Admin would open 2M acres of Gulf to drilling

The Bush administration yesterday moved to open an area off Florida’s coast to oil and gas drilling after an aggressive lobbying push by energy companies and industries that are crimped by high fuel costs.

The Bush administration yesterday moved to open an area off Florida’s coast to oil and gas drilling after an aggressive lobbying push by energy companies and industries that are crimped by high fuel costs.

The Interior Department’s draft five-year plan, which would set federal oil and gas policy from 2007 to 2012, would open 2 million acres in the Gulf of Mexico, part of an area known as Lease 181, if approved.

Sen. Bill Nelson, a Florida Democrat running for reelection, criticized the plan, saying if it would amount to the “largest expansion of drilling off Florida’s coast in the country’s history.”

But business groups welcomed the effort, as they called on both the administration and Congress to open a wider swath of seabed to oil and gas producers to ease an energy crunch.

“The five-year proposed program recognizes that the nation must expand the development of offshore energy resources,” said Mike Linn, the chairman of the Independent Petroleum Association of America.

Interior’s plan would also study reserves off the coast of Virginia. Lawmakers in that state have expressed interest in getting out of a federal ban on drilling for a chunk of oil and gas royalties. The plan also calls for further study of an area south of Lease 181, a wide swath in the eastern Gulf.

The plan would prohibit drilling within 100 miles of Florida’s coast, to minimize the potential damage of an oil spill.

Before the release of the Interior plan, four members of the Senate Energy and Natural Resources Committee, two Republicans and two Democrats, introduced a bill to direct Interior to allow drilling in Lease 181.

Sens. Pete Domenici (R-N.M.) and Jeff Bingaman (D-N.M.), respectively the chairman and ranking member of the Senate Energy and Natural Resources Committee, and by Sens. Jim Talent (R-Mo.) and Byron Dorgan (D-N.D.) introduced the bill.

It would open around 4 million acres in the Gulf to drilling, or roughly twice the amount Interior’s plan suggests.

Both the bill and the draft Interior plan come after coordinated, years-long lobbying to push the government to open new areas to drilling, as prices for oil and natural gas have risen sharply.

Natural gas prices are triple what they were in the late 1990s, and manufacturers say they have lost thousands of jobs as companies moved operations overseas where fuel prices were lower.

The warm winter has lowered prices for natural gas from the record heights reached immediately after Hurricanes Katrina and Rita.

But chemical and agribusiness companies continue to press Congress and the administration to allow new drilling.

Chemical-company executives met with Congress members last week and urged them to adopt pro-production policies that would increase natural gas supplies. The American Chemistry Council, the main trade group for the chemical and plastics industries, estimates that as many as 100,000 jobs have been shifted overseas because of the relatively high fuel costs over the past four years.

The area marked for new drilling is expected to have an estimated 5 trillion cubic feet of natural-gas reserves, enough to heat 5 million homes for 15 years, according to the American Gas Association.

But while drilling supporters seem to have momentum, lobbyists acknowledge that opening new areas to drilling remains an uphill battle, especially in an election year when neither party is eager to take steps that could motivate the opposition.

Nelson said he believed that he and Sen. Mel Martinez (R-Fla.), who has opposed other efforts to open Lease 181 to drilling, could block the bill.

Lease 181 does not fall under the federal moratoriums on oil and gas drilling in effect for most of the nation’s coastline.

The Domenici-Bingaman bill requires that drilling be allowed there within a year of enactment. It likely would lead to drilling more quickly than the administration could act on its own.

Paul Cicio, executive director of the Industrial Energy Consumers of America, said Lease 181 offered the country’s “greatest near-term supply option” because of its closeness to existing production infrastructure farther west in the Gulf along Louisiana’s and Texas’s coastlines, where much of the nation’s energy infrastructure is located.

The group also plans a fly-in day with some of its members next week.

Jack Gerard, president of the ACC, called the Domenici-Bingaman bill a step in the right direction, but he also said additional measures would be needed to cut prices for natural gas.

Gas prices have fallen since the hurricanes, which did widespread damage to energy facilities in the Gulf coast, but Domenici noted that prices have climbed steadily since 2000.

“This bill will make a real difference in the prices people pay to heat their homes and run their businesses,” Domenici said.

While a great portion of the country’s supply of natural gas is devoted to providing electricity and heat to homes, chemical and fertilizer companies have been particularly aggressive in their push for allowing more drilling because they rely on natural gas as a feedstock for their products.

The affect on agriculture in particular has increased support for more drilling from members from the Midwest.

After Hurricanes Katrina and Rita damaged energy production and distribution facilities along the Gulf Coast, natural-gas prices shot higher than $15 per million Btu. Those prices are now around $8 per million Btu, still three times the market price for the fuel in the late 1990s.

Florida’s senators and most of its House members have opposed previous efforts to open Lease 181, fearing that a drilling accident could dump a gooey black mess on the state’s shoreline and hurt the state’s lucrative tourism industry.

Nelson and Sen. Mel Martinez, a Republican, have introduced a measure that would open up a smaller sliver of the Gulf “far off the state’s coast,” according to a news release.

The Domenici-Bingaman bill would allow drilling 100 miles off the Florida shoreline. Nelson and Martinez’s bill would push it to 260 miles, and it would permanently ban drilling in Lease 181.

One lobbyist for the chemical industry estimated that the Nelson-Martinez bill would produce about one-sixth the gas that the Domenici-Bingaman bill would.

But the lobbyist acknowledged that warm weather hasn’t helped his cause. Pro-drilling lobbyists had hoped a cold spell would have brought another constituency to the cause: homeowners livid at their high heating costs.

Instead, the United States had its warmest January on record. The average temperature of 39.5 degrees last month was 8.5 degrees higher than the mean temperature for January, using data collected from 1895 to 2005, according to the National Oceanic Atmospheric Administration, which keeps track of weather data.