The House Resources Committee on Wednesday voted out by a 3-to-2 margin legislation that would permit interested coastal states to opt out of existing moratoriums on oil and natural gas drilling on the federal Outer Continental Shelf (OCS) and would authorize drilling in the northern coastal region of Alaska’s Arctic National Wildlife Refuge (ANWR).

Also on Wednesday, the Senate Budget Committee, by 12 to 10, approved a budget reconciliation measure that would reduce government spending by $39 billion, in part by opening ANWR to energy development. The budget bill will be taken up by the full Senate next week.

The controversial energy measures, which cleared the House committee by 24 to 16, were tucked into the House panel’s 184-page reconciliation budget package that will be forwarded to the House Budget Committee. The panel estimates that opening ANWR to energy development would produce a minimum of $2.4 billion in added revenues for the federal government over a five-year period, while the Congressional Budget Office projects that expanded OCS activity could result in net federal revenues of $832 million over five years, committee staff said.

This was the first of many hurdles the GOP-crafted budget package will have to clear: it still must be incorporated into the large House Budget Committee’s larger budget reconciliation measure, approved by the entire House, make it through the House-Senate conference process, and then be voted out by the House and Senate.

The centerpiece of the budget measure are provisions that would give states more authority over their coastal waters. States that back drilling can choose to allow oil and natural gas production off their shores, while states that oppose drilling can extend the ban on offshore activities past the 2012 expiration for their respective states. It gives states, which currently only control three miles of their offshore, control over 125 miles off their coasts, as well as the ability to share revenues with the federal government for new production off their shores.

By 25 to 15, the Republican-led committee rejected a Democratic amendment, offered by Reps. Frank Pallone of New Jersey, Edward Markey of Massachusetts and Jay Inslee of Washington, that sought to strike the portion of the bill promoting expanded drilling in the OCS. Pallone charged that the OCS language in the budget measure would “seriously undermine” the ability of small states, like New Jersey, to protect their coasts from neighboring states that engaged in energy production.

He further said he objected to Resources Committee Chairman Richard Pombo (R-CA) negotiating the language in the measure with Florida Gov. Jeb Bush and other Sunshine State officials, noting that Florida was only one of 21 states that would be affected. Bush on Monday said he endorsed the Pombo measure that would codify a 125-mile buffer zone around Florida in return for opening parts of the eastern Gulf of Mexico (see Daily GPI, Oct. 26).

Pombo said he asked California to participate in the negotiations, but it did not respond. He noted his committee proceeded with talks with Florida because the state shared many of the same concerns as California and other states that object to expanded offshore drilling. “This underlying bill should be compatible with [the] interests” of states that are against drilling and want to protect their coastlines.

The Pallone-Markey-Inslee amendment sponsors expressed opposition to opening ANWR to drilling, tar sands development and expanded OCS development, said Rep. John E. Peterson (R-PA). “That mindset is why this country is in trouble.” Locking up U.S. OCS reserves is an “absolute tragedy,” he noted.

The budget package “cracks the window open a little bit. It gets [Lease] 181 going” in the Eastern Gulf, Peterson said, but he conceded the bill doesn’t go as far as he would like. He favors lifting the existing moratoriums completely with respect to natural gas leasing.

The bill “may give states more options to drill, but for states that want to protect [their coastlines], it gives them less options,” countered Pallone. “You cannot control the pollution that comes from other states.”

At the urging of Pombo, Rep. Louis Gohmert (R-TX) withdrew an amendment that would have barred anti-production states (or states that refuse to limit their energy consumption) from receiving oil and natural gas from states that open their borders to producers. “Everyone has to carry their own weight…[It is] extremely hypocritical to sit back and suck up” energy from producing states, Gohmert said.

“I understand the spirit [with which] this was offered,” said Pombo, but he requested that Gohmert withdraw the amendment.

By 21 to 10, the committee defeated an amendment offered by Markey that called for the Interior Department to increase royalty payments of producers to raise $2.4 billion in additional revenues, as an alternative to opening ANWR to development. “We’re talking about one-half of 1% of [producers’] profits to offset the revenue [that] we need,” Markey argued.

“How does raising the cost [of production] help us encourage or increase production?” asked Peterson. The amendment “does nothing to get to the root cause” of the nation’s energy problems, agreed Rep. Jim Gibbons (R-NV).

The House panel’s measure calls for the first lease sale in ANWR to be completed within 18 months of enactment of the budget reconciliation package. It further requires that the revenues from leasing and other activities be evenly divided between Alaska and the federal treasury.

The Senate Energy and Natural Resources Committee last week included ANWR development in its budget reconciliation package, which the Senate Budget Committee approved Wednesday, but it chose not to address the OCS issue. Committee Chairman Pete Domenici (R-NM) said he didn’t think there was enough momentum in Congress to tackle the ticklish OCS issue this year. But he said he would continue to press President Bush to exercise his authority to open up a portion of the Eastern Gulf to production activity (see Daily GPI, Oct. 19).

The House bill also would promote oil shale and tar sands activity in the western states, specifically in Colorado, Utah and Wyoming. Rep. Mark Udall (D-CO) objected to the provisions, saying they would gut the oil shale language in the energy policy act to carry out “crash development” of oil shale. His amendment that sought to prevent “fast track” development was defeated.

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