Working through the night, the US Senate approved a legislative package including its OCS leasing reform bill early Dec. 9 and sent it to the White House for President George W. Bush’s signature. The measure had cleared the House at midafternoon on Dec. 8 after an attempt to amend the Outer Continental Shelf oil and gas leasing provision failed by 2 votes.
Senate passage of a measure including S. 3711 concluded months of maneuvering which moved into high gear during the final week of the 109th Congress.
The bill was one of 16 free-standing measures on the calendar as the House resumed work on Dec. 5 following the Thanksgiving holiday recess, but it was pulled at the last minutes when supporters determined they did not have the necessary two-thirds majority for passage under suspended rules.
Proponents sought that status for the bill to avoid amendments, which Senate energy leaders said would sink S. 3711 and let Congress conclude its second session without passing any bill increasing access to the OCS.
They repeatedly indicated that the Senate’s bill, which focuses on the so-called Sale 181 area and adjacent tracts in deeper water in the eastern Gulf of Mexico, stood a much better chance of being adopted than HR 4761-a more ambitious measure that sought to also give states on the US east and west coasts options to initiate offshore leasing and share revenues.
House Resources Committee leaders and members could not get the Senate to attempt to reconcile differences between the two bills. Senators insisted that S. 3711 had to be the vehicle, and that it had to be free of amendments, in part to keep the crucial support of Florida’s two US senators.
Part of HR 6111
After S. 3711 was pulled from the floor on Dec. 5, speculation centered on whether it would return as a separate bill or as part of a bigger package. It showed up on Dec. 8 as part of HR 6111, which also included provisions dealing with reimbursement of physicians, extensions of tax credits, and expansion of health savings accounts.
Reps. Edward J. Markey (D-Mass.) offered an amendment that would have required holders of federal deepwater leases in the gulf issued in 1998 and 1999 without price thresholds to renegotiate terms or forfeit the right to bid on future leases in the gulf.
The amendment failed by 207 to 205 votes. But the fact that it came so close to passing signals that a bill to force renegotiation of those deepwater leases will be a top priority when the Democrats take control of the House in January.
The House then passed HR 6111 and the catch-all bill moved to the Senate, where it passed by a 79-9 vote in the early hours of Dec. 9.
Senate Energy and Natural Resources Committee Chairman Pete V. Domenici (R-NM) said the provision dealing with the OCS was the first legislation in several years to open new federal offshore areas to energy development. “It is particularly fitting that the Senate pass the bill just as the cold winter was setting in and as families start seeing a sharp rise in their natural gas bills. The price of natural gas has more than doubled since October. We aim to ease the gas price volatility by increasing supply,” he said.
Domenici said the OCS provision, which he expects to bring 1.26 billion bbl of crude oil and 5.8 tcf of gas to US consumers over several years, was not the only energy element in the bill. It also includes tax credits and provisions covering renewable resources, energy efficient home and building construction, photovoltaic devices, fuel cells, coal gasification and production of methanol and ethanol from coal, and cellulosic biomass ethanol plants.
“I have always believed that increased production of fossil fuels is effective only if we also expand our production and use of renewable energies and make a concerted effort to use less energy,” Domenici said. “This package achieves all three goals. It complements last year’s energy bill in charting a course for this country toward a future of clean, abundant, and affordable energy.”
Earlier compromise
S. 3711 itself was a compromise. The Energy and Natural Resources Committee passed S. 2253 on Mar. 8 to reopen eastern gulf tracts that President Bush withdrew in 2001 at the request of his brother, Florida Gov. Jeb Bush.
But Mary L. Landrieu (D-La.) and seven more senators from Texas, Louisiana, Alabama, and Mississippi objected because it did not contain a provision to share future revenues from the offshore leases with affected coastal states. Florida’s two senators, Republican Mel Martinez and Democrat Bill Nelson, also protested that a provision barring leases within 100 miles of the state’s coast beyond the Sale 181 area was inadequate.
Domenici withheld the bill until July 12, when Majority Leader William H. Frist (R-Tenn.) announced that compromises had been reached with the 10 Gulf Coast senators. The Floridians won an addition of 25 miles to the no-lease buffer zone, which would be in effect through 2022. The other four Gulf Coast states won a 37.5% share of future federal leases in the area covered by the bill, while another 12.5% would go to the state side of the Land and Water Conservation Fund.
“Today the Senate confirmed its strong support for Louisiana and the entire Gulf Coast by passing the Domenici-Landrieu fair-share bill, which after nearly 60 years, provides for Louisiana a significant share of oil and gas revenues produced off our shores. In August, 71 senators agreed to the bill because they recognized that a dedicated stream of revenue is necessary for Louisiana to protect itself from future storms. [Hurricanes] Katrina and Rita showed us what devastation can ensue if our communities remain vulnerable,” Landrieu said following the Senate’s Dec. 9 vote.
Nelson said that the bill’s final passage made it “a huge day for Floridians... [who] can take comfort in the fact that there will be no drilling off the state’s shores. This is major protection for our state’s $50 billion tourism-driven economy and its unique environment.”
Oil and gas and other industry trade associations immediately hailed S. 3711’s passage through Congress. National Petrochemical & Refiners Association Pres. Bob Slaughter said that it represents the best opportunity for US energy exploration in 25 years. “Reliable supplies of affordably price natural gas are essential to the operations of both the refining and the petrochemical industries, and to the consumers who rely on the essential products they produce,” he said.
Twenty-five-year supply
“While the bill does open as much acreage to exploration as NPRA and others would have liked, we hope that additional action affecting other OCS areas will eventually take place,” Slaughter said. “Allowing full access to the OCS could bring as much as 633 tcf to the domestic market, enough to provide the US with 25 years of affordable natural gas.”
Independent Petroleum Association of America Pres. Barry Russell said the bill was not a solution, but a necessary first step. “The federal government still maintains its unnecessary moratoria on the East and West coasts as well as the eastern Gulf of Mexico. It’s now time as a nation, and as the new Congress convenes in January, to look at frontier areas both onshore and offshore for safe energy development,” Russell said.
American Gas Association Pres. David N. Parker said that Congress “has ensured that an increasing share of domestic natural gas supplies will be available for use by all Americans” and said the bill is a step in the right direction. But he added that more work will need to be done to open additional OCS tracts.
Natural Gas Supply Association Pres. Skip Horvath said Dec. 11 the bill “cannot be the final answer when it comes to ensuring access to the most economical supplies, but it has taken strong leadership in both parties in both houses to achieve this initial step, which represents the first congressional expansion of available offshore resources in several decades.”
Horvath said, “It is vital that the 110th Congress continue to work together to ensure greater access to even more supplies to meet the resource needs of our country, while letting markets allocate supplies where they are needed most.”
National Association of Manufacturers Pres. John Engler said that the legislative package contained several important trade provisions for his group’s members, but immediately cited the OCS segment. “Exploring the OCS is an important step toward a more abundant, flexible, and affordable energy supply that is critical to the US economy,” he said.
American Chemistry Council Pres. Jack N. Gerard called the bill’s passage “an enormous victory in the fight against a 6-year-old natural gas crisis that’s been killing American jobs, making the United States less competitive with other nations and costing households across the nation more for home heating and electricity.”
He also said there’s a relationship between restricting access to gas resources and development of energy alternatives. “One of the biggest sources of rising natural gas demand is for generating electricity, and more natural gas also will be needed to produce ethanol, hydrogen, ultra-low sulfur diesel fuel, solar panels, wind power blades, and energy-efficient materials such as insulation and plastics for light-weight cars,” Gerard said.
