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House Defeats 'Use It Or Lose It' Bill

June 30, 2008
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Oil and natural gas producers scored a major victory last Thursday when the House defeated a Democratic measure that would have forced them to either use their existing leases or lose them. The House did pass two energy bills before leaving for the week-long Fourth of July recess, one which requires the Commodity Futures Trading Commission (CFTC) to be more aggressive in its oversight of energy futures markets and another that would provide mass transit agencies with new funds to deal with skyrocketing gasoline and fuel prices.

By 222-195, the House rejected the "use it or lose it" bill (HR 6251), sponsored by Rep. Nick Rahall (D-WV), which would have barred the secretary of the Department of Interior from issuing new federal oil and natural gas leases to producers who do not "diligently" develop their existing leases. Producers would have had to give up existing leases that they were not actively pursuing and "allow another company to [have] a go at that land," Rahall said. The measure was offered under the House suspension rule, which requires a two-thirds majority or greater to pass.

The House by 402-19 passed a measure (HR 6377) directing the CFTC to use all of its authority, including its emergency powers, to immediately curb excessive speculation in any contract market that the agency oversees, as well as unlawful activity that causes major market disturbances. In short, it directs the Bush administration to take more aggressive action in regulating energy and other commodity futures. The bill was offered under the House suspension rules (see separate story, this issue).

Also clearing the House by 322-98 was legislation (HR 6052) that authorizes $1.7 billion in grants over a two-year period to assist mass transit agencies to reduce fares and expand services.

The "use it or lose it" bill, which was widely opposed by Republicans, sought to compel "the oil industry to do what it should do best -- drill," Rahall said. "Big Oil does not need to be coddled; it needs a swift kick in the backside." Rahall and other House Democrats argued that the oil and natural gas industry is "stockpiling" leases. They said producers are sitting on 68 million acres of leased public land, which they estimated could result in the production of an additional 4.8 million b/d of crude oil and 44.7 Bcf/d of gas.

The House Democrats claim that producers are sitting on leases "is groundless and reflects a lack of understanding of how the federal government's oil and gas lease system works," wrote Red Cavaney, president of the American Petroleum Institute, in a letter Thursday to Congress. "Oil and natural gas leases are options to explore, with no guarantee that they hold any commercial quantities of oil or natural gas. In fact, most don't."

According to the Minerals Management Service and Bureau of Land Management (BLM), more than half of the 68 million leased acres are not producing any oil or natural gas, said Majority Leader Steny Hoyer (D-MD). "This bill simply says to the oil companies, 'be diligent in the development of what you have or lose the lease to someone who will pursue the discovery and production of oil.'"

Rep. Rahm Emanuel (D-IL) said producers shouldn't get additional leases until they "finish everything that's on your plate." Rep. Lois Capps (D-CA) accused the oil and gas industry of "dragging its foot" with existing leases.

If it had passed the House, the "use it or lose it" bill would have faced either a Senate filibuster or a White House veto, said energy analysts Christine Tezak and K. Whitney Stanco of Stanford Group Co.

"The true source of most nonproducing [lease] acres is the U.S. Congress," countered Rep. Mary Fallin (R-OK). She estimated that the majority of federal lands are not leased because of access and permitting restrictions imposed by Congress. The Democrats' legislation "is based on the premise that oil companies are sitting on resources that they should be developing," which she called false.

Fallin offered alternative legislation Thursday that would require the BLM to process applications for oil and gas exploration within 30 days and applications for production within 120 days."When energy companies lease federal land, some wait up to two years to get a permit to drill. My legislation shortens that delay and eliminates bureaucratic obstacles in energy production."

House Democrats tried to turn the tables on Republicans, who believe the only way to deal with the energy crisis is to remove the 27-year-old ban on oil and gas leasing in much of the federal Outer Continental Shelf (OCS). "It's time we started drilling here in the United States," said Rep. Dan Burton (R-IN). And "we have to start drilling now." Measures to lift the ban have not fared well in the Congress and another attempt was bottled up in committee last week (see separate story, this issue).

But Tezak and Stanco think there is little chance of Congress lifting the long-standing moratorium. "While we think there is some support in the electorate for this, we don't expect a decade of Democratic opposition to more exploration in Alaska or the Outer Continental Shelf to suddenly disappear."

Hoyer said 81% of the estimated oil and natural gas resources on federal lands and offshore are presently available for development, with resources equaling 107 billion bbls of oil and 658 Tcf of natural gas. "Our Republican friends have...charged that we're keeping the best lands out of the hands of oil and gas companies. [This] is not the case."

If the Republicans want the offshore leasing ban lifted, Rahall asked why doesn't President Bush with "one stroke of the pen" exert his authority to remove the OCS moratorium. Rather, he noted Bush puts the onus on Democrats in Congress.

In other action, the House voted 276-146 last Tuesday in support of a measure (HR 6346), sponsored by Rep. Bart Stupak (D-MI), to protect consumers from price gouging of gasoline and other fuels, but it failed to get the the two-thirds needed to pass it under the suspension calendar.

In another setback for Democrats, the House Agriculture Committee last Tuesday postponed a scheduled markup of a bill addressing increased speculation in the energy markets until after the July Fourth recess. The bill calls for increased funding for the CFTC to hire 100 additional employees in fiscal year 2009 to oversee increased trading in the commodities futures markets.

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