The House late Tuesday passed a broad energy bill that would clear the way for drilling as close as 50 miles off the Atlantic and Pacific coasts if coastal state legislatures approve, as well as raise taxes on oil and gas producers by nearly $18 billion, accelerate leasing in Alaska, establish the first national renewable electricity standard and encourage the development of renewable energy and other alternative fuels.

The Democrat-sponsored measure (HR 6899), which triggered fierce opposition from Republicans Tuesday, passed the House by 236 to 189, with most Republicans voting against it because the bill does not allow drilling closer to the two coasts and in the natural gas-rich eastern Gulf of Mexico. The bill could face problems in the Senate, which is expected to take up other energy measures this week, and a potential veto by President Bush, who supports allowing drilling three miles from shore, where the federal waters of the Outer Continental Shelf (OCS) begin.

The House bill is “unlikely to make it through the Senate, and the White House issued a veto threat. In our view that bill is dead,” said energy analysts Christine Tezak and K. Whitney Stanco of Stanford Group Co. However, they were more optimistic about a compromise bill on energy taxes that appears imminent in the Senate. “If Senate Republican leadership signs off on that bill, the White House and Republicans may play along — as the tax changes on the oil and natural gas industries are less onerous than before.”

If Congress does not pass an energy bill expanding offshore drilling by Sept. 30, the 26-year-old congressional moratorium on oil and natural gas drilling in the OCS, which has been a staple in appropriations bills since 1982, will expire and will allow drilling as close as three miles to coastlines.

House Democrats offered the bill under a closed rule, which barred Republicans from offering amendments. Republicans tried several procedural tactics Tuesday to stall debate. Their motion to recommit the bill back to the House Natural Resources Committee, giving Republicans one last chance to amend or kill the measure, was defeated by 191-226.

The House leadership measure was the culmination of several weeks of negotiations in response to increased pressure from Republicans and a shift in public support for drilling on the OCS. House Speaker Nancy Pelosi (D-CA) agreed to increased OCS access as Republicans, with support from moderate Democrats from producing states, have threatened to block a continuing resolution to fund the federal government past Sept. 30 if the drilling issue is not settled to their satisfaction.

Pelosi touted the bill as a “reasonable compromise” that makes “Big Oil pay for its fair share of our transition to a clear, renewable energy future.” Rep. Nick Rahall (D-WV), chairman of the House Natural Resources Committee, called the measure a “compromise between the ‘drill nowhere crowd’ and the ‘drill everywhere crowd.'”

But Republicans saw the bill as being anything but a compromise. “You can put lipstick on a bad bill, but it’s still a bad bill,” said Rep. Jo Bonner (R-AL). “This is a pretend bill,” Rep. Joe Barton of Texas, ranking Republican on the House Energy and Commerce Committee, agreed, adding that it would not result in one additional barrel of crude oil or 1 Mcf of natural gas.

The bill opens the door to drilling 100 miles from shore without a coastal state’s consent and would allow a state to “opt in” to drilling 50-100 miles from shore with the approval of its legislature. It calls for Interior to conduct lease sales in these offshore areas “as soon as practicable…but not later than three years after the date of enactment” of the legislation.

But House Republicans and industry contend that the bill takes a lot of “promising areas” off the table by setting a 100-mile buffer for drilling off the Atlantic and Pacific coasts and barring further activity in the eastern Gulf of Mexico. Nor does the bill provide for sharing of royalties between the federal government and coastal states, so there’s no incentive for states to permit leasing. They further said the 100-mile limit will make it quite expensive for producers to drill off certain states, such as Virginia, where there is no existing pipeline infrastructure to bring oil and gas to shore or processing facilities (see Daily GPI, Sept. 17).

“The House energy bill is a dry hole for American consumers. The bill does little to increase U.S. oil and natural gas supplies and, in fact, may well result in less domestic production” due to $18 billion in additional taxes on producers, lack of revenue-sharing for states and the 100-mile buffer for offshore drilling, said the American Petroleum Institute, which represents major oil and gas producers.

“While HR 6899 moves in the right direction, we believe it should be enlarged and expanded to include revenue-sharing with the states, access to the eastern Gulf of Mexico, opportunities to access rich reserves closer to short, and a robust inventory of the nation’s most promising offshore energy reserves,” said Cal Dooley, president of the American Chemistry Council, which represents major companies engaged in the business of chemistry.

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