House Offers States Incentives for Offshore Oil, Gas Drilling

By Maura Reynolds

June 30, 2006 12 AM PT

Times Staff Writer

WASHINGTON — Spurred in part by higher energy prices, the House of Representatives voted Thursday to in effect rescind a decades-old federal moratorium on offshore drilling for oil and gas, a move proponents hope will be the first step toward opening the outer continental shelf to more fuel exploration.

The bill, passed by a vote of 232 to 187, would permit states that agree to offshore drilling to share in the royalties from the leases, thereby creating a financial incentive to spur development.

Gov. Arnold Schwarzenegger has expressed strong opposition to the House measure, saying that the “impacts of new offshore oil and gas leasing and development off the California coast are unacceptable.”

Supporters said the measure would give states control over their shorelines and an opportunity to debate the balance between energy needs and coastal protection.

“Any state will be able to stop production from occurring within 100 miles of its shores should it choose to do so,” said Rep. Shelley Moore Capito (R-W.Va.), a co-sponsor of the bill. “If state officials decide to allow production, they will share in the royalties.”

Opponents argued that sending royalties to states that permit drilling would rob the federal government of billions of dollars in revenue, and would in effect transfer billions out of the federal budget to four Gulf states that already permit offshore drilling.

“This legislation tempts states to sell off their natural heritage by presenting a false choice between federal dollars and their coastlines,” said Rep. Doris Matsui (D-Sacramento), who voted against the bill. “Even worse, the closer to shore a cash-strapped state allows drilling, the more money it stands to receive. In other words, the more intrusive the drilling, the larger the payoff.”

It is not clear how much support the legislation may receive in the Senate, where a more modest bill -- permitting drilling in just one area more than 100 miles off the Florida coast -- has been stalled because of the threat of a filibuster from coastal-state senators.

Energy issues tend to align coastal lawmakers against those from inland and oil-producing states, regardless of party affiliation.

Generally, California and Florida lawmakers have opposed offshore drilling. However, that alignment has begun to crumble under the pressure of high oil prices.

For example, Rep. Jerry Lewis (R-Redlands) had previously opposed drilling, but he has changed his stance because of high pump prices.

“In the past, he had felt it has not been economically feasible or necessary and he saw no reason to create this potential environmental problem,” said Lewis spokesman Jim Specht. “Now, in our current situation, he feels it’s time to take a look at this situation.”

California lawmakers voted largely along party lines, with Republicans in favor and Democrats opposed. Only two Republicans voted against the bill -- Reps. Mary Bono of Palm Springs and John Campbell of Irvine. Just one Democrat, Rep. Jim Costa of Fresno, voted for it.

Overall, 40 Democrats joined with 192 Republicans to pass the bill; 31 Republicans joined 155 Democrats and one independent in voting against it. Fourteen lawmakers were absent or did not vote.

The legislation -- written largely by Rep. Richard W. Pombo (R-Tracy), chairman of the House Resources Committee -- received strong support from Gulf state lawmakers, especially those from Louisiana, who argued that the royalties would assist them in rebuilding coastline and wetlands destroyed by Hurricane Katrina and years of mismanagement.

“I wish we had the beaches that you have. We don’t,” complained Rep. Charlie Melancon (D-La.), who supported the bill. “We’ve lost our beaches.”

Supporters also suggested that coastal drilling would help lower consumer prices for natural gas and other fuels.

“This legislation will impact the price consumers pay at the pump,” Capito said. “Natural gas prices are set on a local, not a global, market. The United States pays the highest natural gas prices in the world, and it is no surprise that countries that make use of their own natural gas reserves pay the lowest prices.”

But opponents said that a better long-term strategy for addressing energy prices was not to increase supply, but reduce demand.

“We should be seizing this opportunity to address our energy crisis responsibly by reducing consumption, improving efficiency and embracing alternative energy sources,” said Rep. Lois Capps (D-Santa Barbara), whose district was the site of a devastating 1969 coastal oil spill. “Instead, the majority has voted to enable our country’s oil addiction and rely on 19th century energy sources to fuel a 21st century economy.”

In a letter sent this week to Pombo, Schwarzenegger boasted that energy conservation efforts had kept California’s per-capita electricity use nearly flat, whereas demand has increased nationwide by 50%.

“If California’s approach to energy conservation and efficiency standards were adopted nationwide, we might not be having this debate over the exploitation of the oil and gas resources off our coast,” Schwarzenegger said.

The Bush administration, while generally supporting opening up coastal waters to drilling, has not pressed the issue. In a statement of policy issued while the House was debating, the Office of Management and Budget expressed reservations about the effect of the House measure on the federal budget.

“Increased revenue sharing for existing leases creates no additional production incentive,” the statement said. “The administration strongly opposes the bill’s revenue-sharing provisions because of their adverse long-term consequences on the federal deficit.”

The chairman of the Senate Energy and Natural Resources Committee, Republican Pete Domenici of New Mexico, issued a statement welcoming the House action, but it fell short of endorsing the bill’s approach.

“Given the international situation right now, I think we should take all responsible steps to increase our own energy production,” he said.

If Domenici’s more limited bill passes the Senate, the two chambers would meet to negotiate a compromise.