New US offshore bill would hurt natgas, industry says

16 September 2009 19:31  [Source: ICIS news]

WASHINGTON (ICIS news)--New legislation to reform federal management of offshore and onshore oil and gas resources will further restrict domestic US production, energy and chemicals industry officials said on Wednesday.

The House Committee on Natural Resources has begun consideration of HR-3534, the Consolidated Land, Energy and Aquatic Resources (CLEAR) Act, authored chiefly by the committee chairman, Representative Nick Rahall (Democrat-West Virginia).

Among other steps, the wide-ranging bill would raise leasing fees for development of oil and gas reserves in federally owned onshore and offshore areas, assess production incentive fees on leases that are not generating oil or gas, repeal certain royalty relief provisions, end the royalty-in-kind lease payment system and allow federal officials to revise royalty agreements later found to be unfair to the federal government.

It also would consolidate operations of the Minerals Management Service (MMS), which currently manages federal offshore resources, and the Bureau of Land Management (BLM), the onshore resources manager, into a single office within the Interior Department.

The bill sets up four regional planning councils that would give state and local governments and private sector organisations - including the oil and gas industry but also tourism groups, fisheries, alternative energy advocates and environmentalists - a say in development of oil and gas resources in US outer continental shelf (OCS) regions.

But US energy producers and chemical sector officials were sharply critical of the bill, charging that rather than promoting and advancing domestic energy production, the measure will retard development.

“While Congressman Rahall continues to pitch his bill, HR-3534, as a solution to promote domestic energy production, it will in fact result in the exact opposite,” said Barry Russell, president of the oil and gas producers' group, Independent Petroleum Association of America (IPAA).

Russell said that by eliminating the royalty-in-kind system - in which energy developers give the federal government a percentage of oil and gas recovered instead of cash royalties - and raising lease rates and other fees, the bill “will result in job losses, decrease royalties and revenues to the US treasury and increase our dependence on foreign energy”.

He said the regional planning councils will create yet another layer of bureaucracy and permitting obstacles to offshore development.

Cal Dooley, president of the American Chemistry Council (ACC), said the Rahall bill fails to advance domestic energy production.

“By neglecting domestic energy supply, the committee is missing a significant opportunity to enhance the nation’s energy security, energy diversity and economic outlook,” Dooley said.

“Imposing tax and procedural provisions that raise the cost of fuel and energy feedstock borne by American manufacturers will threaten US competitiveness and employment,” he said.

Dooley noted that the US petrochemicals industry and downstream chemicals manufacturing are heavily dependent on natural gas as a feedstock and energy fuel, and that many other segments of US manufacturing also rely on natural gas.

The Institute for Energy Research (IER), an energy industry think tank, charged that the CLEAR Act “is a direct attempt to ensure that a de facto ban on much of America’s energy resources remains intact”.

The institute was referring to action taken late last year by Congress to end its 27-year moratorium on offshore energy development on the US east and west coasts. Although that ban was lifted, energy industry officials have charged that the Obama administration has taken steps to delay or block offshore development.

Hearings on the CLEAR Act are set to resume on Thursday this week.

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By: Joe Kamalick
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