Dec 10 2006

Congress OKs new Gulf drilling

Birmingham News

By Mary Orndorff

More than 8 million acres in the Gulf of Mexico will be opened to oil and gas drilling and the proceeds shared with Alabama under a historic deal approved by Congress early Saturday and sent to President Bush for his signature.

Expanding offshore drilling in the Gulf, a controversial idea kicked around for decades, ultimately won approval from a combination of lawmakers interested in more domestic oil production and investment in areas devastated by Hurricane Katrina.

It also helped that the provision was attached to one of the last pieces of legislation moving before Congress adjourned for the year.

In a bit of drama in the final hours of the Republican-led 109th Congress, drilling was first attached to a popular tax bill in the House in the afternoon, and by evening to a less popular trade bill in the Senate. The House approved its version 367-45, and the Senate 79-9. All seven Alabama House members voted for it, as did both senators.

Coastal state lawmakers have long argued that their states have not been adequately compensated for bearing the brunt of offshore energy production, so the law will for the first time share a major portion of the royalties with Alabama, Louisiana, Texas and Mississippi. Exact revenue estimates were not available, but Alabama officials predict the state will gain millions of dollars over several years.

Although the White House initially objected to the revenue-sharing, Bush welcomed the deal Saturday.

"Developing these reliable domestic resources in an environmentally sound manner will help address high energy prices, strengthen our energy security and protect manufacturing jobs," he said in a released statement.

More than 1 billion barrels of oil and about 6 trillion cubic feet of natural gas are in the new 8.3 million-acre drilling area that begins 125 miles south of Baldwin County's beaches and expands southward. A moratorium against drilling near Florida's beaches was maintained.

While half of the new drilling royalties will pour into the U.S. Treasury, 37.5 percent will be split among the four states for coastal protection and restoration. The split depends on proximity to the drilling and historical production, and is expected to be especially beneficial to Louisiana. The remaining 12.5 percent goes to the Land and Water Conservation Fund.

"For too long, the Gulf Coast states have contributed to our nation's energy supply while receiving virtually nothing in return," said Sen. Richard Shelby, R-Ala.

The plan was opposed by environmental groups and those in Congress who argued that all of the money generated by drilling in federal waters should benefit all 50 states.

On the Senate side, the issue was further complicated because a section of the attached trade bill was opposed by Southern senators, including Shelby and Sen. Jeff Sessions, R-Ala., who feared the expanded trade deal with Haiti would damage a domestic textile industry already on the ropes from previous international trade pacts.

Negotiations were under way late Friday night to satisfy a host of senators unhappy with various portions of the massive tax, trade and drilling package - including the total cost of about $40 billion - but in the end, they were able to register their objections only in procedural votes that did not block the final bill.

Shelby, Sessions:

Shelby and Sessions set aside their objections on the Haiti provision and voted against attempts to derail the drilling, tax and trade package.

"There's nothing we can do this year that will have more impact in helping us to contain the price of gasoline and natural gas than getting this bill signed into law," Sessions said.

There was a late side agreement to give textile manufacturers a chance to testify next year about the impact on their industry, according to Sessions' office.

Alabama's drilling windfall could start arriving in 2007 as new leases are negotiated, but exactly how state officials plan to spend the money is likely to be debated in Montgomery. Congress directed the proceeds go to coastal communities to restore the coastline and improve hurricane protections. But the Alabama Constitution divides all oil and gas revenues among three separate statewide trust funds to finance capital improvement projects around the state.

Efforts to reach Gov. Bob Riley were unsuccessful.