Senate Approves More Offshore Drilling

The Senate voted Tuesday to open 8.3 million acres of federal waters in the central Gulf of Mexico to oil and gas drilling, setting up a confrontation with the House which wants even more drilling in waters now off-limits.

Supporters said the measure would be a major step toward producing more domestic energy and forcing down natural gas prices that have soared in recent years.

The Senate approved the measure by a vote of 71-25. It now must be reconciled with much broader drilling legislation passed by the House in June. Those negotiations are likely to begin in September.

"This bill will substantially reduce our reliance on foreign oil and gas. ... It brings more American energy to American consumers," declared Majority Leader Bill Frist, R-Tenn.

Likewise, Sen. Pete Domenici, R-N.M., called the legislation "welcome news for the people of the United States" — for homeowners facing high heating bills as well as for manufacturers and chemical companies that have seen natural gas costs soar.

Some critics of the legislation noted that it will be years before any oil or gas will be taken from the 8.3 million acres and that the legislation falls short of addressing many of the country's energy problems.

At best "this will supply a small amount of gas years from now," said Sen. Mark Dayton, D-Minn., who decried the inability to broaden the legislation beyond drilling in the Gulf of Mexico.

Still, the bill attracted wide, bipartisan support as lawmakers sought to show the flag on energy as they prepared to leave for the monthlong summer recess. The House is already gone.

Some senators noted that natural gas prices jumped by 11 percent this week amid concern about supplies because of the intense summer heat. The price was at more than $8 per thousand cubic feet on the spot market, compared to under $6 a few weeks ago.

Despite the solid Senate vote, the bill's prospect of clearing Congress remains uncertain.

The House-passed bill would allow energy companies access to waters far beyond the central Gulf and lift the quarter-century-old drilling moratorium on Outer Continental Shelf waters on both the Pacific and Atlantic coasts, while allowing states to decide whether to continue the drilling bans.

House leaders have said they are eager to negotiate a compromise bill, once the Senate acts.

Senate Democrats and GOP moderates say such a broad bill would threaten areas that have long opposed energy developing, from New England to California and the Pacific Northwest. Senate leaders say it would spark a filibuster and probably lead to no offshore drilling legislation emerging from Congress this year.

The 8.3 million acres affected by the Senate measure is believed to contain 1.2 billion barrels of oil and nearly 6 trillion cubic feet of natural gas, enough to heat 6 million homes for 15 years.

The bill would create a "zone of protection" for Florida that would stretch 125 to 300 miles from the state's beaches at various points. It also would funnel tens of millions of additional dollars to the four other Gulf coast states as their share of future oil and gas revenues.

One part of the area, known as Lease Area 181, had been scheduled for lease sales by the Interior Department in the 1990s, but was placed off-limits by the Bush administration in 2001 at the request of Florida Gov. Jeb Bush. The remaining 6.3 million acres south of Lease Area 181 has been under a congressional drilling moratorium for years.

Broad opposition to the Senate bill began to melt away last week when Sen. Bill Nelson, D-Fla., who had threatened to filibuster any offshore drilling legislation, said he would go along given the promise that the Senate would not accept the House measure.

The issue has attracted intense lobbying from environmentalists arguing that drilling in areas now off-limits would threaten coastal beaches and marine life if a spill should occur.

Businesses — from chemical companies and manufacturers to utilities and farmers — have pushed lawmakers hard to open more waters to drilling, arguing that will provide new supplies of natural gas and perhaps lower prices.

The bill calls for the Department of the Interior to open bids for developing Lease Area 181 within a year and follow with lease sales in the rest of the area — which is farther off shore in waters more than 10,000 feet deep — as soon as practical.

Energy companies for years have coveted Lease Area 181 because the gas and oil it holds is close to existing pipelines and other infrastructure. It lies about 100 miles off the Louisiana coast.

Under the bill, Louisiana, Texas, Alabama and Mississippi would get 37.5 percent of the royalty revenue the federal government collects from the oil and gas that is pumped off their shores. They now get less than 2 percent.

That is expected to be as much as $1.2 billion a year within 10 years with Louisiana likely to get about half of that.

"There's no policy justification for diverting these revenues," Sen. Jeff Bingaman, D-N.M., said. He said while the revenue sharing will increase gradually, between 2016 and 2055 the states could get as much as $30 billion. After that their share could be $12.5 billion a year.

Sen. Mary Landrieu, D-La., said these states for decades have been shortchanged and that it's only fair that their share be increased in a new "partnership" with the federal government to expand energy development. "We will use the money to restore a great coastline ... restore the great wetlands" off the Louisiana coast and improve storm protection, she said.