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House Resources Panel Adopts Bill Expanding Leasing in OCS

The House Resources Committee last Wednesday voted out follow-up energy legislation that sets the stage for more exploration and production on federal onshore and offshore lands, with a focus on natural gas-directed leasing on the Outer Continental Shelf (OCS), and seeks to relax environmental regulations to encourage more production and construction of energy facilities.

By 27 to 17, the panel adopted the legislative package that included a number of controversial proposals that failed to make it into the national energy policy legislation that was signed into law by President Bush in early August. Democrats harshly attacked the bill, drafted by Committee Chairman Richard Pombo (R-CA) and other Republicans, as being hastily crafted in the wake of hurricanes Katrina and Rita, noting the "ink was barely dry on the last [energy] bill."

Rep. George Miller (D-CA) said the committee's bill was comprised of a "coalition of losers" from the energy bill that were now back for a "second bite of the apple."

Also on Capitol Hill, the House Energy and Commerce Committee last Wednesday approved separate energy legislation (H.R. 3893) that seeks to spur the construction of new refinery capacity in the United States. The bill originally proposed giving FERC new authority to regulate the rates for gathering service on the OCS, but this was withdrawn and replaced with a watered-down amendment that would merely allow the agency to monitor offshore gas gathering services (see related story).

The committee, chaired by Rep. Joe Barton (R-TX), rejected a Democratic substitute amendment that, among other things, would have given the Federal Trade Commission new authority to investigate and prosecute companies that engage in "predatory pricing" of gasoline, crude oil, natural gas and other energy fuels. The measure, sponsored by Reps. Bart Stupak (D-MI) and Rick Boucher (D-VA), proposed imposing tough civil penalties on violators, up to triple the damages of excess profits, which would be used to subsidize the Low-Income Home Energy Assistance Program. Stupak also tried to include the proposal in a bill that was being considered on the House floor last week, but it was defeated.

Reports last week indicated the House energy bills may be merged and considered on the House floor on Oct. 7. On Friday, a spokesman for House Speaker Dennis Hastert (R-IL) said it still was "not sure" the bills would be combined. While the House (with the notable exception of the Florida delegation) may respond favorably to the energy measures, combined or not, the reaction in the Senate is likely to be entirely different. Anti-drilling forces in the Senate, such as Sens. Bill Nelson and Mel Martinez of Florida, have pledged to block any measures seeking to expand activity in the OCS.

The House Resources' bill would give the legislatures and governors of interested coastal states the opportunity to opt out of the federal moratorium and allow oil and gas development off their shores. It would provide states with a higher share of the federal revenues from offshore energy production as well. At the same time, the measure allows anti-drilling states, such as Florida, to solidify the federal ban on offshore production if they choose not to develop energy resources.

A key victory for the natural gas industry in the House Resources' bill was the adoption of an amendment, sponsored by Reps. John Peterson (R-PA) and Neil Abercrombie (D-HI), that would give states the option to engage in natural gas-only leasing and pre-leasing activities. He believes the nation can "drill our way out" of the "explosion" in natural gas costs that are anticipated for this winter. Peterson late Tuesday offered the gas-only measure as stand-alone legislation.

By a two-to-one margin, Republicans and some Democrats voted against an amendment, sponsored by Rep. Edward Markey (D-MA), that sought to gut the entire title of the bill expanding oil and gas production activity in the OCS.

"If you knock out this section, [then] we're lost," said Abercrombie. "It's my personal view that the safest place to produce energy is in the OCS," echoed Peterson. He noted that expanded OCS drilling is critical to reducing natural gas prices. "This issue is a greater threat than terrorism, if we don't bring natural gas prices down."

Rep. Frank Pallone (D-NJ) said he doubted the bill would tame "skyrocketing natural gas" prices by winter, and he added there was nothing in the measure to protect New Jersey in the event a neighboring state opened its coastlines to producers.

This is a "fundamental and crucial amendment to establishing energy independence" in the United States, Abercrombie said. In adopting the amendment, committee members agreed that it was technologically feasible to drill for only natural gas. Canada, for example, drills for and produces only natural gas in the Great Lakes, one lawmaker said.

Peterson offered the same proposal last May on the House floor as part of the Interior Department appropriations bill, but it was soundly defeated by 267-157.

A proposal by Rep. Chris Cannon (R-UT) sparked the most controversy during mark-up last Wednesday. This was "the mother of all bad amendments," proclaimed Rep. Nick Rahall of West Virginia, the ranking Democrat on the panel. It would give the president the unilateral authority to open up national forests and Bureau of Land Management (BLM)-controlled lands, as well as the coastal areas on the East and West Coasts, to oil and natural gas development. He later withdrew the proposal, saying he would work with Abercrombie and Rep. Ron Kind (D-WI) to develop "more agreeable language."

"As it stands right now," the proposal would give President Bush and later presidents "broad opportunity" to authorize drilling on federally owned and controlled lands, Abercrombie said. It gives "unbelievable power to one person," Kind agreed. He also was troubled by the fact that the proposal did not specify that the president could only invoke such power during times of emergency.

In addition, the House panel approved an amendment that would provide incentives to encourage producers to consider drilling deeper oil and gas wells onshore.

Markey sought to block a provision in the bill that would authorize production of an estimated 10.4 billion barrels of oil in the northern coastal plain of the Arctic National Wildlife Refuge (ANWR), but he was unsuccessful.

Rep. Miller argued that ANWR, as well as other proposals favorable to oil and gas, were attempts at a "Hail Mary Pass" by Republicans to address the energy shortfall and price run-ups in the wake of the hurricanes.

Pombo opposed the Markey amendment, saying that the Massachusetts lawmaker's efforts to strip out all of the oil and gas provisions would only exacerbate the energy problems facing the nation.

The committee also defeated an amendment, sponsored by Rep. Tom Udall (D-NM), to strike a portion of the bill that he claimed was "unduly riddled" with waivers of the National Environmental Policy Act (NEPA). Udall urged the panel to wait for the findings of the House NEPA Task Force next month before taking action.

But Rep. Cathy McMorris (R-WA), chairwoman of the task force, said she believed it was appropriate for the committee to streamline NEPA process, and added that the bill was not "out of bounds."

Moreover, the committee approved a proposal to reactivate the royalty relief program for stripper wells within three months.

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