House Democratic leaders are trying to hobble together a broad energy bill that satisfies both the pro-drilling and environmental factions of the House. Details of the measure are expected to be unveiled toward the end of the week, as Democrats and Republicans sharpen their rhetoric in preparation for a fierce battle over the issue of offshore oil and natural gas drilling.

A House bill is expected to mirror the offshore drilling provisions in the comprehensive, bipartisan proposal unveiled by the Senate “Gang of 10” in early August, which would allow the states of Virginia, North and South Carolina and Georgia to opt into leasing off their shores, as well as open additional Gulf of Mexico areas to exploration and production.

House Speaker Nancy Pelosi’s (D-CA) decision to allow House action on the bill, which is expected to occur next week, is in response to continued pressure from Republicans for greater drilling access to the federal Outer Continental Shelf.

“If they want to drill offshore we say, ‘OK…let’s have a discussion and a change of the relationship between our oil, which is owned by the American people, the desire of Big Oil [wanting] us to subsidize their drilling, and…the American people not getting the benefit of the profits,'” Pelosi said Tuesday.

In exchange for limited offshore drilling, Pelosi wants to roll back subsidies to oil and natural gas producers and “we want our royalties” to pay for investments in renewable energy resources, as well as funding for the Low-Income Home Energy Assistance Program and the land and conservation fund.

Other than a modest relaxation of the drilling ban, the Democratic leadership is said to be considering a repeal of the Section 199 domestic manufacturers’ tax credit for major producers to pay for renewable energy tax credit extensions; reintroducing the ill-fated “use-it-or-lose-it” drilling provisions to pressure oil and natural gas companies to produce on existing leases; a royalty “fix” for flawed 1998-1999 deepwater Gulf of Mexico leases; expansion of the Commodity Futures Trading Commission authority to curb speculation in energy markets; a national renewable portfolio standard (RPS) requiring utilities to produce 15% of their power from renewable fuels by 2020; and extension of renewable energy and energy efficiency tax credits.

The repeal of the oil/gas tax credits and the RPS “have been handily filibustered by Republicans in the Senate this year, and we don’t think that the Democrats’ ‘limited’ drilling concessions telegraphed so far are likely to change the current vote counts on an overall bill — meaning it will mean little if the House passes a bill but the Senate cannot move it. Indeed, one could be forgiven for speculating that the Democrats have no desire to pass a bill at all, and merely want to offer a bill that the Republicans will vote down,” said energy analysts Christine Tezak and K. Whitney Stanco of Stanford Group Co.

“If the House considers Mrs. Pelosi’s energy package under normal parliamentary rules [where amendments would be permitted], we believe it would have sufficient support to pass on a party-line vote,” they said. However, the odds of passage would be less if an energy bill is brought up under the suspension of the House rules, which would limit amendments and require a two-thirds majority vote. “A flurry of [House] bills brought up in July under the suspension of the rules failed to achieve the two-thirds majority to pass without amendment.”

Republican leaders aren’t content with Pelosi’s offer — they want a vote on a bill that would lift the blanket moratorium to allow drilling off all coastlines.

“What we know of the plan right now suggests it’s more of the same from this Democratic majority — written for the specific purpose of allowing those who oppose responsible energy development a chance to say that they support it, confident that no such development will ever take place,” said House Republican Whip Roy Blunt of Missouri.

“In fact, this package would permanently put 80% of our offshore resources under lock and key. That’s hardly the kind of comprehensive approach to crafting real energy solutions that the American people are demanding,” he said. A number of national polls over the past couple of months, as crude oil prices neared $150/bbl, showed that a majority of the American public supports greater offshore drilling.

If the drilling issue is not resolved, Republicans have threatened to vote against a continuing resolution to fund the federal government when the fiscal year begins on Oct. 1. This would effectively shut down the government. “We expect rhetoric to get quite heated — including threats of government shutdowns — over the next week or so, as each side struggled to figure out what is best for its agenda and what leverage it really has. So far the battle lines look very difficult to bridge, with both Republicans and Democrats holding firm to their current positions,” Tezak and Stanco said.

On the Senate side of Capitol Hill, Majority Leader Harry Reid (D-NV) has indicated that he may allow three votes on energy bills next week: a Senate Democratic leadership package, the “Gang of 10” proposal for limited offshore drilling that continues to attract sponsors and a Republican alternative, the two energy analysts said.

“We believe the 60-vote hurdle [to bring up a bill in the Senate] will likely remain an obstacle for each of these pieces of legislation, especially those which include the repeal of tax credits for the oil and gas industry…There is no guarantee whatsoever a broad energy bill will pass before the planned adjournment date of Sept. 26 or be signed by the president,” they noted.

Producers also are opposed to the “Gang of 10” offshore proposal. “Unfortunately the proposal appears to be a classic case of one step forward, two steps back — or in this instance ‘light on new production/heavy on new taxes,'” wrote Red Cavaney, president of the American Petroleum Institute, in a letter to the Senate in August (see Daily GPI, Aug. 20).

“The proposal’s approach to access to federal oil and natural gas resources is far too limited in its scope. And it is unfortunately paired with the imposition of at least $30 billion in new taxes on the oil and natural gas industry that would have the effect of limiting needed oil and gas investment…These measures create an environment that will virtually assure a future with less, not more, domestic production.”

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