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Royal Dutch Shell Plc .com: Proposal to end offshore drilling ban advances


Clears House committee, faces likely filibuster in the Senate

Updated: 11:18 a.m. ET June 27, 2006

Legislation that would end a quarter-century ban on drilling in most of the Outer Continental Shelf advanced in the House on Wednesday. The measure would allow oil and gas development in restricted offshore waters unless a state prohibited it.

The House Resources Committee approved the legislation in 29-9 vote, and its sponsors say it has a good chance of being approved by the full House

But the bill’s prospects in the Senate are poor as Florida’s two senators — as well as others from coastal states — have threatened to filibuster any legislation that would end the drilling moratorium in most coastal waters outside the western Gulf of Mexico.

Waters within 50 miles of shore would still be protected by the House bill. But oil and gas drilling would be allowed in areas beyond that unless a state’s legislature and governor act to preserve the ban.

The House bill also seeks to force oil companies to renegotiate some 1990-era offshore leasing contracts in which the government mistakenly allowed a loophole that lets the companies avoid royalty payments.

The leases involve deep water areas of the western Gulf of Mexico.

The bill would impose a $9 a barrel fee on oil companies seeking new offshore oil drilling leases unless they agree to renegotiate the flawed 1998-99 leases.

The royalty issue also was the focus of a second House committee hearing on Wednesday where executives from several major oil companies said they were willing to discuss changes in the 1998-99 leases that would correct the error.

“It’s time to resolve this issue,” John Hofmeister, president of Shell Oil Co., told the House Government Reform subcommittee on energy and resources.

Executives from Chevron Corp., and ConocoPhillips Co., also said they are prepared to discussed changes in the 1990s leases. But Exxon Mobil Corp., said it opposed renegotiating the contracts and an executive from Kerr McGee Corp., a major gas producer, said the issue should be left to the courts.

The Interior Department omitted language in the 1998-99 leases that would have required royalty payments on oil and gas if prices reached a certain level. Since then, oil and gas prices have soared well beyond the trigger, but oil companies are not required to pay royalties because of the omitted language. Some congressional estimates have put the loss to the government at up to $10 billion over the life of the leases.

A congressional drilling moratorium outside the western Gulf has been in effect for 85 percent of U.S. coastal waters since 1981, approved each year by Congress. But there has been growing pressure in Congress to lift the bans and gain access to offshore oil and gas resources.

The bill, pushed by House Resources Chairman Richard Pombo, R-Calif., would be the latest attempt to open more of the Outer Continental Shelf to drilling.

Current restrictions “are based on the false notion that energy production and environmental protection were mutually exclusive,” argued Pombo. He chastised lawmakers opposed to the bill, saying they “are opposed to any energy production … no matter where it is or how it is done.”

Pombo and other drilling advocates emphasized that the bill would permanently protect waters within 50 miles of shore — instead of relying on annual congressional action — and would give states the opportunity to protect waters up to 100 miles from shore.

However, the opponents — while in a clear minority on the committee — didn’t buy the argument.

“This is pretty much a complete rollback of drilling protection of our coasts,” complained Rep. Edward Markey, D-Mass., He said the bill amounts to bribing states by offering large shares of royalty payments.

Rep. Frank Pallone, D-N.J., said he was concerned that his state’s coastal wasters — and a multibillion tourist business — could be harmed by a neighboring state’s decision to allow drilling.

Also, said Pallone, state legislatures and governors every five years would have to make a declaration to continue protecting their own waters — something that could be difficult.

The bill was worked out with the cooperation of a number of Republican lawmakers from Florida, where talk of offshore drilling has sparked a political firestorm.

Rep. Adam Putnam, R-Fla., strongly endorsed the legislation because it assures protection of waters up to 100 miles from shore.

As the Resources Committee debated the legislation, however, five Florida lawmakers held a news conference denouncing the bill.

It puts Floridians “on the short end of the stick facing disastrous legislation that threatens our state’s environment and economic well being,” declared Rep. Robert Wexler, D-Fla. “Imagine what a disaster like Exxon Valdez would do to Florida’s coast. The consequences are horrifying,” said Wexler, alluding to the oil tanker accident that devastated Alaska’s Prince William Sound in 1989.

© 2006 The Associated Press.

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