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Congress Wins Plaudits for Lease 181 Bill, But Producers Want More

The energy industry won a hard-fought victory Saturday when the Senate overwhelmingly approved legislation to open up parts of the natural gas-rich eastern Gulf of Mexico to oil and gas leasing. The vote came only hours after the House passed the measure Friday by 367-45 (see Daily GPI, Dec. 11).

The Senate and House, after months of wrangling over the offshore bill (HR 6111), passed the measure in the final hours of the 109th Congress, giving industry and energy consumers an early Christmas present. Although the final bill was far short of a more comprehensive offshore bill that both House Republicans and industry favored, it represented an advancement nonetheless.

A group of producers lauded Congress for its action, but said more areas of the federal Outer Continental Shelf (OCS) must be made available for leasing by lawmakers. "This bill cannot be the final answer when it comes to ensuring more access to the most economical supplies," said Skip Horvath, president of the Natural Gas Supply Association.

"It is vital that the 110th Congress continue to work together to ensure greater access" to the OCS, he noted. Producers, energy consumers and other OCS drilling proponents plan to pressure the Congress next year to move in this direction, but they are likely to meet resistance from Democratic leaders.

With the leadership reins soon to be turned over to Democrats, many of whom oppose expanded OCS drilling, House and Senate Republican leaders saw the lame-duck session as their last opportunity to pass offshore legislation.

The Republican-crafted legislation provides oil and gas producers with access to more than 8 million acres in the Lease Sale 181 area in the eastern Gulf. The Senate approved the bill in August as a stand-alone measure (see Daily GPI, Aug. 2). But it had to vote on the offshore language again on Saturday as part of a broad package of popular tax extenders in a number of areas, including energy, and healthcare provisions.

The bill, which cleared the Senate by 79-9, is the most significant piece of energy legislation to emerge from Congress this year. President Bush is expected to sign the measure. He has 10 days to sign the bill after receiving it.

The measure makes 8.3 million acres in the Lease Sale 181 area in the eastern Gulf and in a tract south of Lease Sale 181 available for oil and gas leasing. It would require the first lease sale to be held within one year of enactment of the bill. The Republican-crafted bill also provides protections (a minimum of a 125-mile, no-drill buffer zone) for Florida and gives four Gulf coastal states a major share (37.5%) of the federal royalties from leasing to be used in restoring their receding coastal areas. It's been estimated that the Gulf Coast states will get a total of $170 billion in revenues from drilling in 181 over a 60-year period.

Sen. Pete Domenici (R-NM), who crafted the Lease 181 bill, said it would bring 1.26 billion barrels of oil and 5.8 Tcf of natural gas to the market over the next several years. "This will produce gas for millions of homes and thousands upon thousands of businesses."

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