The House Resources Committee Wednesday voted out by a wide margin amended legislation that seeks to open currently closed portions of the Outer Continental Shelf (OCS) to oil and natural gas drilling and increase coastal states’ share of revenues from offshore production.

By a vote of 29 to nine, the panel approved the “compromise” OCS bill (HR 4761) that would remove the moratorium on all drilling beyond 100 miles of states’ shorelines, and would give states one year to decide whether to permit natural gas drilling between 50 to 100 miles off their coasts and until June 10, 2009 to enact a prohibition on oil drilling in the 50-to-100-mile area. States opting in favor of drilling would need the approval of their legislatures, governors and neighboring coastal states.

The measure also would give coastal states a 75% share of the OCS royalties from production within 12 miles of their shores, and up to 50% of OCS revenue beyond the 12-mile mark. In addition, it would impose a new “Conservation of Resources” fee on production from 1998 and 1999 leases that contain no price thresholds and are foregoing royalties on certain volumes.

The legislation, the Deep Ocean Energy Resources Act (DOER), is a “hybrid” of bills offered by drilling proponents Rep. Billy Jindal (R-LA) and John Peterson (R-PA).

The panel approved an amendment in the nature of a substitute, offered by Committee Chairman Richard Pombo (R-CA), that retained all of the OCS provisions of the HR 4761, but which, among other things, proposed levying the “Conservation Resources” fee on producers who refuse to pay royalties on production from the 1998 and 1999 leases.

By 23 to 7, the House committee rejected an amendment, sponsored by drilling opponent Rep. Edward Markey (D-MA), to strike all of the controversial OCS provisions in the bill, yet keep Pombo’s proposal imposing a fee on producers who won’t renegotiate their 1998 and 1999 leases to include price thresholds. The amendment also sought a lower royalty rate (12.5%) on all production, even in shallow waters.

In supporting Pombo’s proposed fee, Markey said “I am not as hopeful” as Johnnie Burton, the director of Interior’s Minerals Management Service (MMS), that oil and gas companies holding the 1998 and 1999 leases will voluntarily renegotiate them with the federal government. The “Big Oil companies [are trying] to play Uncle Sam for Big Sucker,” he said.

The Markey amendment set off a Pombo tirade. “It is amendments like this that have lost us millions of jobs…and cost us billions of dollars,” Pombo said. “It gets so old to hear the same thing over and over.”

An amendment offered by Rep. Mark Udall (D-CO) also was rejected. His measure mirrored a Senate bill, which seeks to make more acreage in the Lease Sale 181 area of the eastern Gulf of Mexico available to producers, while barring leasing within 100 miles of Florida and giving the Department of Defense the authority to reject drilling east of the Military Mission line. The sponsors of the Senate bill are Sens. Pete Domenici (R-NM) and Jeff Bingaman (D-NM). Their bill has been voted out of committee and is awaiting floor action.

While endorsing Udall’s call for more 181 leasing, Pombo said he opposed the amendment because it would “gut the bill” that committee members had worked hard to craft.

The committee approved by voice vote an amendment by Rep. Henry Brown (R-SC) to increase coastal communities’ share of royalties from offshore oil and gas production. Specifically, it would change the royalty portion allocated to coastal communities to 40% from 33%, and would reduce the portion allocated statewide to 60% from 66%. Of the 40% share, 75% would be apportioned to coastal counties located near the shoreline to 25 miles inland. The remaining 25% would be allocated to counties located between 25 miles and 75 miles from shore.

The bill is expected to face considerable opposition on the House floor from Florida and California lawmakers, to mention a few. If it should pass the House, however, the comprehensive OCS bill would likely get a chilly reception in the Senate as well. The Senate is having a difficult time getting the support of 60 members to head off an anticipated filibuster of a more narrowly focused 181 bill. So a broader House bill wouldn’t likely gain much traction in the Senate, particularly in this election year, Capitol Hill aides said.

The Bush administration has concerns about the bill also, said MMS’ Burton last week. It believes that the measure’s royalty-sharing provisions may serve to drain the U.S. Treasury, she noted.

“I don’t want to hear any crocodile tears from the Bush administration about the deficit” and how this bill would make it worse, said Rep. Neil Abercrombie (D-HI). This bill “is generating revenue,” he noted.

Any revenues that are going to be shared with states would come from production that’s not occurring now, said Peterson. “This bill doesn’t go as far as I would like. But I’m supporting it as a damn good compromise.”

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