A bill to open up the eastern Gulf of Mexico to oil and natural gas leasing gained support in the Senate last week, but the next hurdle — to reconcile the chamber’s more narrow offshore measure with the House’s broader offshore bill — is likely to be more difficult to overcome. A cloture vote to cut off debate on the Senate bill has tentatively been scheduled for 5:30 p.m. (EST) Monday, and will be followed by a vote on passage of the measure.

By an overwhelming vote of 86 to 12, the Senate began debate of the mostly Republican-crafted measure (S. 3711) last Wednesday, and picked up support along the way from key Democrats — Sen. Ron Wyden of Oregon, Senate Democratic Leader Harry Reid of Nevada and long-time drilling opponent Sen. Bill Nelson of Florida.

Nelson publicly endorsed the bill last Thursday on the Senate floor after receiving assurances from Republican and Democratic leaders that they would resist House efforts to significantly alter the bill in conference. In declaring his support for S. 3711, Nelson said he received an e-mail from Majority Leader Bill Frist (R-TN) vowing “not [to] bring a bill back before the Senate that does not provide adequate protections for the state of Florida.”

In addition, Reid said he would join Nelson and other senators to filibuster the bill if it is revised in a major way during conference with the House. “It is my expectation that the House of Representatives will accept S. 3711 as passed by the Senate without amending it and without modifying it in a conference committee,” Reid wrote in a letter to Nelson, but that prospect is unlikely.

Rep. Richard Pombo (R-CA), chairman of the House Resources Committee and one of the architects of the House offshore leasing bill, said last Tuesday the House was not willing to accept the Senate’s more limited bill to open up the Lease Sale 181 area in the eastern Gulf in place of its more comprehensive OCS measure.

The Senate bill would make 8.3 million acres in the Lease Sale 181 area in the eastern Gulf and in a tract south of Lease Sale 181 available to oil and natural gas producers, provide protections from drilling for Florida until 2022 and give four Gulf Coast states a bigger share of the federal royalties from drilling in the Outer Continental Shelf (OCS) to restore their receding wetlands and other coastal areas. The new leasing is expected to result in the production of 1.26 billion barrels of oil and 6 Tcf of natural gas.

While the Senate bill is limited to the eastern Gulf, the House offshore bill (HR 4761) that was passed in June would allow leasing off East and Pacific coastal areas that currently are subject to moratoria. The House measure would give coastal states complete control over whether to allow leasing within 100 miles of their shorelines, and would remove the moratorium on leasing beyond the 100-mile mark. The leasing is subject to the approval of state governors, legislatures and neighboring states. The House bill does not offer special protections for Florida.

Frist last week rejected Democratic motions to offer amendments to S. 3711, saying he wanted the offshore leasing bill to be a “carefully crafted, focused [and] very discrete bill.” The “only way to achieve success…is to keep it very, very narrowly crafted and pass [it] as is” out of the Senate, said Majority Whip Mitch McConnell (R-KY).

The White House issued a statement last Wednesday supporting the Senate bill’s goal of opening Lease Sale 181 and the tract south of Lease 181 to leasing, but it tempered its support with concern over provisions in the bill that would allocate a percentage (37.5%) of federal royalties on production in the Lease 181 region to the four Gulf Coast states over the next decade, and would expand that allocation to include a share of royalties on production from new leasing in existing fields in the Gulf starting in 2017. The bill would cap Gulf OCS royalties from new leases in existing fields to the coastal states at $500 million each fiscal year between 2016 through 2055. ” The cap would not apply to royalties from leasing in the Lease 181 region.

“The administration is concerned about the rate of revenue sharing in the bill for new leases in presently accessible areas, and that S. 3711 creates an expectation for an amount of shared revenues that exceeds the cap. For these reasons, among others, it is important that spending be held to the cap in this bill” to protect the U.S. Treasury, the White House statement said.

Sen. Jeff Bingaman of New Mexico, the ranking Democrat on the Senate Energy and Natural Resources Committee, clearly was rankled by the Republican ban on amendments to the bill.

Although he considered the bill to be “seriously flawed” in its current form, Bingaman voted to bring the bill to the floor for debate so that amendments could be offered to improve the measure. “In this Congress, we made great progress on energy because we adopted an open, an inclusive and bipartisan approach on the issues. And that record, in my view, is at risk if we adopt a process on this bill that is a closed process. I hope the Senate consideration of this bill will be in the vein of the consideration that we gave to the last energy bill,” he noted.

In critiquing S. 3711, Bingaman argued that it locks up vast portions of Gulf oil and gas resources for 16 years in exchange for near-term leasing in the Lease Sale 181 area, and it cedes billions of dollars of royalties that would otherwise go to the U.S. Treasury to four Gulf states. He said the bill relinquishes access to 21 Tcf of natural gas until 2022 to gain access to 6 Tcf in Lease Sale 181, and would prohibit drilling in the Florida Straits near Cuba. The measure also would result in a “large diversion” of oil and gas royalties, which are the third largest source of revenues for the federal government, to four Gulf coastal states — a move that Bingaman believes violates federal law that places ownership of the OCS in the hands of the entire nation, not just certain states.

S. 3711 is “bad energy policy for the country,” and “bad fiscal policy” that could “come back to haunt us,” Bingaman said.

Democrats had hoped to propose amendments that would offer states along the East and West Coasts the same protections — a moratorium on drilling off their shores until 2022 — that Florida has received in S. 3711; would call on the House to accept the narrower Lease Sale 181 bill in lieu of the lower chamber’s more expansive leasing measure; would clean up the federal government’s royalty program; and would increase the production of alternative energy fuels.

To the East and West Coast senators who wanted the same coastal protections as Florida, Sen. Mel Martinez (R-FL) countered, “This is a focused piece of legislation that deals only with the Gulf of Mexico.”

“This small lease sale is one of the most important issues spoken of in this [chamber] this year,” said Sen. Pete Domenici, chairman of the Senate Energy Committee and sponsor of S. 3711, last Wednesday. The bill would require the Lease Sale 181 area to be opened to leasing within one year of enactment of the measure.

To Bingaman and other critics of the revenue-sharing provisions in S. 3711, Domenici responded that the costs associated with the sharing of federal royalty receipts with the Gulf Coast states would be far outweighed by inaction.

The Congressional Budget Office has estimated that bonuses, rents and royalties from new leasing authorized under S. 3711 would be $1.5 billion between 2008 and 2016, with 50% of that allocated to the four Gulf coastal states (Texas, Louisiana, Mississippi and Alabama) and to activities authorized by the Land and Water Conservation Fund.

Sen. Mary Landrieu (D-LA) said Louisiana and the other Gulf coastal states could not continue as the energy workhorse for the nation without receiving a “very reasonable portion” of the federal royalties from offshore production to help restore the receding coastlines. Landrieu is the only Democrat to co-sponsor the S. 3711. “We’re not greedy but we want our fair share” of the royalties from OCS production, echoed Sen. Trent Lott (R-MS), whose state also would benefit under S. 3711.

The legislation also provides a “zone of protection for the state of Florida” from drilling that extends 200-300 miles west of Tampa and 125 miles south of the Florida Panhandle until 2022, said Martinez, a co-sponsor of the bill. “It’s the best deal on the table” for Florida. “It cannot be any way but this way if it is to have the support of [the] Florida senators,” he noted.

Martinez, who has come under sharp attack from environmentalists for supporting S. 3711, said he “chose to be part of [the] solution for Florida,” recognizing that the Sunshine State — “one of the nation’s largest consumers” of energy — could no longer stand on the sidelines.

©Copyright 2006Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.