In an attempt to deal with record gasoline prices, President Bush Wednesday called on the Democratic leaders of Congress to remove the 27-year-old ban on oil and natural gas drilling in most of the federal Outer Continental Shelf (OCS), open a small portion of the Arctic National Wildlife Refuge to drilling, offer incentives for oil shale production and expedite the permitting process for new refining capacity.

“I know the Democratic leaders have opposed some of these policies in the past. Now that their opposition has helped drive gas prices to record levels, I ask them to reconsider their positions,” he said during a Rose Garden briefing with reporters.

“[If] congressional leaders leave for their Fourth of July recess without taking action, they will need to explain why $4 a gallon gasoline is not enough incentive for them to act,” Bush said.

“Congress must face a hard reality. Unless members are willing to accept gas prices at today’s painful levels — or even higher — our nation must produce more oil. And we must start now,” the president said. He noted that demand for crude oil has “grown dramatically,” causing prices to rise sharply, while supply has not been able to keep up.

The president’s proposals came on the heels of the announcement by Sen. John McCain of Arizona, the presumptive Republican nominee for president, that he supports lifting the congressional moratorium, which has prohibited drilling activity off the East and West Coasts, as well as in parts of the eastern Gulf of Mexico (see Daily GPI, June 18).

In other major developments, Florida Gov. Charlie Crist dropped his long-standing support for the federal government’s ban on offshore drilling and endorsed McCain’s proposal to let the states decide on whether to allow drilling activity off their shores, the Associated Press reported. Crist is considered a possible running mate for McCain.

Sen. John Warner (R-VA) introduced legislation, co-sponsored by Sen. Jim Webb (D-VA), that would allow Virginia to develop domestic natural gas resources beyond 50 miles from its shores and share in leasing revenues.

Sen. Mary Landrieu (D-LA) Wednesday signaled her intention to reintroduce her legislation to allow coastal states to opt into offshore production and share in the revenues.

But Bush’s proposals were not welcomed by Capitol Hill Democratic leaders. “The president’s proposal sounds like another page from the administration’s energy policy that was literally written by the oil industry,” said House Speaker Nancy Pelosi (D-CA), according to the New York Times. She questioned why Congress should give away more public resources to producers that are sitting on 68 million acres of federal lands they’ve already leased.

The snowballing support to remove the moratorium comes as the price of crude oil exceeds $133/bbl for July delivery, gasoline prices top $4/gallon and natural gas prices are more than $13/Mcf for July delivery.

“I’m not dictating to the states that they drill for oil. I’m saying the moratorium should be lifted so states can choose that option if they want to,” McCain said. The federal government, he added, might have to offer “additional incentives…in terms of tangible financial rewards,” such as a greater share of royalties, to those states that permit drilling off their shores.

McCain’s Democratic opponent, Sen. Barack Obama of Illinois, Tuesday attacked the Republican senator and said McCain was flip-flopping from previous statements and was capitulating to Big Oil interests.

McCain’s announcement came less than a week after a House Republican proposal to lift the congressional ban on leasing on most of the federal OCS was met with a wall of opposition from Democrats (see Daily GPI, June 12). Democrats in both the House and Senate have steadfastly opposed attempts to remove the congressional moratorium on offshore leasing.

By 9-6, the House Interior Appropriations Subcommittee last Wednesday failed to approve an amendment offered by Rep. John Peterson (R-PA) as part of the Department of Interior and related agencies’ spending bill for fiscal year 2009. The vote broke along party lines, with every Democrat on the subcommittee opposing the amendment. The measure sought to remove the congressional moratorium on oil and natural gas pre-leasing, leasing and associated activities in areas 50-200 miles from the East and West Coasts, as well as in the eastern Gulf of Mexico.

Peterson, an avowed proponent of opening up federally protected waters to expanded drilling, had planned to offer the amendment again when the full Appropriations Committee met to mark up the spending bill on Wednesday (June 18), but the mark-up was postponed indefinitely. The House lawmaker has tried repeatedly over the years to overturn the congressional ban on offshore leasing, which is routinely renewed each year as part of the Interior appropriations bill.

The growing Republican support to overturn the drilling moratorium appears to reflect voter sentiment. A new Rasmussen Reports survey found that 67% of surveyed voters believe that drilling should be allowed off the coasts of California, Florida and other states. Only 18% disagreed and 15% were undecided, according to the survey’s results. Conservative and moderate voters strongly supported lifting the ban, while liberals were more evenly divided (46% of surveyed liberals favored drilling, 37% opposed it). A Gallup survey last week revealed that 57% of Americans supported offshore development in U.S. coastal areas that are now off-limits to production.

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