‘Dry Hole’ Energy Bill Passes Democrat-Led House

Oil and gas industry experts described it as a “dry hole” energy bill that “does little to increase oil and natural gas supplies and, in fact, may well result in less domestic production, which would make America more dependent on foreign energy.”  Regardless, the Democrat bill that purports to allow more offshore drilling passed by a vote of 236-189 in the U.S. House of Representatives.

The plan, according to an American Petroleum Institute statement issued prior to the vote last night, does more harm than good as follows:

• It guarantees $18 billion in new taxes on the industry, which would discourage new energy production.

• It offers the illusion of increased offshore access but with no guarantee that energy would ever be produced in new areas on the Outer Continental Shelf.

• It all but guarantees that states will not agree to allow drilling off their coasts since the legislation does not permit states to share revenue derived from lease bids and production royalties.  The arbitrary 50-mile buffer puts off-limits some of the most potentially promising areas for oil and natural gas production.  In fact, under this bill, 15 billion barrels, or more than 80 percent of the OCS oil resources under current moratoria, would remain off-limits.

• The “conservation of resource fee,” which proponents acknowledge is designed to force certain OCS leaseholders to renegotiate the terms of their lease contracts with the government, raises serious Constitutional and contract law concerns and likely would further reduce investment and lower domestic oil and natural gas production.  Imposing this fee also would undermine the U.S. reputation as being a safe place to do business, putting our country in the same league as nations that abrogate contracts at will.

Though API stood “ready to work with the Congress towards policies that encourage all forms of domestic energy production, while avoiding taxes, fees and penalties that run counter to our shared goal of increased energy security,” it’s apparent through the House vote that Speaker Nancy Pelosi and others in the Democrat-controlled House are content playing politics with the nation’s energy future.

According to a Wall Street Journal article this morning, it appears two slivers of hope still remain for those in favor of real solutions to safeguard that energy future:

The White House announced late Tuesday that Mr. Bush’s senior advisors would recommend he veto the House measure, should it reach his desk. The White House cited the royalty issue among its objections. The Senate appears unlikely to pass a drilling proposal, based on interviews with lawmakers in recent days.

Developing…

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UPDATE:  The Bush Administration offered it's opinion of the House Democrats' actions. Below are the highlights:

• The Administration strongly opposes H.R. 6899.  At a time when American families are in need of genuine relief from the effects of high fuel prices, this bill purports to open access to American energy sources while in reality taking actions to stifle development.

• If H.R. 6899 were presented to the President, his senior advisors would recommend that he veto the bill.

• Including these poison pills further demonstrates a lack of seriousness about expanding access to the vast domestic energy resources in the OCS.

Click here to view the entire statement issued by the White House this morning.

-- Bob McCarty Writes