Republicans next month may try to open new U.S. offshore areas to oil and gas drilling in a move that would bring in billions of dollars in new revenue and let politicians claim progress in boosting domestic energy supplies at a time of record prices.
WASHINGTON — Republicans next month may try to open new U.S. offshore areas to oil and gas drilling in a move that would bring in billions of dollars in new revenue and let politicians claim progress in boosting domestic energy supplies at a time of record prices.
Such a plan would face stiff opposition from environmental groups as well as influential California, Florida and New York lawmakers who fear offshore drilling's impact on tourism.
The move could come when the U.S. Senate and House of Representatives return from summer recess Sept. 6 and try to craft a package of federal spending cuts and tax reductions that Congress outlined last spring.
Opening more of the Gulf of Mexico and all areas of the Outer Continental Shelf (OCS) to energy exploration and production could raise billions of dollars in revenue for the U.S. government from auctioning federal leases.
A similar effort to expand drilling failed earlier this year during congressional debate of the recently enacted broad energy law. That law instead offers billions in tax breaks for expanding drilling in existing onshore and offshore areas.
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"They're looking at considerable dollars coming from OCS lease sales," said one oil industry source who asked not to be identified. The source added that while figures were not yet firm, $3 billion in potential revenue was possible.
Currently, federal offshore drilling is allowed only in four states: Alaska, Alabama, Louisiana and Texas.
Already attached to the budget legislation is a Republican plan to open the Arctic National Wildlife Refuge (ANWR) to drilling, which should raise $2.4 billion over five years.
The budget bill is an attractive vehicle for such controversial initiatives because it is protected by special procedural rules to ease passage.
Aides to Sen. Pete Domenici, the New Mexico Republican who heads the Senate Energy Committee and is seen as a powerful backer of expanded drilling, were not available for comment.
According to government estimates, the Outer Continental Shelf running along the U.S. coasts may hold as much as 76 billion barrels of oil and 406 trillion cubic feet of natural gas that can be recovered with existing technology.
On Monday, the U.S. Interior Department asked interested parties, including the energy industry and environmentalists, for suggestions on how to develop a leasing plan through 2012. That move would dovetail with efforts in Congress to lift the moratorium on offshore drilling.
Debbie Boger, deputy legislative director for the Sierra Club environmental group, Tuesday said that merely conducting the survey was harmful to fish populations.
'EXPLOSIVE COCKTAIL'
Besides bringing in new revenue to the government, the offshore plan would let politicians take credit for bolstering domestic energy supplies at a time of runaway prices.
In mid-August, U.S. crude oil prices hit a record $67.10 a barrel and U.S. natural gas prices marched to a record $9.91 per million British thermal units. Retail gasoline also raced to a new high of $2.61 per gallon nationwide.
Still unclear is whether any additional revenue from drilling would ease pressure to cut food stamps, farm subsidies, elderly health care or other domestic programs.
But even with the procedural protections that would block opponents in the Senate from filibustering a new energy initiative, passage is not certain.
One Senate veteran of budget fights noted that this autumn's bill to cut $35 billion from federal spending over five years could "become an explosive cocktail" for Congress.
"When you have student loans, farm price supports, Medicare, PBGC and ANWR all in one bill, it's a delicate balance," he said, referring to politically popular programs that Congress targeted for spending cuts in the spring. PBGC is the Pension Benefit Guaranty Corp., a deficit-ridden agency that could face $6.6 billion in budget savings.
Lawmakers from Florida, California and New York warned they would aggressively oppose expanding offshore drilling, largely due to environmental and tourism concerns. Sen. Bill Nelson, a Florida Democrat, also contends that drilling in the eastern Gulf of Mexico could threaten the U.S. military's weapons testing in that region.
Further complicating the debate is the possibility that in order to blunt some opposition, especially from environmentalists, the legislation might close the door to offshore oil drilling even for crude found while developing natural gas.
"We don't see, as major producers, a reason to discriminate among the energy sources when they can all be produced in a safe manner," said Mark Stultz, a spokesman for the Natural Gas Supply Association,
But environmental groups like the Sierra Club are working toward a much different result.
"We think the conversation should be moving toward permanent protections for sensitive coastal areas," Boger said, adding, "We need to protect local fishing and tourist economies, not to mention the marine life itself," while developing renewable energy sources.
The oil industry source said that language giving states the option to participate or not in expanded drilling "may be the ticket. That may make it happen."
Source: Reuters
