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NAM Urges Congress to Follow South Carolina's Lead in Backing Expanded OCS Activity

The president of the National Association of Manufacturers (NAM) has called on individual coastal states and Congress to move in the same direction as South Carolina, which earlier this year called on federal lawmakers to exempt states from the ban on oil and natural gas production in areas off their shores that are under federal jurisdiction.

"I commend the General Assembly and especially Labor, Commerce & Industry Committee Chairman Harry Cato for his leadership on this important issue for South Carolina and the U.S. economy. Other states and the U.S. Congress should follow South Carolina's lead," John Engler said in a recent speech to the South Carolina Chamber of Commerce.

The South Carolina General Assembly unanimously passed a resolution supporting congressional approval of expanded oil and gas drilling in the federal Outer Continental Shelf (OCS) at the end of its 2005 legislative session. The assembly took this action in May as Congress was debating whether to open more of the OCS to exploration and production. The issue turned out to be too controversial to be included in the omnibus energy bill, which lawmakers approved in late August and President Bush signed into law in early September. But it has taken center stage again in the wake of back-to-back hurricanes that have put increased pressure on oil and gas prices and supply.

Responding to the mounting crisis, the U.S. House Resources Committee last week adopted a follow-up energy bill that would give interested coastal states, such as South Carolina and Virginia, the opportunity to opt out of the federal moratorium on drilling on the OCS and open their shores to producers. The measure is expected to be considered on the House floor at the end of the week. While the bill may receive a favorable vote in the House, the general belief is that the Senate won't be as receptive.

South Carolina's resolution called on Congress to secure states' authority over coastal and offshore resources; provide an exemption to the moratorium that prevents until 2012 any surveying, exploration, development or production of potential natural gas deposits in areas off the state's Atlantic shore that are under federal jurisdiction; and incorporate revenue-sharing between federal and state governments for leasing activity that potentially would provide South Carolina with significant sources of revenue.

"The people who oppose energy production [in the OCS] are doing our country a disservice," Engler said. South Carolina's neighboring state, North Carolina, is one of several coastal states that object to drilling off their shores, and could put a halt to any future plans of South Carolina to welcome producers to its coastline.

Currently, about 85% of the OCS oil and gas reserves are off-limits to producers. NAM said it supports proposals to lift federal restrictions on states' ability to develop the reserves and collect resulting revenues. The Interior Department's Minerals Management Service estimates that the OCS offers about 406 Tcf of natural gas.

Congressional action to expand drilling is critical in light of the forecast of the Energy Information Administration (EIA) that average natural gas prices nationwide are expected to increase by more than 47% this winter, Engler said. And the EIA projection assumes that there will be a timely recovery from the effects of Hurricanes Katrina and Rita, the agency said. The EIA projects that key manufacturing areas in the central United States (Ohio, Indiana, Illinois, Michigan and Wisconsin) will be especially hard hit, with prices climbing by 70% over the last winter heating season.

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