Barely a month after President Bush signed a $14.5 billion energy bill into law, Hurricane Katrina's destructive dance through the U.S. oilpatch is being seized on by Republicans as a reason to open more federal offshore waters to drilling.
WASHINGTON — Barely a month after President Bush signed a $14.5 billion energy bill into law, Hurricane Katrina's destructive dance through the U.S. oilpatch is being seized on by Republicans as a reason to open more federal offshore waters to drilling.
The House and Senate energy committees are also looking at measures to help the energy industry, such as incentives to build the first U.S. refinery since 1976 and cutting the array of fuel blends required by anti-pollution rules.
Before Katrina shut most of the Gulf of Mexico's oil and gas production and 10 percent of U.S. refining capacity, Republicans were gunning for a budgetary step to open the Arctic National Wildlife Refuge (ANWR) to exploration.
Now they have widened their scope to include drilling in banned Outer Continental Shelf (OCS) waters off Florida and other states. Currently, federal offshore drilling is allowed only in Alaska, Alabama, Louisiana and Texas.
ANWR and offshore drilling may be included in an omnibus federal budget bill that lawmakers want to take up after they work on hurricane disaster aid. Such a bill cannot be filibustered, or talked to death under Senate rules and can be passed with a simple majority vote.
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Florida and some other states oppose offshore drilling, fearing it could hurt their tourism industries.
Environmental activists see crass opportunism.
"This is not the time to be grabbing the political football out of the wreckage of this hurricane," said Richard Charter, co-chair of the National OCS Coalition, which opposes more offshore drilling. "This is an opportunistic effort to resurrect the parts of the energy bill that were too controversial to be passed before."
SHARE OF ROYALTIES FOR STATES?
The offshore drilling measure will likely give states the right to opt out of the existing ban in exchange for a cut of drilling royalties that energy companies will pay.
Over 79 trillion cubic feet of natural gas -- more than three years of domestic consumption at current levels -- lie under OCS waters where leasing is now banned.
Support is building for offshore drilling. Some American consumers could face a 71 percent jump in natural gas heating costs this winter, according to the government. Midwest farmers and many industries depend on natural gas.
"The odds of letting states opt out of coastal moratorium in return for a share of offshore royalties are much higher," said James Lucier, an analyst with Prudential Equity Group.
"There is sufficient momentum behind this idea that it is going to take more than objections from Florida to stop it."
Sen. Bill Nelson, Florida Democrat, said the White House wants offshore drilling inserted in a budget bill "that I can't filibuster."
Energy Secretary Sam Bodman said the administration is not reviewing its offshore drilling policy, which bans drilling in most OCS waters. "A lot of states feel strongly about it and we have not elected to take issue with that," he told reporters.
Senate Energy Committee Chairman Pete Domenici told Nelson late Wednesday that he will support OCS drilling in the budget as "payback" for Nelson's previous filibuster of energy legislation, a congressional source said.
The Interior Department in its 2007-2012 offshore plan pledged not to allow drilling leases within 100 miles of Florida's coast. Florida lawmakers say that leaves the door open for drilling in area 181, about 300 miles off Tampa.
With energy prices soaring in Katrina's aftermath, the industry sees an opportunity to try again to win access.
"The OCS has oil and gas that can be used in the near future," said John Engler, president of the National Association of Manufacturers.
A separate coalition of more than 100 U.S. corporations and trade groups is lobbying Republican leaders to allow drilling in all off-limits waters including the 181 area.
"The highest priority should be placed on Lease 181 in the Gulf of Mexico," said the letter, signed by companies such as BASF Corp. and Dow Chemical Co.
There is also talk among among lobbyists that House Majority Leader Tom DeLay may revive a failed attempt to win liability protection for U.S. refiners that make MTBE, an additive that pollutes underground water supplies. "We'll discuss all the options," a DeLay spokesman said, refusing to elaborate.
(Additional reporting by Richard Cowan)
Source: Reuters
