House Republicans protested Tuesday when they were forced to begin debate on the Democrats’ broad energy bill only hours after getting their first glance at the 290-page measure. An up-or-down vote was expected late Tuesday on the measure that would lift the 26-year-old congressional moratorium on oil and natural gas drilling beyond 100 miles from coastlines.

The House leadership measure (HR 6899) was the culmination of several weeks of negotiations on energy policy, as well as increased pressure from Republicans and a shift in public support for drilling on the federal Outer Continental Shelf (OCS). House Speaker Nancy Pelosi (D-CA) agreed to increased OCS access as Republicans, with support from moderate Democrats from producing states, threatened to block the continuing resolution to fund the federal government past Sept. 30 if the drilling issue was not settled to their satisfaction.

The two issues — offshore drilling and the continuing resolution — have become intertwined. The continuing resolution to keep the federal government operating beyond Sept. 30 will not include the drilling moratorium this year, which has been a staple item in appropriations bills since 1982. With the absence of the moratorium, this would allow drilling three miles offshore if the energy bill fails to clear the House.

The hot-button issue in the bill is offshore drilling. The bill would allow drilling 100 miles from shore without a coastal state’s consent, but would permit drilling 50 miles out and beyond if a coastal state permits the activity. The measure 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.

House Democrats offered the bill under a closed rule, which barred Republicans from offering amendments. Republicans tried several procedural maneuvers Tuesday to stall debate. They were expected to make a motion to recommit, giving them one last chance to amend or kill the measure. Even if the bill gets through the House, it could face problems in the Senate and a veto by President Bush.

The House Democratic energy bill was “filed [in the] dark of night” Monday, complained Republicans. “Nobody knows what’s in the bill in its entirety,” said Rep. Joe Barton of Texas, ranking Republican on the House Energy and Commerce Committee. But Rep. Nick Rahall (D-WV), chairman of the House Natural Resources Committee, countered that Republicans engaged in similar practices when they were in control. “Nothing should surprise them as far as the timing of this bill.”

Rahall called the measure a “compromise between the ‘drill nowhere crowd’ and the ‘drill everywhere crowd.'” Rep. Gene Green, a moderate from Texas who often sides with Republicans on oil patch issues, supported the leadership’s measure, saying that not only is it a “drilling bill, but it’s also a comprehensive [bill] for energy production.”

But Republicans disputed claims that the bill was 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,” Barton agreed, adding that it would not result in one additional barrel of crude oil or 1 Mcf of natural gas.

The offshore drilling provisions will open up 63% to 80% (319-404 million acres) of areas off the Atlantic and Pacific coasts that are currently off-limits to to oil and natural gas drilling, according to Democrat leaders. The bill would expand crude oil availability by at least 2 billion bbl — nearly four years worth of oil produced offshore America — and would make available enough natural gas to heat 6 million homes for over 42 years, they said.

But House Republicans and industry contend that the bill takes a lot of “promising areas” off the table by prohibiting drilling within 100 miles from coastlines. 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.

“While [the Independent Petroleum Association of America, or IPAA] commends the Congress for recognizing the importance of developing America’s offshore resources, HR 6899 falls short of an effective program and presents new, inappropriate burdens,” said IPA President Barry Russell.

“While HR 6899 appears to allow development of offshore areas previously prohibited by moratoriums, it largely excludes the eastern Gulf of Mexico from development until well beyond 2022. Clearly the eastern Gulf of Mexico offers the earlier opportunity to deliver new American oil and natural gas from previous moratoria areas,” he said. The Democratic bill keeps in place the 125-mile, no-drill buffer zone off Florida’s western coast (eastern Gulf) until 2022.

“The western and central Gulf of Mexico are some of the most prolific production areas in the world and the eastern Gulf offers similar potential. Moreover, because the Gulf infrastructure could be more quickly extended to the eastern Gulf, the potential to produce resources and deliver them from this area is the highest and quickest,” Russell said.

The National Association of Manufacturers (NAM) agreed. “While we support an increase in domestic energy supplies, we have serious concerns that without any state revenue-sharing mechanisms it is highly unlikely that states will ‘opt in’ to leases and the result will be no new access.”

NAM and Republicans also opposed proposals that deny Section 199 tax benefits for the Big Five producers controlled by foreign governments, while freezing the current Section 199 benefits at 6% for oil and gas production income of other taxpayers; require holders of the flawed deepwater leases issued in the late 1990s to renegotiate their lease contracts to include price thresholds, before they can bid on new offshore leases; and require producers to “diligently develop” the federal lands that they already control.

The denial of the Section 199 tax benefits would raise $13.9 billion over 10 years for investment in renewable energy, carbon capture and sequestration demonstration projects, energy efficiency and conservation. A provision that seeks to prevent the understatement of foreign oil and gas extraction income in calculating foreign tax credits would raise $3.84 billion for 10 years to invest in renewables.

“This will directly add to the costs to energy production, discourage new domestic oil and natural gas production and make domestic energy investments less competitive economically with foreign opportunities,” NAM said.

Also drawing the ire of Republicans and industry was a proposal to establish a federal renewable electricity standard. The bill would require 15% of a retail electric supplier’s power base to be generated from renewable resources by 2020. “This provision will directly add to the cost of electricity for manufacturers and consumers by mandating a renewable standard in regions of the country that do not have adequate resources to comply. In effect, it would translate into a new tax on electricity, passed on to U.S. manufacturers and consumers,” NAM said.

In response to the disclosure of drug usage and sexual misconduct at the Interior Department’s Minerals Management Service last week, the Democrats included a provision in their bill that would subject agency employees to penalties, suspension from work without pay or termination if they accept gifts from the oil and gas industry; and proposes ethics training and random drug testing for agency employees (see Daily GPI, Sept. 11).

It also calls on the Bush administration to accelerate oil and gas leasing in the National Petroleum Reserve in Alaska (NPRA), including at least one lease sale during each of the calendar years 2009 through 2013. Currently lease sales are held every other year in the NPRA. It also urges the administration to facilitate the construction of an oil pipeline into the reserve and the construction of an Alaska natural gas pipeline.

The NPRA, a 23 million-acre area on Alaska’s North Slope, is estimated to hold technically recoverable resources of 1.3-5.6 billion bbl of crude oil and 39.1-83.2 Tcf of natural gas on federal lands, according to the U.S. Geological Survey. But the economic viability of the natural gas resources hinges on the ability to transport them to markets in the Lower 48 states.

In response to high crude oil and gasoline prices, Democrats also propose to temporarily release nearly 10% of the oil stocks from the Strategic Petroleum Reserve, to be replaced later with heavier, cheaper oil.

Moreover, the House measure seeks to raise the use of natural gas vehicles in the United States over the next 10 years by providing incentives to consumers to purchase natural gas vehicles, automakers to manufacture natural gas vehicles, and service stations to install the infrastructure necessary to fuel gas vehicles.

It also seeks to extend and expand tax incentives for renewable energy, including incentives for plug-in vehicles at a cost of nearly $7 billion, and would create a Strategic Renewable Energy Reserve to invest in renewable energy resources and alternative fuels, promote new energy technologies, develop greater efficiency and improve energy conservation. The reserve would be paid for by the royalties from the flawed 1990s leases, the Democratic leadership said.

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