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Bush Nixes OCS Ban; Congress Doesn't Follow Lead

President Bush last Monday removed the executive ban on oil and natural gas drilling in much of the federal Outer Continental Shelf (OCS), and called on Congress to follow suit and lift its long-term prohibition on drilling in key offshore areas. But the congressional Democrat leadership, which is focused more on potential excess energy speculation and existing oil and gas leases, gave the president the cold shoulder.

The president's action alone will not allow leasing on restricted areas of the OCS to proceed. The Democratic-controlled Congress also must lift its 27-year-old ban to clear the way for exploration and production in restricted offshore areas, including the East and West Coasts and in the eastern Gulf of Mexico.

The "only thing standing between the American people and these vast resources is action from the U.S. Congress," Bush told reporters during a press briefing in the Rose Garden. "I've taken every step in my power" to open up the restricted OCS areas, he said, adding that the "ball is squarely in Congress' court."

It's been "almost a month since I urged Congress to act [on the OCS] -- and they've done nothing. They've not moved any legislation. And as the Democratically controlled Congress has sat idle, gas prices have continued to increase," Bush said. Fundamentals are at the root of the current price "volatility," not speculation as some have charged.

Along with repealing the congressional OCS ban, Bush urged Congress to pass legislation to facilitate responsible offshore exploration. This legislation must allow states to have a say in what happens off their shores, as well as allow states and the federal government to share leasing revenues. He also called for Congress to take action to tap into the "extraordinary potential" of oil shale, open up oil-rich land in Alaska and expand domestic refining capacity.

While some congressional Democrats are joining Republicans in their rallying cry for more OCS production, this may not be enough to push pro-OCS legislation through Congress this year. "It looks rather unlikely at this juncture that Democrats would be willing to follow this lead, and legislative efforts to give the individual states the ability to make decisions on OCS drilling have failed to garner majority support. The support of 'energy' Democrats and presidential hopeful John McCain (R-AZ) is not likely to be enough to force the issue in the Senate, and prospects look even less favorable in the House," said energy analysts Christine Tezak and K. Whitney Stanco of Stanford Group Co.

Blocking OCS legislation in the House and Senate are House Speaker Nancy Pelosi (D-CA) and Senate Majority Leader Harry Reid (R-NV), respectively. Pelosi called Bush's decision to remove the executive ban on OCS activity a "hoax," and said if he was really serious about reducing gasoline prices, he would grant the Democrats' request to release a small portion of the Strategic Petroleum Reserve stocks.

Desperate to produce some kind of energy legislation to take home to constituents during the August recess. House Democrats last Thursday resurrected their "use-it-or-lose-it" legislation that would require producers to actively pursue their existing leases before requesting new leases from the Interior Department, and lost again.

The revised "use-it-or-lose-it" measure offered by Rep. Nick Rahall (D-WV) won a majority, 244-173 votes, but lost the war because, like its predecessor, it did not command the two-thirds majority necessary for passage specified by the no-amendments rule under which it was offered (see related story). The vote on the earlier version was 222-195 (see NGI, June 30). The legislation is based on the Democrats' professed belief that oil and gas producers are sitting on 68 million acres of leases in the Lower 48 states, where little or no exploration and production is taking place.

Currently legislation that could remove the congressional offshore ban is hung up in the House Appropriations Committee. Rep. David Obey (D-WI) has refused to bring up the Interior appropriations bill for fear that the Democrats on the committee do not have enough votes to defeat a proposal to repeal the current congressional ban on OCS drilling.

The executive OCS restrictions and the congressional moratorium largely overlap. The executive OCS restrictions were enacted by the first President Bush in 1990, and in 1998 were extended by President Clinton to 2012. The congressional ban was enacted in 1981, and has been renewed annually in the appropriations process.

Bush's action gives industry reason for optimism. "We're encouraged not only by today's news, but also the important bipartisan talks taking place in the House and Senate among lawmakers exploring energy legislation that could include domestic supply," said Jack N. Gerard, CEO of the American Chemistry Council.

"Clearly the ground is shifting on energy policy. As the crisis has grown, as it has become clear to Americans that the United States is jeopardizing our own economy and our ability to compete globally by not moving forward with expanded domestic energy development, and as [polls] have shown that more than two-thirds of American support it, we've seen growing interest in this issue among lawmakers of both parties."

The American Gas Association (AGA), which represents gas utilities, also gave the president high marks for his action. "While Congress must still take similar action, the president's decision...is an important first step in increasing our domestic energy supply and lowering consumers' energy bills," said AGA President David N. Parker.

"The buck truly stops with Congress; they still must lift their moratorium before production or even exploration can commence," agreed Robbie Diamond, CEO of Securing America's Future Energy (SAFE). "[The] action by the president is yet another sign that the American people understand that the status quo is unacceptable and are demanding that their leaders address the fundamental issues of energy supply and demand."

The existing congressional moratorium prohibits exploration or production for oil and natural gas in approximately 85% of the OCS acreage. Estimates indicate that the off-limits area may contain 20 billion bbl of crude oil and more than 80 Tcf of natural gas or more, according to SAFE.

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