Tuesday, March 17, 2009

Natural Gas Exploration Up Before the Hill

Published: March 16, 2009 - New York Times

Senior Interior Department officials will be on Capitol Hill tomorrow to discuss oil and gas drilling and renewable energy development on land and offshore as momentum builds toward possible comprehensive enerIn the House, the Energy and Mineral Resources Subcommittee will hold the latest in a series of hearings on petroleum development on the outer continental shelf, or OCS, that will feature an official with the Minerals Management Service, Interior's acting inspector general and a Government Accountability Office expert.

The House hearing is expected to explore allegations that oil companies are failing to produce energy from tens of millions of acres of existing leases on federal lands and waters even as the industry is pressing for new areas to be made available, among other OCS drilling issues.

Interior Secretary Ken Salazar is slated to appear tomorrow before the Senate Energy and Natural Resources Committee, where Chairman Jeff Bingaman (D-N.M.) plans to introduce and mark up a broad-based energy bill before the Easter recess. Bingaman's bill is expected to cover a range of energy efficiency, transmission, research and development issues.

But it remains unclear how Bingaman will address regulations that cover oil and natural gas on land or offshore. "The comprehensive energy bill we are working on will have an oil and gas supply component to it," said Bingaman spokesman Bill Wicker, declining to provide further details.

It appears unlikely the bill will try and redraw lines regarding where leasing can and cannot occur, which is in flux following the expiration of OCS leasing bans last year.

The Obama administration is still formulating its position on where new leasing may be allowed. In February, Salazar delayed a Bush-era proposal to allow much wider coastal leasing to study the issue further, while Bingaman in January said he would "like to know what their view is before we settle on ours."

Beyond leasing questions, a host of royalty and other issues surrounding oil and gas development are in play.

President Obama's fiscal 2010 budget plan calls for several changes, including new fees on nonproducing Gulf of Mexico leases, part of a "use it or lose it" strategy Democrats say is needed to encourage production from acreage already offered for leasing.

House Natural Resources Chairman Nick Rahall (D-W.Va.) has championed plans that would prevent companies from obtaining new federal leases unless they are already producing from their current leases or "diligently developing" them.

Industry officials have derided the idea as a gimmick. A top Chevron Corp. executive, in testimony to Rahall's committee last month, said the "existing regulatory process and basic economics ensure that leases are developed in a diligent manner."

Other plans in Obama's budget include new fees on companies to fund processing of permits for oil and gas drilling on public lands, and increasing the return from oil and gas production by revising the royalty system and adjusting rates.

Tough questions

Salazar will likely face some tough questions about onshore energy development from Republicans, who say his early moves as secretary have all been aimed at slowing production.

In early February, Interior canceled oil and gas leases on 77 parcels of federal land in Utah and launched a review to see whether they were appropriate for leasing. Also last month, Salazar halted Bush administration oil shale research and development leasing efforts, saying he would offer "new and fair" lease terms after seeking public input.

Salazar is still reviewing commercial oil shale regulations for millions of acres in the West that were put in place months before Bush left office, but he has been openly critical of them.

Senate Energy and Natural Resources Committee ranking member Lisa Murkowski (R-Alaska) used the confirmation hearing for Interior deputy secretary nominee David Hayes last week to rail against Obama's energy policies, saying the administration's 2010 budget blueprint is "a war on domestic production." She said punishing the oil and gas industry will not bring the age of renewable energy any faster.gy bills in the House and Senate.

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