Sen. Pete Domenici (R-NM), chairman of the Senate Energy and Natural Resources Committee, and other senators introduced legislation last Thursday that would open more than eight million acres to oil and natural gas leasing in the eastern Gulf of Mexico, as well as bolster the coastal states’ share of royalties on offshore production from new leases.

The bill (S. 3711) would make 2.5 million acres available to producers in the Lease Sale 181 area in the eastern Gulf, located west of Tampa and south of the Florida Panhandle, and would make another 6.3 million acres available in a tract just south of the Lease 181 area. It also would establish a 125-mile, no-drill buffer around the state of Florida in the eastern Gulf until 2022 and would give the four Gulf coastal states a greater share of the royalties (37.5%) on offshore production from new leasing.

The legislation, which is co-sponsored by Senate Majority Leader Bill Frist (R-TN) and 10 other senators, calls for Lease 181 area to be leased within one year following enactment, said Frank Macchiarola, majority counsel for the committee. The tract south of Lease 181 — which will have to undergo review under the National Environmental Policy Act — would be opened to leasing “as soon as practicable,” he noted. One of the co-sponsors is Florida Republican Mel Martinez, who agreed to support the bill in return for the 125-mile buffer.

The Senate expects to hold a cloture vote on a motion to proceed with the bill late Monday (July 24), according to committee staff members. Proponents of the measure will need 60 votes to move ahead with debate. Domenici’s “taken absolutely nothing for granted, but he feels he has a very, very good shot” at achieving cloture Monday and proceeding to debate, said Bruce Evans, committee staff director. Domenici and the Republican leadership hope to have a vote on the Lease 181 bill by the end of this week, before the Senate leaves for its August recess.

“We expect to get cloture,” Evans told reporters during a telephone conference briefing Friday. However, he would not speculate on whether the bill will be dead for the year if cloture is not invoked.

There has been no commitment from House leaders as to whether they will accept the narrower Senate Lease 181 bill and forego conference. The House last month approved a broad Outer Continental Shelf (OCS) drilling bill (HR 4761), which gives states complete control over whether to allow oil and gas leasing within 100 miles of their shorelines, and lifts the 25-year-old moratorium on all drilling beyond the 100-mile mark. It also provides for more aggressive revenue-sharing with coastal states. Lawmakers have significant doubts that the two vastly different OCS bills can be merged in conference.

The Congressional Budget Office has estimated that new leasing in the 181 area will result in gross receipts of $1.55 billion over a 10-year period, with $926 million going to the federal government and $540 million earmarked for the Gulf coastal states and the Land and Water Conservation Fund. The bulk of the $540 million (37.5%) will be allocated to the coastal states, committee staff members said..

The bill is consistent with the position of the Bush administration, which supports sharing with states royalties on production from new leases in new OCS areas, according to committee staff members. The administration is opposed to sharing royalties on production from existing leases in mature offshore areas. However, the Senate measure would open up significantly more acreage in Lease Sale 181 than that proposed by the Interior Department (2 million acres) in its lease plan for the 2007-2012 period.

“My top priority this year has been OCS legislation that makes a real difference in our energy supply. Every time the price of oil has climbed to a new high, I have intensified my efforts to do this bill,” Domenici said.

Sen. Jeff Bingaman of New Mexico, the ranking Democrat on the Senate energy panel who co-sponsored the original Lease 181 bill with Domenici this year, does not support the new bill in its current form. He is strongly opposed to the sharing of royalties from offshore production with coastal states, arguing that the OCS belongs to the entire nation — not just to the Gulf coastal states. Bingaman further believes that sharing offshore royalties with the states would deprive the U.S. Treasury of significant funds.

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