Senate panel adds oil, gas provisions to energy bill

June 11, 2009
The US Senate Energy and Natural Resources Committee returned to work on an energy bill with new oil and gas provisions it adopted two days earlier.

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, June 11 -- The US Senate Energy and Natural Resources Committee returned to work on an energy bill with new oil and gas provisions it adopted two days earlier.

Its previous actions included modification of earlier legislation to allow continued US imports of crude oil produced from Canadian oil sands and opening of additional eastern Gulf of Mexico acreage including the Destin Dome to leasing.

The committee also rejected proposals to authorize directional drilling from adjacent state lands to produce oil from beneath the Arctic National Wildlife Refuge, to require that lawsuits challenging new US Outer Continental Shelf leasing be filed directly to the US Court of Appeals for the District of Columbia, and to allow coastal states to receive shares of federal offshore oil and gas revenues.

Committee member Mary L. Landrieu (D-La.) emerged from the June 9 markup with mixed feelings. “We took a significant step forward today to open new drilling in the eastern Gulf of Mexico and make America more energy independent . . . [but] the expansion did not include the robust energy-sharing provision that many Democrats and Republicans support,” she said.

The committee rejected by 13 to 10 votes her amendment that would have allowed affected coastal states to participate in future federal offshore oil and gas revenue. “Coastal states need a partnership with the federal government, as states that drill onshore on federal lands enjoy, and revenue sharing provides the security they need to contribute to the nation’s energy supply,” said Landrieu.

“If we want to expand offshore drilling, states need to share in the benefits, along with the risks,” she maintained.

Expanding federal leasing
Other members focused on benefits of expanding federal leasing in the eastern GOM. “Our country desperately needs to take steps to increase energy independence. I believe that requires us to take a comprehensive approach to our energy industry, and that includes opening new areas like the eastern [GOM],” said Byron L. Dorgan (D-ND), who proposed the amendment that was adopted by 13 to 10 votes.

The amendment would open the GOM’s Eastern Planning Area to leasing, a move which Dorgan said could provide access to billions of barrels of oil and trillions of cubic feet of natural gas. It also would leave in place a 45-mile buffer along Florida’s coast. But the amendment’s possibly most significant feature is that it would include the Destin Dome, which Dorgan said is one of the nation’s most promising new gas resources.

Oil and gas industry groups applauded the amendment’s adoption. “Destin Dome by itself contains at least 2 tcf of gas, enough to heat 2 million homes for 15 years, while the potential resources in the entire eastern [GOM] are estimated at 3.7 billion bbl of oil and 21.5 tcf of gas,” American Petroleum Institute President Jack N. Gerard said. Destin Dome access could open the way to supplies that could be brought to market fairly quickly because the area is near existing pipelines and plants, he added.

“What this means in practice is the potential for vast new energy to come online quickly, which in turn means thousands of additional jobs, billions in new revenues, and a significant lessening of our dangerous dependence on foreign energy,” Independent Petroleum Association of America President Barry Russell noted.
Increased access to domestic resources will not only reduce energy costs but also make the nation more energy-secure, American Gas Association President David N. Parker said as he also approved of the amendment’s adoption. “This vote moves us one step closer to greater control of our natural resources,” he said.

Enhancing energy security
Other groups approved of the amendment too. “This vote represents a major step in the effort to enhance our nation’s energy security,” said P.X. Kelley, a retired US Marine general who co-chairs the Energy Security Leadership Council at Securing America’s Future Energy (SAFE).

“Today, we depend on imports, often from hostile regimes or unstable regions, for 60% of the oil we use. Last year, petroleum and petroleum products represented more than $380 billion of our $677 billion trade deficit,” he continued. “Increasing domestic supply will not end this threat, but it will help to protect our nation while we make the crucial changes, particularly in our transportation system, that will help to build a less oil-intensive economy.”

The committee also adopted an amendment offered by Lisa Murkowski (R-Alas.), the committee’s ranking minority member, which would require the US Interior secretary to incorporate into lease sales the areas covered by Dorgan’s amendment within 180 days of completion of all necessary environmental impact studies.
Two other Murkowski amendments were rejected. The first, which failed by 13 to 10 votes, would have authorized use of directional drilling and other subsurface technology from Alaska state lands adjoining ANWR to avoid disturbing the refuge’s surface area. The second, which failed by 12 to 11 votes, attempted to expedite judicial reviews of oil and gas lawsuits by requiring direct appeals to the US Appeals Court for the District of Columbia of any OCS development the full energy bill authorized.

The committee also adopted by voice vote an amendment proposed by member Sam Brownback (R-Kan.) to clarify US refineries can buy crude oil produced from Canadian oil sands. The matter has been in question since enactment of the 2007 Energy Independence and Security Act, which included a provision, Section 526, that prohibits federal agencies’ purchases of fuels from sources that have a heavier carbon impact than conventional fuels. US Rep. Henry A. Waxman (D-Calif.), who wrote the provision, said he intended it to discourage a US Air Force coal-to-liquids program, but others said it could be interpreted to include Canadian oil sands.

Karen A. Harbert, president of the Institute for 21st Century Energy at the US Chamber of Commerce, said the amendment’s adoption began the process of assuring that oil from Canadian oil sands will continue to be part of the total US energy supply. “Every barrel of oil that we purchase from Canada is a barrel that we do not have to purchase from nations that do not share our security and economic interests,” she said. “I’m pleased that progress has been made toward ensuring that our strong relationship with Canada continues, and I hope this amendment is enacted into law.”

Contact Nick Snow at [email protected].