INSIGHT: A major victory for US offshore energy

25 September 2008 16:50  [Source: ICIS news]

By Joe Kamalick

 

WASHINGTON (ICIS news)--US chemical producers and the broad manufacturing sector won a major victory this week when the Democrat majority in Congress abandoned the 27-year-old ban on offshore drilling along most of the country’s mainland coasts.

 

On Wednesday Democrat leaders in the House threw in the towel by allowing an omnibus government spending bill to go forward - but without the single sentence that since 1981 has barred oil and gas exploration and development in 85% of US outer continental shelf regions.

 

Representative David Obey (Democrat-Wisconsin), chairman of the House Appropriations Committee, conceded defeat on the floor of the House on Wednesday, saying that the stop gap spending bill - which will fund federal government operations until March - would be put to a vote without the OCS drilling ban. It passed and is headed for certain approval by the Senate and President George Bush.

 

The ban had been a major policy point for House Speaker Nancy Pelosi (Democrat-California), who had sworn to never allow offshore drilling.

 

But the congressional offshore drilling moratorium had come under increasing fire from the US public as retail gasoline costs rose to above $4/gal.  Republicans championed the offshore energy issue, with chants of “Drill, drill, drill!” accompanying the nomination of Senator John McCain (Republican-Arizona) for president at the party’s convention.

 

Popular opinion polls showed voters supported offshore development by 70% and more. Despite Pelosi’s adamant opposition to ending the offshore moratorium, many worried Democrats in the House expressed reluctance to renew the ban, citing voter opposition and anger over high fuel costs.

 

In the 4 November national elections, all 435 seats in the US House of Representatives are in contention and one-third of the 100 senate positions are in play.

 

Each year since 1981 the Interior Department appropriations bill has contained a one-sentence ban on spending by the department for offshore oil and gas development along the US East and West Coasts and in the eastern part of the Gulf of Mexico near Florida’s West coast.

 

Led chiefly by Representative John Peterson (Republican-Pennsylvania), a coalition of Republican lawmakers along with some Democrats have worked for seven years to have the drilling moratorium lifted on grounds that the US needs access to what may be vast offshore energy reserves.

 

The offshore drilling ban was put in place in 1981 when natural gas was plentiful and cheap in North America and amid widespread concerns that offshore drilling would despoil coastal recreational beaches and ruin tourism.

 

But as natgas prices have climbed steadily since 1999, the US chemicals industry - heavily dependent on natural gas as a feedstock - and a broad spectrum of other manufacturing interests have been pressing Congress to end the drilling ban.

 

A spokesman for Peterson said the Democrat majority’s decision to end the drilling moratorium “is a huge victory for the American people”.

 

Senator Pete Domenici (Republican-New Mexico), ranking member of the Senate Energy Committee, said that “Democrats have done a 180 on this issue".

 

“As the price of gasoline rose, the American people became outraged that Democrats have blocked us from producing offshore,” Domenici said.

 

The American Chemistry Council (ACC) hailed Wednesday’s House action as “an important step toward development of a sound, comprehensive energy policy that includes a meaningful role for America’s offshore energy resources”.

 

Cal Dooley, a former congressman newly installed as council president, said the quarter-century ban on energy resources on the country’s Atlantic and Pacific coasts has “hindered our nation’s energy security and ability to compete in the global economy, at a cost of more affordable energy and millions of jobs”.

 

US manufacturers estimate that some 3m US production jobs have been lost to foreign manufacturers in large measure because of the increasing cost of natural gas.

 

However, when the offshore drilling ban expires next Tuesday (30 September) at the end of the US government’s fiscal year, it will not necessarily mean that drilling will proceed. In fact, the offshore energy issue will emerge again after the elections when a new Congress convenes and a new president moves into the White House.

 

Still, with the ban ended and energy prices unlikely to moderate much within the next year and beyond, Congress would have to flout broad popular support for offshore development in order to re-impose the moratorium.

 

Domenici noted that “It will be up to the next president and the next Congress to decide if they want to take these resources off the table once again”.

 

Republican presidential nominee John McCain supports offshore drilling. His Democrat opponent in the 4 November national election, Senator Barack Obama, says he supports “limited” offshore energy development, but he has not specified what that means.

 

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By: Joe Kamalick
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