florida's offshore region, the accord dealt a major blow to the plans of Sen. Mary Landrieu (D-LA) to offer an amendment that would give nonproducing coastal states the opportunity to opt out of the 20-year-old congressional moratorium on oil and natural gas drilling in much of the OCS, said Walsh.

But an amendment to relax the OCS moratorium "was never her main focus," said Landrieu spokesman Adam Sharp. "Our floor fight [now] is going to be all about coastal impact assistance," he noted.

"The biggest threat [of a possible Landrieu amendment] has been to the eastern Gulf" that is adjacent to Florida's shores, but that threat has been eliminated as a result of the agreement, Walsh noted. Walsh said Landrieu has backed away from offering her moratorium amendment following the agreement brokered between the Florida delegation and Senate energy leaders.

In addition to the OCS moratorium, Domenici and Bingaman also agreed to oppose any attempts to redraw the seaward boundary line with respect to Florida, she said. The agreement, however, does not affect a section in the Senate energy bill that calls for an inventory to be conducted of oil and natural gas resources on the OCS, Walsh noted.

Because of the demands of the Florida senators, Domenici lamented that "we're not going to do anything significant" in the energy bill to give coastal states the opportunity to produce natural gas off their shores.

"Off our [shores] sits the largest reserve of natural gas," he said, but the nation will be denied much of the gas because of the opposition by Florida, a state that consumes more energy than it produces.

The two Florida senators were prepared to give "lengthy order to keep this moratorium in place," Nelson warned senators, particularly Domenici, last week. "And it's not only the senators from Florida that are interested in this," but the senators from East Coast and West Coast states as well, he said.

"If we cannot get agreement from the chairman and ranking [Democratic] member that they will oppose a change in the moratorium...we have no choice but to use the tools available to us as which to prolong debate" and prevent the bill from coming up for a vote, Nelson said.

Martinez echoed Nelson's concerns, saying Florida's coasts "[are] not open for consideration." He further opposed a section in the Senate energy bill that calls for an inventory to be conducted of the oil and natural gas resources in the OCS. "Why would we inventory an area where we're never going to drill?" he asked. It's like telling pro-drilling interests to "come and get it."

He called for the entire package of so-called "coastal killer amendments" to be rejected. These include proposals to redraw the seaward boundaries for states; give states the opportunity to opt out of the OCS moratorium; and provide more financial incentives for states to opt out.

Martinez didn't buy proponents' arguments that if one state opted out of the ban against OCS drilling, a neighboring state would be unaffected. "If Alabama opts out, you bring drilling to Florida's shores whether we like it or not," he said.

But Sen. Lamar Alexander (R-TN) said it was time for the Senate to reconsider the OCS moratorium, saying, "I believe it's time to explore, where appropriate, more of the vast reserves that we have offshore." He believes oil and gas drilling can be done without affecting states' coastlines. "Drilling rigs can be put far off [the] coast so they can't be seen," he noted.

"If Virginia, North Carolina or Florida agree [that they'd] like to put oil and gas rigs so far offshore that they can't see them, and use some of those revenues to build up their universities or lower their property taxes, I think they should be able to," Alexander said.

While not representing a coastal state, Sen. Byron Dorgan (D-ND) said the odds were against the Senate overturning the OCS moratorium in the Senate bill. "I don't think there's a ghost of a chance of us finishing this energy bill and having it carry some new mandate for Outer Continental Shelf production. That's just not going to happen."

In other action later in the week, the Senate by 52 to 48 passed an amendment, sponsored by Sen. Bingaman, that would require 10% of electricity to come from renewable energy sources by 2020. Immediately following the vote, Sen. Saxby Chambliss (R-GA) called for the Senate to provide "more flexibility" for the states to meet the RPS. Domenici said he would work with concerned senators in conference to ensure that their states are not burdened by the "overly rigid mandate."

The White House signaled last Tuesday that it would not support an RPS provision in the energy bill. Also, the House of Representatives' energy measure that was approved in late April does not contain an RPS provision. As a result, there now is one more issue for the two houses to resolve in conference.

Citing estimates from the Energy Information Administration (EIA), Bingaman said his amendment would cause cumulative expenses for natural gas in electricity to drop by $22 billion over the next 20 years. "This will take some of the pressure off of the price of natural gas."

But Sen. Alexander interpreted the EIA's figures differently. He said that Bingaman's amendment would result in an $18 billion increase in electricity rates for consumers.

The problem with the EIA projection is that it assumes that the price of natural gas will fall to $5/Mcf over the period, he noted. "I don't think we can count on a decrease in natural gas [prices] to $5" to offset an $18 billion rise in electricity bills over the next two decades.

"Maybe you believe that the lower prices for natural gas will make up for that [$18 billion]...I wouldn't count on it," Alexander said on the Senate floor. Bingaman countered that an RPS provision would cause neither an increase in electricity nor gas prices in the years ahead.

Bingman's amendment came under intense attack from Senate Republicans, who called it a "mandate" that would interfere with individual states' RPS programs. "What we're saying is that one shoe shouldn't fit every state," said Sen. Domenici.

The RPS amendment defines renewable energy sources as solar, wind, geothermal energy, ocean energy and biomass. Domenici recommended that other energy sources, such as nuclear or carbon-free coal, be considered candidates for the RPS.

Sen. Larry Craig (R-ID) said renewable resources are an "important part of our energy mix," but he added that he strongly opposed the RPS standard because it would result in higher electric bills. He favors the idea of states "doing it on their own," rather than a federal mandate.

During the long debate, opposing senators tried to make their case by using the words "renewable energy sources" and "windmills" interchangeably. "I do not want to rely on windmills," argued Alexander. He said he would prefer that Congress spend a "reasonable amount" of money on solar energy, carbon-free electricity and coal gasification instead. "This is not an amendment just about windmills," Bingaman shot back.

Elsewhere in Washington, DC, President Bush last Wednesday called on Capitol Hill lawmakers to stop sparring over the controversial issues like methyl tertiary butyl ether (MTBE) and get a bill to his desk by the end of summer.

"Now is the time to stop the debate and the partisan bickering and pass an energy bill. I look forward to working with members of the Congress to come up with reasonable compromises on outstanding issues such as MTBE," he said during a forum sponsored by the United States Energy Association.

"But for the sake of national security and for the sake of economic security, the Congress needs to pass an energy bill now," he told energy executives and regulators.

Bush renewed his call for Congress to deliver an energy bill to him before the August recess. "My advice is they [lawmakers] ought to keep this in mind: Summer is here, temperatures are rising and tempers will really rise if Congress doesn't pass an energy bill" this year. Efforts to pass an energy bill in previous years have collapsed in conference.

The House energy bill would give producers of the gasoline-additive MTBE liability protection from lawsuits involving the contamination of the groundwater in several states. Both House Majority Leader Tom DeLay (R-TX) and Rep. Joe Barton (R-TX), chairman of the House Energy and Commerce Committee, are committed to shielding MTBE producers in the energy bill.

But MTBE is not part of the Senate energy bill and this is not likely to change. "In the United States Senate, [MTBE] would be a killer amendment," threatening the entire energy bill, said Sen. Domenici.

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