1. OFFSHORE DRILLING: Drilling advocates face uphill climb despite price pressure (E&E Daily, 06/19/2008)

Ben Geman and Alex Kaplun, E&E Daily reporters

President Bush's call to end offshore drilling bans highlights a basic question: Will record oil and gasoline prices weaken longstanding Capitol Hill support for the no-drilling zones?

Probably not, but environmentalists are worried. And Democratic leaders, wary of the push to open coastal waters, are increasingly arguing that the oil industry can do more with the acreage it already has under lease.

Efforts to upend the outer continental shelf leasing bans have fallen short in recent years. In 2006, when the more drilling-friendly GOP ran Capitol Hill, a measure relaxing the coastal bans and giving states discretion to allow drilling off their coasts passed the House but stalled. Congress eventually approved far more modest legislation opening up more acreage in the Gulf of Mexico.

But White House spokesman Tony Fratto yesterday wondered if the landscape has changed now that motorists are paying more than $4 per gallon. Current leasing bans cover both coasts and most of the eastern Gulf of Mexico.

"We know where Congress was when the price of gasoline at the pump was a dollar," Fratto said. "We know where they were when it was $2. Maybe there will be more members of Congress in the right place with gasoline at $4 ... a gallon."

In a Rose Garden speech yesterday, Bush said coastal states should decide if there will be oil and gas production in federal waters off their shores -- and get a cut of the royalties if they welcome the rigs (Greenwire, June 18).

Supporters of increasing domestic production are heartened by recent developments. Florida Gov. Charlie Crist (R) has dropped his opposition to offshore production and now supports allowing states to decide.

But Democratic leaders in both chambers quickly attacked Bush's plans. The issue has also become prominent in the presidential campaign, with presumptive GOP nominee John McCain in support of wider offshore drilling and Democrat Barack Obama attacking the plan.

Sources on and off Capitol Hill yesterday said that Congress remains highly unlikely to abandon limits on coastal production even though oil prices have surged in recent years -- and risen 40 percent this year alone.

Environmentalists are worried about how the soaring prices are affecting support for drilling restrictions, even though the Democrats are in charge on the Hill.

"It has changed the politics," said Athan Manuel, a lobbyist for the Sierra Club.

Manuel and other activists say expanded offshore drilling would endanger ecosystems without providing enough oil to curb prices meaningfully. "I think at the end of the day we will hold on," he said. "My hair will be a lot grayer, but I think the moratoria will still be in place."

Linda Stuntz, a Washington energy lobbyist who was a high-level Energy Department official during George H.W. Bush's presidency, says lawmakers should take another look at the current bans in light of the benefits of new supply and new technologies.

"I would like to think there is enough pressure on these guys to do something that they would be willing to take a fresh look," Stuntz said.

But are major policy changes in the offing? "The Washington insider in me would say probably not. It is an election year and the lines are drawn." Stuntz said. "I would love to be proven wrong."

The most recent test did not prove her wrong. In a party line vote last week, a House Appropriations subcommittee rejected Rep. John Peterson's (R-Pa.) proposal to remove coastal leasing bans (E&ENews PM, June 11).

Members may be considering similar measures all summer long. Peterson and other Republicans will offer three oil and gas development amendments to the fiscal 2009 Interior spending bill in the full House Appropriations Committee markup, likely next week. That markup was scheduled for yesterday, but Democrats scrapped it to finish work on the Iraq supplemental spending bill.

Peterson's chief of staff, Jordan Clark, said they have doubts about the delay but say it only helps the GOP cause. "The further this train goes down the track, the more grassroots support we get behind this," Clark said.

On the other side of Capitol Hill, Sen. Mary Landrieu (D-La.) plans to introduce a bill to allow states in areas where leasing is banned to have production offshore and share a portion of the revenues. "I imagine senators are looking at any relevant vehicle including appropriations," said Adam Sharp, an aide to Landrieu.

Also yesterday, Virginia's two senators -- Republican John Warner and Democrat Jim Webb -- introduced a bill that would allow natural gas production off their state's coast and provide the state with 37.5 percent of the leasing and royalty revenue. The 2006 law that expanded gulf oil and gas leasing acreage also provided revenue-sharing for Louisiana, Texas, Mississippi and Alabama.

One oil industry lobbyist suggested that more modest measures may surface as the debate continues. This source said that supporters of increased production are eyeing the Senate Interior Appropriations Subcommittee to make inroads.

One potential proposal when that subcommittee takes up the fiscal 2009 spending plan would be further drilling expansion in the eastern Gulf of Mexico, and new assessments of resources off East Coast states if those state governments request it, the lobbyist said.

The West Coast is "off the table," this source added. Subcommittee Chairwoman Dianne Feinstein (D-Calif.) is a staunch opponent of new oil and gas drilling off California.

Last year, the Senate Appropriations Committee approved an Energy Department spending bill that would have steered $10 million for seismic testing to assess the amount of oil and gas below federal waters in the eastern Gulf of Mexico. The measure was offered by Sens. Larry Craig (R-Idaho) and Byron Dorgan (D-N.D.) but did not ultimately become law.

State officials split on proposal

Reaction at the state level to Bush and McCain's calls for lifting the moratorium has been somewhat mixed. Several coastal governors said they remain strongly opposed while a handful of other officials said the policy was worth exploring.

California Gov. Arnold Schwarzenegger (R) -- who has often clashed with the White House on energy policy but has endorsed McCain -- reaffirmed his opposition yesterday to drilling off the state's coast.

"California's coastline is an international treasure. I do not support lifting this moratorium on new oil drilling off our coast," Schwarzenegger said.

On a conference call with reporters organized by the Obama campaign, two other coastal governors -- New Jersey Gov. Jon Corzine (D) and North Carolina Gov. Mike Easley (D) -- said they did not believe their states would approve offshore drilling if given the option.

"I don't think you're going to see any change on this -- people have studied this issue long enough," Easley said. "I don't think they're going to bite on this."

Elsewhere though opposition to offshore drilling appeared to be softening somewhat, highlighted by Crist's support for coastal drilling.

In Virginia, former governor and Democratic Senate candidate Mark Warner (D) yesterday gave a lukewarm endorsement to the proposal, saying he generally supported giving states the ability to decide whether they should allow drilling. But he also said during a campaign stop that other policies would do more to lower costs at the pump. Current Gov. Tim Kaine (D) has endorsed a study of the resources available offshore though he has yet to expressly back drilling.

Democrats to industry: Drill what you have

Amid pressure for expanded offshore access, Democratic leaders in both chambers are highlighting proposals that would pressure oil companies to produce on their current onshore and offshore leases.

Reps. Rahm Emanuel (D-Ill.), who chairs the House Democratic Caucus, Ed Markey (D-Mass.) and Nick Rahall (D-W.Va.) have floated plans that would create escalating fees on companies for their nonproducing leases and prevent companies from obtaining new leases unless they are already producing oil or gas from their current leases or "diligently developing" them.

Democratic leadership aides say they want to bring measures addressing the undrilled leases to the floor but did not provide a time frame.

The issue was discussed at a meeting among lawmakers yesterday that included these members, and the measures are under consideration for moving ahead, an aide said.

Eric Bontrager contributed to this story.

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