Gulfstream Caught Up in Unfolding Debate on FL Drilling Ban

Gulfstream Natural Gas System, an Alabama-to-Florida pipeline project jointly owned by Duke Energy and Williams, was caught in the middle of what began as a feud between the House Alabama and Florida delegations on Capitol Hill last week, and led to a heated debate over the need for Florida to re-think its ban on offshore drilling in light of the state's expanding appetite for natural gas. If not, one Texas lawmaker warned Florida could become the next California.

Rep. Sonny Callahan of Alabama attached an amendment seeking to block construction of the Gulfstream project to an energy spending bill last week in retaliation for the Florida delegation's move to bar drilling in the entire eastern Gulf of Mexico (including Florida) in an interior appropriations bill, which passed the full House on June 21. Florida House lawmakers brought the offshore drilling measure up for a floor vote when the majority of the members of Alabama's delegation weren't in Washington, D.C., which only served to widen the rift between the two factions.

Surprisingly, Callahan managed to win enough support for his amendment in the House to narrowly beat off an attempt by key members of the Florida delegation last Thursday to strip the anti-Gulfstream measure from a $24 billion Energy and Water Development Appropriations bill. The vote was 213-210.

The Gulfstream project, which Florida is counting on to supply its growing gas market, was primarily used as a "club" by the Alabama delegation to focus attention on what it believes to be a lopsided energy policy in the Sunshine State --- its growing dependence on neighboring producer states to supply it with energy, while it steadfastly refuses to open up its waters to exploration and production activity.

Callahan's anti-Gulfstream measure isn't expected to have any real impact on the pipeline, given that it's already received its certificate from FERC, gotten its permits, and, in fact, began laying pipe in the Gulf of Mexico over the weekend. Still, Callahan was undeterred. If he had lost in the House last week, he even vowed to go to the state level to block Gulfstream. "If I want to stop it, I think I can stop it through the permitting process in the state of Alabama, which I might [do]" if the amendment is stripped from the bill.

Although Callahan's Gulfstream measure survived floor debate, it still may not make it into the final bill. Rep. C.W. "Bill" Young (R-FL), chairman of the House Appropriations Committee, has promised to remove the section during conference on the legislation, which will probably occur in September. The Senate will begin mark-up of the bill following the July 4th recess, and it could reach the Senate floor later this month.

Meanwhile, the House vote Thursday was a big defeat for the Florida delegation and reflected a growing resentment among certain factions in the House, especially lawmakers from Gulf Coast states, with the Sunshine State's continued opposition to oil and gas drilling off of its coasts.

Callahan, who is chairman of the House Appropriations Subcommittee on Energy and Water Development, called it the "height of hypocrisy" for Florida to not only want to bar offshore drilling off of its own coasts, but to block it for neighboring states along the Gulf -- such as Alabama -- and then favor construction of a pipeline to transport gas from those states for consumption in Florida.

The bill adopted by the House on June 21 not only would halt the Lease Sale 181 for offshore Florida that the Interior Department had scheduled for December of this year, but it would also bar offshore drilling in the entire eastern Gulf of Mexico until April 2002. Reps. Jim Davis (D) and Joe Scarborough (R), both of Florida, co-sponsored the amendment to prohibit offshore drilling. The measure faces an uncertain fate in the Senate, and is likely to be opposed by President Bush.

Although it hasn't said so publicly, the White House reportedly endorses Lease Sale 181 and has been trying to drum up support for it among Republicans on Capitol Hill. The area where the sale would occur holds an estimated 7.8 Tcf of natural gas, enough to supply the Florida's electricity demand for more than a decade.

But most of the members of the Florida delegation, led by Davis, favor the Gulfstream pipeline as an alternative: it would enable the state to continue importing gas from neighboring states and keep its offshore drilling moratorium intact. Davis is telling Alabama "you [can] suffer but we don't want to suffer," Callahan said. "I don't know how in the world we can tolerate the hypocrisy," he remarked during an hour-long debate in the House on the issue.

