INSIGHT: US Congress heads for offshore showdown

14 August 2008 17:34  [Source: ICIS news]

US Congress poised for a critical energy moveBy Joe Kamalick

 

WASHINGTON (ICIS news)--The offshore energy issue is heading for a showdown vote in the US Congress next month, and it is shaping up as a major, one-time, all-or-nothing decision that could impact US chemical and other manufacturing interests for years.

 

Members of Congress who want to open US offshore regions to oil and gas development said on Wednesday they will force a federal government shutdown on 1 October unless they get a vote on expanded drilling.

 

Representative John Peterson (Republican-Pennsylvania) said that when Congress returns from its recess on 8 September he and other pro-drilling members of the House will force a vote on whether to continue a 21-year-old congressional ban on offshore drilling in 85% of the US outer continental shelf (OCS) regions.

 

The US chemicals industry - heavily dependent on natgas as a feedstock and power source - and a broad spectrum of other manufacturing interests have been pressing Congress for years to end the offshore moratorium.

 

According to the Interior Department, those offshore areas closed to drilling may contain 18bn barrels of oil and some 77,000bn cubic feet (bcf) of natural gas. But those estimates are based on old-technology seismic measurements taken in the 1970s, and the moratoria areas may yield four or five times that much in hydrocarbon reserves, as is typically the case as exploration and development unfolds.

 

The US consumes 8bn barrels of oil and more than 22,000 bcf of gas annually

 

The congressional ban on drilling in most of the OCS areas off US coasts is contained in the Interior Department’s appropriations bill that typically is renewed each year by Congress. 

 

Democrat leaders in the House have delayed committee and floor action on the fiscal year 2009 Interior Department appropriations bill, apparently in order to avoid a vote on the offshore drilling ban, fearing the moratorium would be ended.

 

What Peterson and other Republicans and a number of Democrats want is just a straight up-or-down vote on the record to renew or end the OCS drilling ban in the Interior Department appropriations bill. 

 

But House Speaker Nancy Pelosi (Democrat-California) and Senate Majority Leader Harry Reid (Democrat-Nevada) don’t want that simple yes-or-no vote to take place, for two very unpalatable reasons.

 

First, if the OCS ban were to be voted down (and many think it would be), that action would infuriate environmentalists and other liberal groups among the Democrats’ core constituencies.

 

In the second place, if Pelosi and Reid want to avoid seeing the offshore ban eliminated and their core constituencies angered just before the election, they would have to twist arms among enough congressional Democrats to ensure that the offshore drilling ban is maintained and extended for another year. 

 

But, with US consumers paying around $4/gal for gasoline and higher costs for electricity, food and other necessities, Democrats would not want to be on record as voting against increased US domestic energy production.

 

So that simple yes-or-no vote on the offshore drilling ban embedded in the Interior appropriations bill is a lose-lose proposition for Pelosi and Reid.

 

However, the Democrat leadership on The Hill will have to do something soon. Unless the offshore drilling moratorium is renewed by a vote of Congress within the next month, it will automatically expire on 1 October, the beginning of the federal government’s 2009 fiscal year.

 

House leaders still could avoid a confrontational vote on the offshore moratorium by postponing the Interior Department’s and other appropriations bills to next year - when Democrats expect to have wider majorities in both the House and Senate and perhaps a Democrat in the White House.

 

But if they do that, to keep the federal government in operation for the last three months of this year, Congress would have to pass a continuing resolution (CR), which would maintain funding authority for the Interior Department and other federal agencies at current levels.

 

Peterson and others in Congress warn they will do whatever is necessary to either get a vote on offshore drilling or force a shutdown of federal operations by refusing to approve continuing resolutions needed to keep federal operational funds flowing.

 

“If the Democratic leadership fails to address the energy crisis when we return in September and includes the offshore moratorium in a CR, I am prepared to explore all avenues - including a government shutdown,” Peterson said earlier this week.

 

If they cannot get a straight-up vote on the Interior Department drilling ban, Peterson and other House Republicans along with some Democrats want action on a bill, HR-6709, that would repeal all offshore drilling bans but bar development within 25 miles of shorelines. It also would channel some royalty fees to states and research toward alternative energy and conservation.

 

In the Senate, Senator Jim DeMint (Republican-South Carolina) and nearly 40 other senators have signed a letter asking Majority Leader Reid to allow a vote to end the offshore drilling ban. A similar campaign in the House is being led by Representative Jeb Hensarling (Republican-Texas).

 

DeMint indicated earlier that he has enough votes in the Senate to block any emergency spending bills and force a shutdown of federal operations on 1 October.

 

Speaker Pelosi has long opposed offshore drilling and until recently has vowed to block any House vote on ending the OCS moratorium.

 

However, earlier this week she indicated she might allow such a vote if ending the offshore ban was to be coupled with alternative energy, conservation and efficiency measures favoured by Democrats.

 

DeMint and other Republicans are wary, suspecting that Pelosi will bundle a couple dozen provisions into what ostensibly would be an offshore energy measure, thus ensuring that the bill will languish in three or four House committees for the few weeks remaining before Congress closes up shop around 26 September.

 

That’s why Representative Peterson, Senator DeMint and others are trying to force the issue with the Interior Department appropriations bill - it is the simplest phrasing of the question:  to drill offshore or not. Yes or no.

 

This September showdown is especially crucial because if US manufacturing industries cannot now win access to the offshore oil and gas they need, their odds of ending the OCS moratorium will be even less next year and perhaps for years afterward.

 

If, as expected, Democrats expand their majorities in both the House and Senate in the November elections and perhaps Senator Barack Obama wins the White House, opposition to expanded offshore drilling will be more deeply entrenched.

 

In addition, as recent developments have shown, US production of natural gas already is growing, according to the Energy Department, with expanded development of onshore conventional gas reserves and newly promising shale gas production.

 

Independent natgas exploration and development companies recently boasted that new horizontal drilling and fracturing technologies give the US access to a 100-year supply of shale gas. 

 

And the Energy Department said it is soon to fund research projects that it is confident will deliver carbon capture and sequestration technologies to enable environmentally friendly use of the nation’s abundant coal reserves by 2020.

 

As a consequence, if next month’s vote on offshore energy fails, when advocates of OCS development go knocking on congressional doors next year and beyond, they’re almost certain to meet replies of “See, we don’t need the offshore reserves!”

 

So the offshore vote that is approaching in the next few weeks could be one of the most crucial energy decisions that this country will make for the next decade and beyond.

 

To discuss issues facing the chemical industry go to ICIS connect


By: Joe Kamalick
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