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Senate to vote on bill crucial to state
Its drilling royalties plan less generous than House version
Wednesday, July 26, 2006
By Bill Walsh

WASHINGTON -- Louisiana faces a critical hurdle this week in its decades-long campaign to secure a permanent stake in the billions of dollars in offshore oil and gas royalties derived from drilling in the Gulf of Mexico.

The Senate is considering legislation that would open to exploration 8.3 million acres in the eastern Gulf and cut Louisiana and three other coastal states in for a 37.5 percent share of the royalty payments private companies would be charged. Capitol Hill aides say the bill could mean $200 million to Louisiana in over the next decade and as much as $650 million annually after that as the state shares in royalty payments for the entire Gulf of Mexico.

It's not as generous as a House-passed bill, which promises more than $9 billion to Louisiana over 10 years, but it's also not as controversial. A bipartisan coalition backing the Senate bill predicted it would clear a key procedural obstacle today and win final passage Friday or Monday, at which point House and Senate negotiators will meet to hash out a compromise.

Gulf states as thieves

But opponents promise a spirited fight. Environmental groups launched an ad campaign this week featuring a menacing shark meant to portray "insatiable" oil companies as well as Gulf Coast states eager to "devour $20 billion in federal drilling revenues that belong to all Americans." The ad quotes President Truman calling a similar scheme more than 50 years ago "robbery in broad daylight."

The Republican governor of California, Arnold Schwarzenegger, voiced the fundamental concern of opponents, who are worried less about the Senate bill than the more expansive House version. The House bill would allow states to opt out of the 25-year-old drilling moratorium on the nation's east and west coasts. The Senate measure would leave the moratorium in place and prohibit drilling within 125 miles of Florida's coast through 2022. But the fear is that in negotiations with the House, the nationwide moratorium will be eroded.

Rep. Richard Pombo, R-Calif., chairman of the House Energy Committee, stoked those concerns Tuesday when he said he wouldn't settle for a final bill that is any less expansive than the one passed by the House earlier this summer.

"I'm concerned that when the (Senate) bill merges with the House bill it will lead to a weakening of the (drilling) moratorium that has protected the California coast for 25 years," Schwarzenegger said. "For anyone to think this will bring gas prices down is making a big mistake."

Election time posturing

No one is promising that the legislation would immediately reduce oil or natural gas prices, although in an election year lawmakers in both parties are eager to do something to show they are concerned with prices at the pump.

Supporters say that opening the new region in the Gulf would produce 1.2 billion barrels of oil and enough natural gas to warm 12 million households for 15 years. That has been a key selling point to many Democratic senators who are under pressure from heavy industries in their states as well as farmers, all of whom have felt the pinch of high natural gas prices.

"This piece of real estate is owned by the American people and contains more natural gas and crude oil than any piece of property owned by the United States," Sen. Pete Domenici, R-N.M., chairman of the Senate Energy Committee.

Domenici predicted the bill will get the 60 votes it needs today to invoke cloture, a procedural step necessary to move to formal consideration of the legislation. Sen. Mary Landrieu, D-La., also predicted Tuesday that the bill has the votes for final passage.

Despite their optimism, Senate roadblocks remain. Sen. Jeff Bingaman, D-N.M., opposes the revenue-sharing provisions of the legislation. He has long contended that because the drilling would occur in federal waters, the royalty payments belong to the federal Treasury, not the four coastal states.

A spirited defense

Gulf Coast senators struck back in a letter Tuesday to the Washington Post, whose editorial accused them of "robbing" the federal Treasury. They pointed out that without the revenue-sharing arrangement there would be no royalty payments because drilling would remain off limits. They also noted that the money would go toward protecting the eroding Gulf coastline, which has rendered the region vulnerable to hurricanes.

"This bill is important to the nation and it's important to Louisiana," Sen. David Vitter, R-La., said.

Another speed bump was thrown up by Sen. Bill Nelson, D-Fla., who plans to push a resolution instructing House negotiators to adopt the Senate version of the bill. Nelson is one of several senators who say they would mount a filibuster if the drilling moratorium is lifted. But Domenici said that Nelson's concerns are overblown.

"I think he's nuts," Domenici said. "We've told the senator from Florida that we will protect his state."

Democrats had hoped to alter the legislation to force U.S. auto manufacturers to improve fuel efficiency for cars, but Republican leaders indicated that they would not allow substantive amendments during debate.

A key player in the process, the White House, has yet to express its views. It opposed the revenue-sharing provisions of the House bill but has not made a statement about the narrower Senate version.

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Bill Walsh can be reached at or (202) 383-7817.