Democratic victory leaves U.S. oil drilling industry scrambling

Just a few months ago House Republicans and representatives of the energy industry were poised to rewrite a quarter century of U.S. energy policy and open the seas off the Atlantic and Pacific coasts to oil and gas drilling that environmentalists had fervently resisted.

But the Democratic victory in the midterm elections on Tuesday has changed the legislative landscape, obliterating the chances that anything close to the drilling bill passed by the House of Representatives will be enacted for years to come.

Now the proponents of drilling off U.S. beaches are reluctantly, but with great urgency, jockeying to settle for a small patch of new offshore drilling provided for in a competing – and more modest – Senate drilling bill before the Democrats take control of the House.

The new Congress will take over in January, and would have to begin legislating an offshore drilling bill from scratch.

Congressman John Peterson, a Pennsylvania Republican who is a leading proponent for expanded offshore drilling, said, “I don’t want to end up having no progress. Something is better than nothing.” He added, “With Nancy Pelosi as Speaker it will be difficult to talk about producing in the outer-continental shelf.”

Robert Slaughter, president of the National Petrochemical and Refiners Association, said, “We are going to have to be pragmatic in what is possible in this new environment.”

The Senate bill opens for bidding 8.3 million acres of federal waters in the Gulf of Mexico. Those waters, which are south of the Florida panhandle and 235 miles, or 378 kilometers, west of Tampa, are thought to hold 5.8 trillion cubic feet of natural gas and 1.3 billion barrels of crude oil.

Exxon Mobil, Shell, BP, ConocoPhillips and many independents are expected to make bids in the area known as Lease Area 181, which is attractive because it is relatively shallow and close to pipelines and other infrastructure built previously.

But the Senate bill was far too modest, many House and energy industry leaders said before the election, because it would only produce the equivalent of two months of domestic demand for oil as well as enough gas to cool and heat six million homes for 15 years. The bill also would prohibit drilling over a far greater area than the House version, including 125 miles off most of Florida’s west coast.

In contrast, the House bill passed in June would virtually eliminate a federal moratorium on offshore drilling on most of the outer continental shelf off the Atlantic and Pacific coasts that has been in place since 1982.

Industry officials said drilling off the two coasts would add enormous amounts of oil and gas to the national inventory over many years. The exact amount of oil and gas in those areas are not known because there has been little surveying in recent years.

Brian Kennedy, deputy chief of staff for the House Committee on Resources, conceded that there was now no chance of expanding offshore drilling at anything close to what the House had hoped for. “The supply side of the argument has been lost,” he said.

Before all the ballots from the midterm elections were even counted, lobbyists for big oil and manufacturing groups began pressing congressional leaders and the White House to enact a bill passed by the Senate in August and discard most if not all of a far more ambitious House bill.

Industry officials said the lobbying campaign actually began several weeks ago when it became clear that Democrats had a good chance of taking the House.

Leaders of the oil and gas industries, as well as manufacturers and chemical, forestry and paper businesses, are lobbying the White House and Congressman John Boehner of Ohio, the outgoing Republican majority leader, to convince House Republicans to either pass the Senate version or tinker with it at a minimum.

Business leaders say they are arguing that as hard as it was to convince the Senate to go along with any major expansion of offshore drilling, it is now impossible to get anything better than the Senate bill.

“It’s a matter of being pragmatic,” said Dave Parker, president of the American Gas Association, which represents utilities. “The Republicans who had thought they would retain control basically now have one option which is to accept the Senate passed version.”

Parker added, “We will use every opportunity we can between now and when the Congress adjourns to get the House to back the Senate bill to gain access to this supply that will benefit American consumers.”

Congressman Peterson said he still held out hope that the Senate bill could be expanded a bit by giving one or two states the right to opt out of the coastal drilling moratorium or allowing drilling as far as 100 miles off shore.