"What [Rep.] Davis said is 'we're going to take [natural gas] you're already extracting because you [Alabama] have too much and we're going to send it to Florida because they don't have any.' He's right, except we don't have too much. When we ship this natural gas out of the state of Alabama, our power rates...go up," the Alabama Democrat noted.

For Callahan, "the issue is whether or not you [Florida] need to build a pipeline if you're not going to permit drilling" like most of the Gulf Coast states."

"If Alabama, Mississippi, Louisiana, Texas and Alaska want to drill for oil, God bless them," countered Scarborough. But "Florida doesn't want to be Louisiana. It wants to be the state of Florida," which for years has campaigned against exploration and production off of its coasts.

"I agree Florida probably doesn't want to become like Louisiana or Texas. I'm worried they want to become like California. They don't want to produce" any of the oil and gas that they consume, countered Rep. Gene Green (D-TX).

Some of the Florida House lawmakers, however, weren't as unyielding. Demand for natural gas to produce electricity is expected to grow by 97% in Florida by 2020, noted Rep. John Mica (R-FL). Twenty-eight of the 34 new generation plants planned for the state over the next decade will be gas-fired, he said. "Where are we going to get the natural gas? You can't have it both ways," he told his Florida colleagues.

"At the risk of being hit from all sides," Mica noted that he has proposed a compromise that would permit drilling beyond a 100-mile limit from Florida's coastline. The idea has gained some support with the Bush administration, particularly with Vice President Dick Cheney. Most of the planned Lease Sale 181 would be 100 miles or more from the state's beaches.

"I think [Rep.] Mica is right. There's plenty of gas, and I think we should drill for that gas. I think there's room for compromise on drilling, but let's not fight over this pipeline," said Rep. Dan Miller (R-FL), through whose district Gulfstream will be routed.

With respect to the planned Lease Sale 181 for offshore Florida, "I think we need to open that up to discussion," he noted. Florida House lawmakers, Miller said, are being squeezed at one end by state Gov. Jeb Bush, an avowed opponent of Florida offshore drilling, and at the other end by the Bush Administration.

Rep. David Obey (D-WI) accused Callahan of introducing his anti-Gulfstream measure as "payback" for the Florida delegation's initiative to blocking oil and gas leasing off of the state's coasts. Callahan denied the allegation, but he added "I thought it awfully strange that they waited until we [Alabama lawmakers] got out of town" before introducing their measure.

Rep. Young said he had hoped the "little bit of warfare between the different delegations" in the House could have been avoided, but he agreed that "we do need more production of oil and gas." He didn't say whether he thought Florida should contribute, however.

He denounced what he said was an "attack" by Rep. Tom DeLay (R-TX), majority whip, on the Florida delegation. DeLay earlier had accused the opponents of drilling in the eastern Gulf of Mexico of attempting to "systematically choke off every promising source of domestic energy."

In the end, Young noted the debate over whether or not to include Callahan's anti-Gulfstream measure in the energy spending bill was really "about nothing," given that the pipeline already has been certificated and permitted. The Callahan initiative, if it remains in the bill, would bar FERC from using any funds allocated under the legislation "or any other act" to "complete the remaining reviews and issue further authorizations to proceed" with the construction of the Gulfstream project. The measure might affect Gulfstream only if it needs to obtain revisions to its certificate or permits.

FERC issued a certificate for the $1.7 billion Gulfstream pipeline project in February. The pipeline has a targeted in-service date of June 1, 2002, and would offer Florida customers pipeline-on-pipeline competition for the first time. The market has long been dominated by a single pipeline, Florida Gas Transmission.

When completed, the 744-mile Gulfstream pipeline will run from Mobile Bay, AL, under the Gulf of Mexico and come ashore on the west coast of Florida near Tampa, where it will supply 1.13 Bcf/d of natural gas to an growing power generation market in the state.

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