Senate Panel Clears the Way For Expanded Oil and Gas Drilling

Oil and gas drilling has been expanded in the eastern Gulf of Mexico under an amendment approved Tuesday by the Senate Energy and Natural Resources Committee. But long before oil and gas companies set up shop in this new extended area, the measure faces a number of hurdles and opposition within Congress.

Right now the biggest threats to the amendment come from within Congress. Sen. Bill Nelson, a Florida Democrat, told Bloomberg today after the vote, he will pursue a fillibuster, if necessary. The amendment essentially ends a 2006 compromise that opened 8.3 million acres to drilling, but also established a 125-mile buffer zone from the Florida coastline through 2022. Under the amendment, drilling would be allowed within 45 miles, which would threaten beaches and interfere with military training in the area, Nelson said.

The oil and gas industry is of course cheering the amendment’s approval. Although there is some concern that a defeated proposal to share revenue with coastal states will have an adverse effect on increasing domestic oil and gas drilling in that area. Oil and gas proponents say advance production may be slowed because coastal states may be weary of entering into partnerships without revenue-sharing.

I expect that if gasoline prices in the U.S. rise this summer as anticipated, the amendment, which is part of a broader energy bill, will pass. After all, American outrage over skyrocketing gas prices was a driving factor behind former President George W. Bush’s decision to remove a presidential moratorium on offshore drilling last year.

And all signs point to rising prices. The Energy Department reported Tuesday that regular gasoline will cost $2.47 a gallon from April through September, 12 percent higher than estimated last month.  

I do believe adding the amendment will alter the broader energy bill. The energy bill, which will require 15 percent of electricity in the U.S. come from renewable sources by 2021, will face opposition partly because of Dorgan’s amendment. I’m not suggesting the bill will fail. But it will surely mean acquiescing to the desires of various members of Congress. And that means a number of sweeteners — which the public rarely finds out about until the deal is over and done with — will likely be added on to ensure support.

Here are the nuts and bolts of the amendment:

• The committee voted in a 13-10 bipartisan vote in favor of Democratic Sen. Bryon Dorgan’s proposal to allow oil and gas development starting 45 miles from Florida’s Gulf coast.
• The measure ends a 2006 compromise that created opened 8.3 million acres to drilling, but also established a 125-mile buffer zone from the Florida coastline through 2022.
• Drilling also would be allowed in the Destin Dome — 24 miles south of Pensacola. The American Petroleum Institute estimates the Destin Dome contains at least 2 trillion cubic feet of natural gas.
• A separate proposal from Democratic Sen. Mary Landrieu asking for revenue sharing for coastal states was defeated. The proposal would have given 37.5 percent of the revenues generated from the oil and gas leases to coastal states.
• The Senate panel also OK’d a measure from Sen. Lisa Murkowski, R-Alaska, to offer leases in coastal waters within 180 days after completing environmental reviews.
• Another defeated amendment would have allowed companies to use directional drilling based outside Alaska’s Arctic Natural Wildlife Refuge to access oil.