A Political Cliffhanger

Jane Van Ryan
Posted June 12, 2009

As API President and CEO Jack Gerard noted a couple of days ago, the U.S. Senate Energy and Natural Resources Committee voted 13-10 on Tuesday to open the eastern Gulf of Mexico to oil and natural gas development.

This should be welcome news to American consumers. If this amendment is enacted as part of the Senate's proposed energy bill, the United States finally will be able to harness the power of the area's abundant energy resources that have been off-limits for many years. It's estimated that the eastern Gulf contains 3.7 billion barrels of oil and 21.5 trillion cubic feet of natural gas, which are huge deposits by any measure. Producing the energy will create jobs, generate revenues for government and make more domestic energy available to consumers.

But it's not known whether the drilling amendment will survive the legislative process and remain in the bill. The so-called Dorgan Amendment, named for its sponsor Sen. Byron Dorgan, (D-ND), is facing tough challenges in the days ahead.

Kevin Book of ClearView Energy Partners, LLC, says despite the vote, he still isn't seeing "a true reversal of Congressional opposition to new drilling in previously off-limits areas." Kevin, a regular guest on our podcasts, believes the Dorgan Amendment has several hurdles to clear before passage. One of the largest obstacles is the proposed House energy bill, which would change the way federal onshore and offshore lands are leased for energy development and raise fees on energy production. Kevin says the House bill might make new offshore investment less attractive.

Another stumbling block could be the issue of revenue sharing with states. On the same day that the Dorgan Amendment was approved, the Senate committee rejected a proposal to share a portion of the federal government's proceeds from eastern Gulf energy development with the surrounding states. Sponsor Sen. Mary Landrieu, (D-LA), argued that Florida and other nearby states might oppose drilling unless they could reap some of the financial rewards.

Then there is the question of whether Florida's residents and lawmakers want drilling off their western coastline. A poll conducted by Harris Interactive for API last July indicated that 67 percent of Florida's registered voters supported offshore energy development. And early last month, the Florida House voted in favor of offshore drilling.

Still, Florida's U.S. Sen. Bill Nelson, (D-FL), says he'll fight the Dorgan Amendment with a filibuster, if necessary. "We're just simply not going to let this happen," he told reporters, according to the Miami Herald.

So, how will this chapter in the ongoing offshore drilling saga end? It's much too early to say. But Kevin Book expects it to be a "cliffhanger."