Florida’s two senators plan to unveil legislation Wednesday that they say will offer something for both opponents and proponents of offshore drilling — it will give the state of Florida continued protection of its coastline from energy production, will permanently set aside an area for military training in the eastern Gulf of Mexico, and will open up additional acres of the natural gas-prone Lease Sale 181 to producers. A key House energy lawmaker criticized the bill as being too limited in its scope.

The bill, sponsored by Sens. Bill Nelson, a Democrat, and Mel Martinez, a Republican, would permanently ban oil and gas drilling in waters ranging from 150 miles to 260 miles off the shores of the Sunshine State. The prohibition would stay in place even after the existing presidential and congressional moratoriums against drilling in the eastern Gulf expire.

The legislation, to be announced at a press conference on Capitol Hill Wednesday morning, would permanently close off an area of the eastern Gulf, including a large part of Lease 181, for military training exercises.

For the energy industry, it would open up about one million more acres for production, or roughly one-fourth of the 3.5-3.6 million acres of Lease 181 that are not currently available, a congressional aide told NGI. This would be in addition to the two million acres that already are being drilled, he said. The “stovepipe” area immediately off the Alabama and Florida coasts, which includes about 750,000 to 800,000 acres, would remain off-limits, however.

The bill seeks to balance the “needs of Florida against the country’s energy needs and the military’s training needs,” the aide said. It does not reflect a weakening of Nelson’s position, who he said has always sought to protect the military training and “stovepipe” areas from encroachment by energy production.

A spokeswoman for House Resources Committee Chairman Richard Pombo (R-CA) called the measure “impractical” because it would block drilling in parts of the eastern Gulf, as well as in the Great Lakes region, but does not address the entire Outer Continental Shelf (OCS). Pombo “thinks the committee would rather have something focusing on the entire OCS [instead of] a one-shot deal,” said Jennifer Zuccarelli.

The bill also “does nothing to increase domestic supplies,” or address revenue-sharing between the federal government and coastal states, she noted. Currently, states that permit drilling off their coasts receive less than 1% of offshore drilling revenues.

The Nelson-Martinez measure “in part” is a response to the new administrative lines drawn by the Interior Department in the eastern Gulf that Nelson’s office contends would give energy-friendly Louisiana and Alabama control over waters that are close to Florida’s shores, including portions of the gas-rich Lease 181, the aide said. Nelson, as well as other members of Florida’s congressional delegation, believe Interior plans to use the boundary changes to open up a greater portion of Lease 181 in its upcoming five-year leasing plan for 2007-2012.

The boundary changes were published by Interior’s Minerals Management Service (MMS) in the Jan. 3rd issue of the Federal Register (see Daily GPI, Jan. 10). Interior is expected to issue its draft five-year leasing plan soon.

Florida saw the boundary changes as “the latest threat to the state,” the aide noted. In addition, he said Florida was concerned by all the efforts in Congress last year to open up the entire Gulf to natural gas drilling. And lastly, he noted that the administrative agreement keeping the eastern Gulf, and most of Lease 181, closed to drilling is set to expire in 2007.

In a related development, a Washington, DC-based analyst believes Interior’s new boundaries in the Gulf could lead to outcomes that would not be particularly favorable for Florida. MMS could use the new boundaries to include greater portions of the eastern Gulf within its soon-to-be-released leasing proposal for the 2007-2012 period, said analyst Kevin Book of Friedman, Billings, Ramsey & Co., an investment firm, in a report on “The State of U.S. Energy Policy.”

Or, Congress could react to the MMS boundaries by debating and passing its own, limited OCS bill confining new production exclusively to the Lease 181 area (and possibly setting different boundary lines), he noted.

The heat wave so far this winter and subsequent drop in natural gas prices may have hurt the chances for a bill to be passed this year that would open up more of the OCS to oil and natural gas drilling, Book said. “We expect proposals that would give states a share of federal royalties in return for allowing new offshore production in their adjacent federal waters to resurface this year, but we feel that the unseasonably mild winter and resulting decrease in natural gas prices have hurt odds of passage,” he noted.

“With six weeks left in winter and natural gas futures in the $9/Mcf price band, we doubt that offshore drilling supporters in either chamber will be able to build [enough] support for the so-called ‘state option’ proposals,” which would give coastal states the opportunity to opt out of the moratoriums on energy exploration and production in federal waters off their shores, Book said.

Even so, he noted a number of Senate and House lawmakers — Sens. Pete Domenici (R-NM), Mary Landrieu (D-LA), Mark Pryor (D-AR) and John Warner (R-VA), and Reps. John Peterson (R-PA), Neil Abercrombie (D-HI) and possibly Pombo — “have already voiced plans to offer offshore drilling plans.”

He believes Senate support for an expanded OCS drilling bill “could quickly climb…if Groundhog Day sends temperatures plummeting and constituents’ home heating bills skyrocketing.”

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