The oil and natural gas industry clinched a crucial victory last Tuesday when the Senate by a wide margin passed legislation that paves the way for future leasing in the eastern Gulf of Mexico. However, the legislative battle is far from over. The Senate and House are now tasked with the responsibility of reconciling two vastly different offshore leasing bills — a feat some believe will test the mettle of even the best Capitol Hill negotiators.
Following the favorable 71 to 25 vote, the Senate planned to send its narrower oil and gas leasing bill (S. 3711) to House leaders in the hope that they will agree to accept the Senate bill in lieu of the House’s more comprehensive leasing bill (HR 4761) that was passed in late June. The House essentially will have three options: 1) approve the Senate bill as is; 2) amend the Senate bill, which would mean that the delicate deal negotiated with Florida and Gulf State lawmakers could fall apart; or 3) do nothing and let the Senate offshore bill languish.
“If this bill is tampered with in the House…most of us on this side will do everything to block it,” warned Sen. Charles Schumer (D-NY). Senate Democratic Leader Harry Reid of Nevada has vowed to filibuster the bill if it’s radically revised in the House.
House Resources Committee Chairman Richard Pombo (R-CA), one of the architects of HR 4761, signaled that the House was willing to negotiate with the Senate, but he said it was not inclined to accept the Senate measure without question. The House thinks the Senate measure is “a lot of sizzle but not much steak,” a Capitol Hill aide said.
Echoing that sentiment, Rep. John Peterson (R-PA), a co-author of the House bill, called the Senate measure “limited in scope and modest in design.” Nevertheless, he said, “I remain confident that given the opportunity we will come up with a plan in conference that protects the needs of coastal states while putting a worthwhile amount of natural gas and oil into the pipeline.”
The House “is kind of insulted that the Senate is insisting that it be our bill or no bill,” the Capitol aide noted. In fact, he said a cartoon was circulating on Capitol Hill that portrayed a caricatured Majority Leader Bill Frist (R-TN) wearing a “Senate” beanie and riding an “offshore energy” tricycle, while crying “But I don’t want to play with the House.”
Asked if he thought the offshore leasing bills could be successfully conferenced, the aide told NGI, “I don’t even know that we’re going to see a conference” on an offshore leasing bill when Congress returns from its August recess after Labor Day.
Groups representing gas-hungry industrial gas consumers, manufacturers, chemical producers and gas utilities applauded the Senate action, calling it an “historic” step. The American Gas Association, which represents gas utilities, said it hopes House-Senate conferees will work to develop a final bill that allows for even broader development of gas resources in the Outer Continental Shelf (OCS). The National Association of Manufacturers expects the House and Senate to work quickly when they return from their recess, sending a completed bill to President Bush in September.
The mostly Republican-crafted Senate bill, which is sponsored by Sen. Pete Domenici (R-NM), is limited strictly to the Gulf of Mexico. It would make 8.3 million acres in the Lease 181 area in the eastern Gulf and in a tract south of Lease 181 available for oil and gas leasing, would provide protections (a minimum of a 125-mile, no-drill buffer zone) for Florida and would give four Gulf coastal states a major share (37.5%) of the federal royalties from leasing in the areas opened by the bill to be used in restoring their receding coastal areas.
The House measure, which is far more broad, would give all coastal states, including the Pacific and East Coast states, the option to allow drilling within 100 miles of their shorelines and would remove the moratorium on drilling beyond the 100-mile mark. It would give coastal states a greater share of the royalties than that proposed in S. 3711.
Reconciling the two bills will be a delicate balancing act. If the House should significantly alter the Senate bill, Florida and Gulf Coast senators and Senate leaders would likely withdraw their support for S. 3711. And if the Senate should demand that the scope of the House bill be narrowed to focus only on the Gulf of Mexico, the support in the House would collapse.
The Bush administration has endorsed opening the gas-rich Lease 181 region to leasing, but it is concerned about provisions in the Senate and House bills that would allow coastal states to share federal royalties from OCS production. The Senate bill is expected to result in new production of 1.26 billion barrels of oil and nearly 6 Tcf of natural gas, and calls for the first lease sale to be held within a year of enactment of the bill, according to Domenici.
S. 3711 is the “first breakthrough in 25 years” involving OCS oil and gas drilling, Domenici said. He indicated that his Gulf leasing bill could be the “stimulus” for future initiatives that would make other coastal areas available for leasing.
“This is the first 10 yards” and legislation targeting other coastal states, such as Virginia, will follow, Domenici told Republican Sen. George Allen of Virginia, who wanted to offer an amendment to S. 3711 that would allow non-Gulf coastal states to participate in oil and gas leasing as well. But, in a procedural move to get S. 3711 quickly through the Senate, Republican leaders banned all amendments during debate of the bill last week.
Allen proposes to model a future bill for Virginia after Domenici’s measure, with 37.5% of the federal royalties going to the state for coastal areas and to reduce in-state tuition. “I’m going to continue fighting for Virginia” to get the same treatment the Gulf coastal states received in S. 3711, Allen said. “You’re on the right track,” Domenici told Allen.
Sen. John Warner (R-VA) called S. 3711 “a step in the right direction,” but he said “more needs to be done.” Like Allen, Warner wanted to attach an amendment to S. 3711 that would give non-Gulf coastal states, such as Virginia, the authority to either extend the existing moratorium on oil and gas leasing or petition the federal government for a waiver of the moratorium to allow drilling. Warner said his proposal would provide the opportunity for up to 350 million offshore acres to be considered for development.
“I will return to this floor time and time again” to fight for the right of coastal states to decide their future with respect to drilling, he said.
Â©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.
© 2021 Natural Gas Intelligence. All rights reserved.
ISSN © 2577-9877 | ISSN © 1532-1266 |