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Energy spike leads to a new drilling battle

There is a fight in Congress over the future of offshore drilling, with billions of dollars at stake. The battle lines pit Republicans against Republicans, Democrats against Democrats, and industry against environmentalists.
/ Source: a href="" linktype="External" resizable="true" status="true" scrollbars="true">The Washington Post</a

More than a mile beneath the surface of the Gulf of Mexico lies a tract of sea floor that is bigger than New Jersey and that oil and gas companies believe holds a trove of natural gas and a measure of salvation for corporate and residential consumers.

But the area, three-quarters of which is closed to development, also lies at the center of a fight in Congress over the future of offshore drilling, with billions of dollars at stake. The battle lines pit Republicans against Republicans, Democrats against Democrats, and industry against environmentalists.

Ever since a disastrous 1969 oil spill off Santa Barbara, Calif., drilling off U.S. coastlines has been a sensitive subject. For 25 years, a congressional moratorium, renewed annually, has barred exploration on 85 percent of the Outer Continental Shelf, from three miles offshore, where federal waters begin, to 200 miles out, where U.S. jurisdiction ends. An order issued by President George H.W. Bush and extended by President Bill Clinton through 2012 provides additional protection.

"We don't need to sacrifice our beaches, coastal waters and economies to meet America's energy needs," says the Sierra Club, which favors alternative energy sources and energy-efficiency measures.

Yet the spike in natural-gas prices last fall has inspired a coalition of industrial users and a variety of lawmakers to try again to modify the moratorium, citing the harm high natural-gas prices do to American competitiveness and the benefits of reducing U.S. dependence on foreign energy sources. Drillers also want to win changes before the Interior Department's 2007-12 leasing plan takes effect.

Even as gay marriage and immigration grab headlines, top House and Senate members have been bargaining in private to reach a compromise over new contours for offshore drilling. Much of the haggling has been over the New Jersey-size tract, known as Lease 181.

At the moment, the chances of a compromise don't look good. But the wrangling provides a glimpse of how U.S. energy policy is made — or isn't made — when Congress and the White House try to balance big business interests, political supporters, environmental concerns and national energy needs.

The fight has made some strange bedfellows. President Bush, though seen as friendly to oil and gas interests, has done little to break the impasse, in deference to his brother Florida Gov. Jeb Bush (R) and Sen. Mel Martinez (R-Fla.), who have opposed offshore drilling, citing the need to protect the state's tourism industry from the harm a spill would do.

That has angered conservative Rep. John E. Peterson (R-Pa.), who together with liberal Rep. Neil Abercrombie (D-Hawaii) tried to strike the words "natural gas" from the moratorium, which would allow natural-gas wells within three miles of U.S. coasts. Without the support of either party's leadership, this political odd couple came within a handful of votes of prevailing. Now the two are seeking support to allow drilling at least 20 miles from shore, far enough to be out of sight of beach-going tourists.

Each of the lawmakers has taken on his own party. Peterson, who tried and failed to win Bush's support during a flight last summer on Air Force One, says the president argued that the most "doable" cure for tight-natural gas markets was to build more terminals for liquefied-natural-gas imports — the opposite of what Bush argues when he cites foreign dependence as a reason for opening the Arctic National Wildlife Reserve in Alaska.

"I'm surprised because we have two oil people at the top," Peterson said of the administration. "Yet two states are controlling the most important part of our energy policy," he said of Florida and California.

In the Democratic camp, Abercrombie has criticized what he calls an "environmental Taliban" for opposing offshore natural-gas drilling, and 38 House Democrats defied their minority leader, Rep. Nancy Pelosi (Calif.), and voted in May to keep the Peterson-Abercrombie change in the moratorium.

"I said, 'Nancy, you're wrong on this,' " Abercrombie said of a conversation he had with Pelosi. "I think that the Democratic party should get out in front on this issue instead of standing off to the side."

Florida's senators, Republican Martinez and Democrat Bill Nelson, have teamed up to guard against drilling that they say could mar the shorelines. They have their own proposal to extend the presidential drilling ban on the Atlantic and Pacific coasts until 2020, carve out a slice of Lease 181 to allow some new drilling there, have the federal government buy back other leases closer to Florida's west coast, and permanently ban drilling within 150 miles of Florida's shores.

