Senate Majority Leader Bill Frist (R-TN) signaled that he will schedule debate this month on a bill based on a deal negotiated by Republicans Wednesday that would open up eight million acres in the eastern Gulf of Mexico to oil and natural gas leasing and would allow sharing of federal royalties from offshore production with four Gulf coastal states.
The GOP-crafted agreement would give Florida a 125-mile buffer zone against drilling in territorial waters, and a 100-mile buffer against drilling in non-territorial waters. In addition to opening 1.7 million more acres in Lease Sale 181 to leasing, the deal calls for leasing to occur in a 6.3 million-acre tract south of Lease 181. It also would require the federal government to share royalties from offshore production with four Gulf states: Texas, Louisiana, Mississippi and Alabama.
The bill keeps intact the revenue-sharing language announced by Sen. Mary Landrieu (D-LA) last Thursday. That would provide the four Gulf coastal states with 37.5% of the the federal revenues generated by Lease Sale 181 and subsequent production. And beginning in 2017, coastal energy-producing states would receive 37.5% of the revenues generated from any Gulf lease issued after the enactment of the bill. Louisiana would receive the lion’s share of the revenues from Outer Continental Shelf (OCS) oil and gas production.
The Republican Senate negotiators inserted the 125-mile buffer zone in the deal to win the support of Sens. Mel Martinez (R-FL) and Bill Nelson (D-FL), who vowed to torpedo any OCS legislation that permitted drilling near Florida’s coastline. They included the revenue-sharing language to gain the support of senators from the four Gulf coastal states.
“This concept comes close to achieving the protections for Florida and the military sought by Sen. Martinez and me in the legislation” that was introduced earlier this year, Nelson said. “It sounds promising. But the devil’s always in the details,” he noted.
“Passing this bill is the most important thing we can do in the near term to impact the price of natural gas and boost our domestic energy supply,” said Sen. Pete Domenici (R-NM), chairman of the Senate Energy and Natural Resources Committee who played a lead role in negotiating the agreement. “I applaud the House for recently taking action to increase access to American oil and gas resources in the OCS. I hope with this agreement the Senate will also be able to act, and that we will get a bill to the president that will have a real, immediate impact on American energy security.”
He said last week he was “optimistic” the Senate would pass a Lease 181 bill in the next three weeks before Congress leaves for its month-long recess in August.
The Senate agreement won tepid approval from industry. “While it’s not the complete answer to comprehensive energy policy, it’s a step in the right direction,” said Jack Gerard, president and CEO of the American Chemistry Council.
The new agreement “builds upon” the original Lease Sale 181 bill (S. 2253), which was approved by the Senate energy panel in March. The bill was sponsored by Domenici and Sen. Jeff Bingaman of New Mexico, the ranking Democrat on the Senate committee. It sought to open up about 2.9 million additional acres in Lease 181 to producers, but it did not include revenue-sharing language or an extended no-drilling buffer for Florida.
The decision to widen the scope of the original Senate Lease 181 bill may be partly in response to Frist’s recent call for key Senate committees to step up the pace on energy measures, or just a concession by Domenici that he won’t get an OCS bill through the Senate without including additional measures to gain senators’ support, according to Capitol Hill aides.
The Domenici-Bingaman bill had “north of 50 votes” in support of the measure, according to Bill Wicker, a spokesman for Bingaman. The bill, however, needed 60 votes to head off an anticipated filibuster from Florida senators.
The House OCS bill (HR 4761), which was approved in June, is a much more comprehensive bill than the language in the Senate negotiated deal (see Daily GPI, June 30). It would give states complete control over whether to allow oil and gas leasing within 100 miles of their coastlines, and would lift the ban on offshore drilling beyond the 100-mile mark. It also would give all coastal states a greater share of royalties on production off their shores.
The House OCS bill “may erode support in the Senate” for the Lease 181 measure, Wicker said. Some senators, “who would be ordinarily inclined to support OCS legislation,” are concerned that a House-Senate conference could result in a bill that would significantly expand drilling in protected federal waters, he noted.
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