Senate sends strong signal of support for gulf drilling plan

Final vote on the bill expected around 5 PM EDT, 8/1/2006

Reprinted from E&E Daily; 7/31/2006

The Senate voted 72 to 23 yesterday to cut off debate on legislation that would open 8.3 million acres in the eastern Gulf of Mexico to new oil and gas drilling.

Yesterday's cloture vote paves the way for easy passage of the bill itself before the August recess, possibly as soon as this afternoon. It also sets up hard negotiations with the House of Representatives, which passed a much more expansive measure in June.

Fifty-two Republicans joined 20 Democrats in voting for cloture. Supporters called it an important step toward increasing domestic production to help temper energy costs and address energy security concerns, while opponents said the bill could endanger coastal areas and criticized the absence of auto efficiency and renewable energy provisions.

Sponsors estimate the bill would provide access to 1.26 billion barrels of oil and 5.8 trillion cubic feet of natural gas, which they say is enough gas to heat and cool 6 million homes for 15 years.

The Senate bill requires leasing in much of the eastern Gulf of Mexico's Lease Sale 181 area and additional acreage in a tract to its south that is now covered by formal offshore leasing bans. Of the 8.3 million acres opened to new drilling, roughly 2 million are in the Lease Sale 181 area itself and the rest is in the 181 south region. The 181 area itself is not under formal moratoria but has been largely withheld from leasing.

The bill steers 37.5 percent of production revenues from newly opened areas to the Gulf Coast states that have coastal drilling -- Alabama, Louisiana, Mississippi and Texas. In a decade the revenue sharing expands. These states begin receiving the same share from leases in other gulf areas entered into after enactment of the bill. Louisiana alone could gain more than $650 million per year starting in 2017, according to the office of Sen. Mary Landrieu (D-La.), a sponsor of the bill.

Landrieu has pushed hard for gulf states to receive a share of revenues from leasing in federal waters, which now goes almost entirely to the U.S. Treasury. The new money for the states is targeted for coastal restoration and protection efforts under the bill. Opponents of revenue sharing, including Sen. Jeff Bingaman (D-N.M.), say it wrongly steers a huge amount of federal money from federal waters drilling to just a handful of states.

The bill also contains a no-drilling buffer for Florida -- included to secure backing from that states' senators -- of 125 miles off the panhandle coast and 235 miles west of the Tampa Bay area through 2022.

The House plan is broader. It would lift offshore drilling bans that now cover both coasts and much of the eastern Gulf of Mexico and replace them with a system under which drilling would be allowed in all areas beyond 100 miles from state shores, while drilling is also allowed from 50 to 100 miles from state shores unless state legislatures and governors oppose it. Drilling is banned for good within 50 miles unless states seek to allow it.

Key Senate lawmakers -- including the chamber's GOP leadership -- say the delicately negotiated Senate plan may be the most expansive measure they can pass this year.

"I expect something like the Senate bill to return," said Sen. Pete Domenici (R-N.M.), the chair of the Senate Energy Committee, discussing talks with the House. "I will do everything in my power to bring back a bill that can pass the Senate."

Senate Minority Leader Harry Reid (D-Nev.), who supports the Senate bill, has vowed to help Sen. Bill Nelson (D-Fla.) rally the votes to sustain a filibuster if the measure comes back with any changes after talks with the House.

But House leaders have so far criticized the idea of adopting the Senate bill, instead supporting their bill and calling for negotiations between the chambers.

Key industry officials seeking more offshore energy production yesterday praised the Senate bill, but they have also made clear they support efforts to open far more of the outer continental shelf than the Senate bill allows. Natural gas-intensive industries like manufacturing and fertilizer production blame elevated natural gas prices in recent years for job losses in their sectors.

These officials sidestepped questions as to whether they will press for a compromise version that goes beyond the Senate plan, or whether they would encourage the House to adopt the Senate plan if indeed that is all that is politically feasible. "Our position is let's get a bill out of the Senate as quickly as we can and then start comparing [the measures]," said John Engler, president of the National Association of Manufacturers, in a briefing with reporters yesterday.

Dave Parker, CEO of the American Gas Association, issued a statement praising the bill after the cloture vote. "This overwhelming vote signaled the Senate's strong support for bringing additional natural gas resources to market for the American natural gas consumer," he said.

But environmentalists continued attacking the measure. U.S. PIRG said the measure provides what, in the end, is a relatively small amount of energy compared to the United States' massive consumption. "This bill gives us more drilling, little energy supply, and no conservation since Senate leadership would allow no amendments that save energy or develop new, renewable energy resources," said Mike Gravitz, an oceans advocate with the group.

Domenici said yesterday he believes the bill could set a precedent for further plans to open other areas and share revenues with states, arguing it will show that opening new areas is safe. He called the Senate plan an important first step.

"I will in due course argue for opening more, and then more, and then more," Domenici said yesterday during a briefing with reporters, indicating he sees an incremental approach to offering other areas for leasing that are now restricted. "I see us on the verge of making the first major breakthrough in 25 years," he later said on the Senate floor.

Sen. George Allen (R-Va.) also took to the floor yesterday to speak in favor of allowing oil and gas production off Virginia's coast if the state supports it.