Some drilling advocates note that Cuba recently decided to allow drilling in its waters, just 50 miles from the tip of Florida, closer than prime U.S. drilling prospects that fall under the moratorium.

But Nelson and Martinez have enlisted Defense Secretary Donald H. Rumsfeld, who wrote a letter in November asserting that the Gulf of Mexico from the west coast of Florida all the way into Lease 181 are essential for military training. "In those areas ... drilling structures and associated development would be incompatible with military activities, such as missile flights, low-flying drone aircraft, weapons testing and training," Rumsfeld wrote to Senate Armed Services Committee Chairman John W. Warner (R-Va.).

Oil and gas companies have long eyed the Outer Continental Shelf. The Interior Department's Minerals Management Service estimates that the OCS holds 420 trillion cubic feet of undiscovered natural gas, which Anadarko Petroleum's exploration manager for the Gulf of Mexico, Stuart Strife, notes is enough to heat every home in the United States for the next 80 years. In the past, Strife notes, the MMS estimates of potential reserves have been, if anything, too conservative.

That's why Anadarko bet on the portion of Lease 181 that was sold in 2001, offering more than a third of the $341 million worth of winning bids. It has drilled, with partners, 10 wells in 8,000 feet of water to reservoirs 10,000 feet below the ocean floor. The company has already found 1 trillion to 2 trillion cubic feet of gas reserves, which travel by pipeline to Louisiana.

Strife says fears of oil spills are overblown. So far Anadarko has only found natural gas, but even if it found oil the industry could handle it well. "People still think back to Santa Barbara in '69 and think that's the state of the industry," Strife says. "The industry has made leaps and bounds since then."

But environmentalists say a single incident can do extensive and possibly irreparable damage to natural habitats. Richard Charter, co-chair of the National OCS Coalition, says, "There is no such thing as a 100 percent failsafe petroleum process."

Despite strong environmental concerns, high natural-gas prices have made the politics of offshore drilling more fluid. Abercrombie has been courting union support, citing job losses to other low-gas-cost countries. Meanwhile, a Quinnipiac University poll in mid-May showed that Floridians, by 51 percent to 42 percent, favored drilling as close as 100 miles from shore, though 55 percent to 36 percent opposed drilling as little as nine miles from the coast.

"A number of Floridians realize that their state is dependent on natural-gas supplies," said Donna Harman, vice president of congressional affairs for the American Forest and Paper Association. "Some of their members are saying that they need to look at this in a more rational way."

But as with so much else in Congress, the issue is fractious. Rep. Bobby Jindal (R-La.) has a proposal that would erase the moratorium but force states to petition for continued drilling bans off their shores. Jindal appealed to lawmakers who favor more power for states, but other lawmakers see a grab for power and money by Louisiana. His proposal would funnel to the states 75 percent of royalties from wells within 12 miles of shore and 50 percent from those further out. Under current law, that money belongs to the federal government.

The best chances for a deal rest with Sens. Pete V. Domenici (R-N.M.) and Jeff Bingaman (D-N.M.), who want to open up almost all of Lease 181 while leaving the moratorium on other U.S. waters largely intact. Senate Majority Leader Bill Frist (R-Tenn.) has also been involved in talks with Florida senators over whether to trade the opening of more offshore territory for the extension of the wider moratorium past 2012.

In the House, Reps. Adam Putnam (R-Fla.) and Richard W. Pombo (R-Calif.) have been seeking compromises. But it isn't clear whether Pombo will pursue the issue if he faces a tough reelection contest. The Sierra Club has run ads citing oil and gas company campaign contributions to Pombo, who also favors opening up the Arctic wildlife reserve. Last fall, Pombo had floated a plan similar to Jindal's but with a buffer zone for Florida's coasts.

Talking to reporters last week, Jeb Bush hinted that he might be ready to make a deal. "We're kind of on the sideline waiting for a partner to engage with," he said. He said Pombo's proposal was "very fair" and added, "I think people now regret not taking it in the Florida delegation." The governor said, "A degree of certainty for the protection of our coastline is what we're looking for."

Yet Charter says Americans are sensitive about their beaches and predicts that election-year attempts to lift the moratorium will turn out to be "much ado about nothing."