Senate to vote on allowing offshore drilling

With war raging in an oil-rich part of the world, interest in tapping domestic sources of the precious resource is becoming more acute. And as Congress heads off on its August break this week, that interest centers on the waters off the US coast.

At stake is a moratorium – renewed annually by Congress since 1981 – that protects much of the Atlantic and Pacific outer continental shelf (OCS) from oil and gas drilling. Now lawmakers are moving to open more coastal areas to energy development. The House passed a bill favoring this, and the Senate is poised to do so as well.

As with the debate over oil drilling in Alaska's Arctic National Wildlife Refuge, the OCS is largely a partisan issue. But it's also a regional one.

California Gov. Arnold Schwarzenegger (R) has joined the state's two Democratic US senators Barbara Boxer and Dianne Feinstein in opposing any legislation that might cause a repeat of the 1969 oil spill from a Union Oil Company platform six miles off Santa Barbara's coast. That event spread 200,000 gallons of crude oil over 800 square miles and killed thousands of seals, dolphins, and birds. It was the prime motivator of the moratorium.

"When I campaigned for governor, I promised the people of California that I would do everything I can to protect our coastline," Governor Schwarzenegger said in a conference call with reporters last week. "There will be no offshore oil drilling in our state, and I will fight against it."

Although bills in Congress do not address the Pacific Coast, he said, "They could lead to the weakening of the moratorium that has protected the California coast for 25 years."

Earlier this year, the Bush administration proposed a five-year plan for opening up some parts of the Gulf of Mexico and tracts off the coasts of Alaska and Virginia.

A bill recently passed in the House allows states to lift the moratorium and gives large royalties to states that provide for oil and gas development off their coasts. The Senate bill, now expected to be voted on Monday or Tuesday, extends the federal moratorium in some areas, including the coast of California, and also offers lucrative state royalties for drilling in other areas off the East Coast and in the Gulf of Mexico.

Both bills would open up 8 million more acres of the Gulf of Mexico to oil and gas exploration.

Royalties already give significant revenues to states such as Louisiana, where the governor and lawmakers have been urging Congress to increase state royalties that are now typically less than 5 percent.

Advocates of offshore drilling point to the energy potential in that 3 mile to 200 mile band off the US coastline: ten years worth of oil demand and 30 years of natural gas, according to the American Petroleum Institute and the American Gas Association industry groups.

"We believe this could be done safely and be great for the country economically," Sen. Jeff Sessions (R) of Alabama said during Senate debate last week. His state would benefit from increased royalties.

Current trends help explain the push to drill offshore.

The Energy Information Administration reported last month that world energy consumption is projected to increase by 71 percent from 2003 to 2030.

"To meet the projected increase in world oil demand ... total petroleum supply in 2030 will need to be 38 million barrels per day higher than the 2003 level," the federal agency reported.

The problem for the US is that while it is the largest consumer of oil (about one-fourth the world total), it has only about 3 percent of world oil reserves. Even so, the growing need and advanced means of producing the oil make it worth the effort, advocates say.

"Technology has made energy development of supply in the OCS safe, and new technologies are making it even safer," John Engler president of National Association of Manufacturers said in a statement last week.

Others disagree.

"The idea that we are going to drill our way out of the problem is wrong," says Carol Browner, head of the Environmental Protection Agency in the Clinton administration. Instead, she and others associated with the Center for American Progress – former Secretary of State Madeleine Albright and former Clinton White House chief of staff John Podesta among them – promote developing biofuels and other technologies.

Royalties and oil company profits add to the debate.

"With the federal debt mounting and oil and gas prices nearing record highs, reducing federal earnings on our natural resource royalties does not make fiscal sense," Steve Ellis, vice president of the watchdog group Taxpayers for Common Sense Action wrote to all members of the Senate last week.

The White House shares the concern. The Office of Management and Budget warned last month that state royalties in the House bill, 64 percent of total government royalties, could result in "adverse long-term consequences on the federal deficit."

Meanwhile, the consumer advocacy group Public Citizen points out that oil companies "are raking in record profits." During the first three months of this year, the five largest companies – ExxonMobil, Chevron, Conoco Phillips, BP, and Shell – earned $27 billion in profits. Last week, several major oil companies reported large second-quarter earnings as well.