July 24, 2006
Monday

WASHINGTON -- The Senate is expected to decide this week whether to open vast areas off the coast of Florida to oil and gas drilling, a debate with billions of dollars in energy royalties at stake that could affect the ability of coastal states like California to prevent drilling off their shores.

Senate Republicans want to allow drilling in Lease Area 181, a portion of the eastern Gulf of Mexico south of Florida's Panhandle that is believed to contain one of the nation's largest untapped reserves of oil and natural gas. Proponents claim that opening the new area could help rein in the high energy prices consumers are paying and reduce America's dependence on foreign sources.

"There's nothing we can do this year that would have more impact in helping us contain the price of gasoline and natural gas than passing this bill," said Sen. Jeff Sessions, R-Ala.

But environmentalists and many California officials are worried the bill, if approved, could be merged with a more sweeping House measure approved last month that would end the quarter-century federal ban on drilling off the Pacific and Atlantic coasts and offer states lucrative financial incentives to approve oil and gas exploration.

"It is too early to speculate about what the final Senate bill will look like and what compromise, if any, can be reached in conference," said Rep. Lois Capps, D-Calif., a leading opponent of drilling in the House. "I would submit that any expansion of offshore drilling is a step in the wrong direction because it continues to enable our addiction to fossil fuels rather than pursuing efforts to reduce consumption and develop alternative energy sources."

California's two Democratic senators - Dianne Feinstein and Barbara Boxer - had joined with New Jersey's two Democratic senators to stop the bill, until they received assurances it would not harm their states' coasts. But Senate Republican leaders decided to put the measure on the fast track, despite the threat of a filibuster led by drilling opponents. Key votes on the drilling measure are expected as soon as Wednesday.

Much of the debate has focused on the generous revenue-sharing provisions added by lawmakers in Louisiana, Texas, Mississippi and Alabama. Oil and gas rigs have drilled off the coasts of those states for decades, and the states stand to receive a windfall if the bill becomes law.

Under the narrower Senate bill, 37.5 percent of all oil and gas royalties would go to energy-producing states in the Gulf of Mexico starting next year. The bill would extend the new revenue-sharing formula to all offshore projects across the country starting in 2016.

The House-passed bill contains an even more generous revenue-sharing scheme. States would receive 63.75 percent of royalties for oil and gas platforms within 12 miles of shore, and 42.5 percent of revenues for areas more than 12 miles offshore.

"Fundamental fairness dictates that states and local communities who voluntarily sustain this important energy industry should receive part of the proceeds," said Sen. Trent Lott, a Republican from Mississippi.

But even the Bush administration is worried that the legislation could divert billions of dollars from the federal Treasury at a time the nation is facing a costly war in Iraq and steep budget deficits.

However, new Interior Secretary Dirk Kempthorne said last week he believes a deal to share royalties can be reached.

The Senate bill was the product of a compromise reached this month between Republican leaders and Florida Sen. Mel Martinez, a Republican who has mostly opposed efforts to drill off Florida's coast.

Martinez agreed to allow drilling in an 8 million-acre portion of the eastern gulf in return for the promise that Florida would be allowed to block drilling all other projects within 125 miles of its coast.

Martinez has since been blasted by environmental groups in full-page newspaper and TV ads in his home state for agreeing to the deal. Florida's other senator, Democrat Bill Nelson, has said he may filibuster the bill.

Lease Area 181, which is about 100 miles south of the Florida Panhandle, is not covered by the congressional moratorium on drilling, but President Bush and his brother, Republican Florida Gov. Jeb Bush, had worked out a deal not to offer any new lease sales in the area. The areas covered by the Senate bill are estimated to contain 1.25 billion barrels of recoverable oil and 5 trillion cubic feet of gas.

California officials, including Republican Gov. Arnold Schwarzenegger, are suspicious of the Senate measure, warning that it could pave the way for the House bill to become law. While the Senate bill would extend the federal ban on drilling nationwide by 10 years until 2022, the House bill would end the moratorium. The House measure also would require states that oppose drilling to petition the federal government every five years to block development of areas from 50 to 100 miles offshore. And states would have no control over oil and gas leases more than 100 miles off shore.

House Resources Committee Chairman Richard Pombo, R-Calif., the chief architect of the House measure, said that if the Senate passes its bill this week, he plans to work in conference committee to add as many of the House provisions as possible.

"If the deal is good for Florida, why aren't my senators insisting that we get the same protections for my state?" Pombo said, referring to the Senate's bill provision to block drilling within 125 miles. "I want the same protections for California that they are willing to give Florida."

But the Senate bill faces major hurdles. It will take 60 votes to override a possible filibuster against the measure.

Among the bill's opponents is Sen. Ted Stevens, the powerful Alaska Republican lawmaker who chairs the Senate Commerce Committee.

Stevens supports offshore drilling, but was angered that Senate Republican leaders did not include Alaska among the states that will share in the billions of dollars in revenue. He said he plans to object on the Senate floor.

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