The OCS leasing struggle

Dec. 11, 2006
Meager offshore oil and gas leasing reform tested political winds in the US House of Representatives Dec. 5 and nearly got blown away.

Meager offshore oil and gas leasing reform tested political winds in the US House of Representatives Dec. 5 and nearly got blown away. At this writing, the effort was trying to skirt opposition in the final days of the 109th Congress as an attachment to unrelated legislation.

The bill, which would open 8.3 million acres of the Outer Continental Shelf in the eastern Gulf of Mexico, is far less aggressive than a measure the House passed in July. Still, supporters had to withdraw it when they sensed trouble winning the two-thirds majority required for passage under special rules for expeditious handling. At midweek, MSNBC reported that leasing reform was one of several bills drawn to renewal of tax cuts as a possible vehicle through the House.

Acting on supply

Trouble passing the lesser of two OCS leasing measures typifies the 109th Congress. This is the Congress that produced the sweeping Energy Policy Act of 2005, a marvel of bipartisan deal-making notable mostly for pushing the US toward the nationalization of fuel choice. It’s the Congress that chose to address outside its deliberations on “energy policy” the question of how the world’s single biggest energy-consuming country can preclude leasing of 85% of its offshore territory. It’s the Congress that, when it did take up leasing reform, acted with awesome timidity. It’s the Congress that stayed reluctant to the bitter end to act substantially on energy supply.

Voters should remember this performance if the US winter is as cold as the last weeks of autumn. That leasing reform in any configuration survived this long is in fact a political triumph born of stressful prices for natural gas. States with industries hurt by expensive gas, some of them in the US interior, have learned that OCS access serves general interests and not just those of oil companies and coastal communities. This is ideological progress. But the legislative payoff, if any, will fall far short of what the US needs.

The bill seeking a path of least resistance through the House last week was one passed in August by the Senate, which refused to consider the broader legislation that the House passed in June. The Senate bill makes opening of the eastern gulf acreage palatable to Floridian lawmakers by precluding leasing until June 30, 2020, of acreage 125 miles off Florida’s western coast and 100 miles off the panhandle. It also allows Gulf Coast states to share 37.5% of future OCS revenue up to a $500 million limit (OGJ, Aug. 7, 2006, p. 24).

The House bill would have made possible the lifting of leasing moratoriums across the whole OCS. Moratoriums would have ended automatically for federal acreage 100 miles or more offshore. Coastal states could have blocked federal leasing 50-100 miles offshore. And leasing would have been prohibited within 50 miles of shore except where affected states rescinded the ban.


Beyond the controversial ending of moratoriums long in effect, the House bill poisoned itself in at least two other ways. To entice states to approve leasing, it would have shared federal revenue without limits. And it provided for gas-only leases. The White House Office of Management and Budget, in addition to some leasing supporters in the Senate, objected to fiscal consequences of the revenue-sharing provision and to administrative challenges of the gas-only leases (OGJ, July 10, 2006, p. 22). Senators promised not to consider the House bill if it went to a conference for reconciliation with their narrower measure. If there was to be any leasing reform, therefore, it would be the Senate bill, which the House had to pass before adjournment last week.

The something-beats-nothing argument has been made in this space before (OGJ, Aug. 7, 2006, p. 19). It’s worth repeating that any bill expanding OCS acreage available for oil and gas leasing bears historic significance. But the energy significance is a direct function of the amount of acreage involved. By that test, the Senate bill didn’t amount to much. It apparently requires a cold winter to underscore what still needs to be done.