In a surprising shift in policy, President Obama announced that his administration plans to open previously closed areas in Alaska, off the Atlantic Coast and in new areas of the Gulf of Mexico (GOM) to oil and natural gas drilling, at the same time extending some current leases. The Senate, however, law week shot down a proposal to open up more of the offshore to oil and gas drilling. It also voted against repeal of oil and gas taxes for the five biggest producers.

“I am directing the Department of Interior to conduct annual lease sales in Alaska’s National Petroleum Reserve [NPRA], while respecting sensitive areas, and to speed up the evaluation of oil and gas resources in the Mid- and South Atlantic. We plan to lease new areas in the Gulf of Mexico as well, and work to create new incentives for industry to develop unused leases both on and offshore,” the president said in his weekly address on May 14.

Obama had proposed development of the Mid-Atlantic (offshore Virginia) and South Atlantic regions, as well as expanded development of the GOM and offshore Alaska, prior to the deadly blowout of the Macondo well in April 2010, which lead to the explosion aboard the Deepwater Horizon rig and its sinking off the coast of Louisiana (see NGI, April 5, 2010). The administration quickly scrapped its plan after the disaster.

In his weekly address, Obama further said “We’re also taking steps to give companies time to meet higher safety standards when it comes to exploration and drilling. That’s why my administration is extending drilling leases in areas of the Gulf that were impacted by the temporary moratorium, as well as certain areas of the coast of Alaska. And to streamline that permitting process, I am establishing a new team to coordinate work on Alaska drilling permits.”

At a hearing of the Senate Energy and Natural Resources Committee last Tuesday, Sen. Kay Bailey Hutchison (R-TX) commended Obama for his actions, but she added “the president’s statement leaves a lot of questions unanswered. Which leases will be extended?…How long will the selected leases be extended?” She noted that a bill (S. 516), sponsored by her and Sen. Mary Landrieu (D-LA), “answers those questions.”

Hutchison said that more than 350 offshore leases are due to expire this year — many of which have not had the opportunity to be developed because of the federal moratorium that was imposed following the Deepwater Horizon disaster. Under the Hutchison-Landrieu bill, she said no producer would have to pay for the leases unless they get a full extension.

Hutchison said the House passed a version of the Hutchison-Landrieu bill (the Lease Act) earlier this month. She called on the Senate energy panel to insert the bill into energy legislation that it plans to send to the floor.

The Senate energy committee last Tuesday took up four bills that have goals similar to those of Obama’s: (S. 843) would establish regional joint Outer Continental Shelf (OCS) leasing and permitting coordination offices in Alaska, and in the Atlantic and Pacific regions; (S. 516) would extend OCS leases to accommodate permitting delays and to provide operators more time to meet new drilling and safety regulations; (S. 916) calls on the Interior secretary to conduct a comprehensive inventory of oil and gas resources in the Atlantic, Gulf and Alaska regions; and (S. 917) would reform the responsibilities of the Interior secretary with respect to management of the OCS, and requires the secretary to conduct a review of royalty and rental rates within a year of the bill’s enactment and every four years thereafter.

Rep. Doc Hastings (R-WA), chairman of the House Natural Resources Committee, said Obama’s actions were baby steps. “The Obama administration held a lease sale in the NPRA in 2010 — this is not a new proposal. The real problem is the Obama administration continues to delay the issuance of permits for necessary roads, bridges and pipelines to transport the energy once it’s produced,” he said.

And before the president “touts increased production in the Atlantic, don’t forget that his administration canceled the Virginia lease sale scheduled to take place this year. Speeding up seismic work is a puny consolation prize for delaying the lease sale until at least 2017,” Hastings noted. As for holding GOM lease sales in 2012, he said “these lease sales were previously scheduled to take place in either 2011 or 2012 until they were delayed by the Obama administration. The president is not opening new areas for drilling.”

Hastings said Obama’s decision to extend drilling leases in the Gulf and Alaska that were impacted by the moratorium “is a simple matter of fairness that the…administration is finally recognizing.” He added that the president’s proposal to create a team to “look at permits makes a good talking point, but means nothing until actual permits in Alaska are issued.”

While pressing for expanded oil and gas development, Obama also called for “Democrats and Republicans [to] come together” and repeal oil and gas taxes for the largest producers. But the plea fell on deaf ears.

Senate Republicans last Tuesday pushed back a Democratic effort to repeal $21 billion in oil and natural gas tax breaks for the five largest producers over the next decade.

Democrats needed 60 votes to advance their bill (S. 940), but only garnered 52. Three Democrats — Landrieu, Mark Begich of Alaska and Ben Nelson of Nebraska — crossed the aisle to oppose the bill, while two Republicans — Sens. Susan Collins and Olympia Snowe, both of Maine — and Independent Sen. Bernie Sanders of Vermont voted with Democrats to support the measure.

“The Senate was right to reject this bill,” said Bruce Josten, executive vice president for government affairs for the U.S. Chamber of Commerce.

The bill, sponsored by Sen. Robert Menendez D-NJ), sought to revoke the tax breaks for Chevron, BP, Royal Dutch Shell, ConocoPhillips and ExxonMobil. Few people on or off Capitol Hill believed the bill had a chance of clearing the Senate.

Senate Majority Leader Harry Reid (D-NV) signaled last Tuesday that he wants to see the legislation resurface. “I am confident that before we finish our budget negotiations here in anticipation of raising the debt ceiling, that that [repeal of oil, gas taxes] will be part of it…There’s no justification for giving these [tax breaks to] companies that are making so much money,” said Reid in a CQ Today article.

At a hearing Sen. Lisa Murkowski of Alaska, the ranking member of the Senate Energy and Natural Resources Committee, expressed concern that a proposal raising oil and gas taxes could be tacked onto energy legislation voted out of committee. “Many of us are wary [of this],” she said.

By a vote of 42-57, Democrats last Wednesday responded in kind by blocking a GOP measure aimed at promoting drilling in the Gulf of Mexico and offshore Virginia and Alaska. Republicans failed to get the 60 votes needed to head off a Democratic filibuster of the pro-drilling legislation.

The bill (S.953), which was sponsored by Senate Minority Leader Mitch McConnell (R-KY), mirrored the trio of pro-drilling bills that the House passed earlier this month (see NGI, May 16). Ironically the Senate GOP bill, which Democrats opposed, proposed some of the same drilling measures advocated by Obama in his May 14 weekly address.

The Senate’s rejection of the measure “was a missed opportunity to address America’s stagnant economy and growing energy insecurity,” said Karen Harbert, president of the U.S. Chamber’s Energy Institute. “One would hope that the high gasoline prices currently burdening families and businesses would serve as a call to action, as it did in the House, but unfortunately the Senate is off to a disappointing start.”

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