Obama Drilling Plan May Aid Democrats on Climate Bill (Update1)
By Jim Efstathiou Jr. and Kim Chipman
April 1 (Bloomberg) -- President Barack Obama’s pledge to expand offshore oil and natural-gas drilling may help Democrats deliver legislation that regulates carbon dioxide emissions before any fuel is produced.
The president wants to permit exploration in parts of the Gulf of Mexico and the Atlantic Ocean not previously offered to companies such as Exxon Mobil Corp., the largest U.S. energy producer. Obama’s offer yesterday doesn’t guarantee access to the new areas and needs support from Congress and the states, said Tom Moskitis, a spokesman for the American Gas Association, a Washington-based trade group whose directors include representatives of Xcel Energy Inc. and El Paso Corp.
Obama had highlighted offshore drilling as a prospect for compromise with Republicans on energy and climate legislation Jan. 27 in his State of the Union address. Now, the administration’s proposal may bring additional lawmakers onboard as efforts are made in the Senate to craft a new version of the stalled measure.
“The cynical view is that this is an attempt to buy a few more votes for a bill that would introduce carbon regulation,” Moskitis said. “I don’t know if I would go that far, but today’s announcement does not guarantee that oil and gas leasing will indeed take place in the new frontier areas on the outer continental shelf.”
The Obama proposal would allow drilling 50 miles off the Virginia coast in what would be the first Atlantic oil and gas sale in more than two decades, and reduce a buffer zone off Florida’s west coast from 235 miles (378 kilometers) to 125 miles. It would cancel future lease sales for Alaska’s Bristol Bay and delay work in other Alaska waters for further study.
Congressional Compromise
Obama’s plan could be reshaped as Senators John Kerry, a Massachusetts Democrat, Lindsey Graham, a South Carolina Republican, and Joseph Lieberman, a Connecticut independent, seek to craft climate legislation after a House-passed approach stalled, said Kevin Book, a Washington-based managing director for Clearview Energy Partners LLC. The compromise, which Kerry said could be introduced the week of April 22, may give states more say over offshore drilling.
“This sets a baseline which is easy to beat,” Book said of Obama’s plan in an interview. “So if Congress comes in with anything above and beyond that baseline, it’s going to generate money and make the climate bill look prettier.”
Obama’s drilling plan drew a mix of reactions among both proponents and opponents of Obama’s energy policies.
‘Not Far Enough’
“Some people are saying we went too far; others are saying we didn’t go far enough,” Carol Browner, Obama’s chief adviser on energy and climate policy, said in an interview yesterday with Bloomberg Television.
House Republican Leader John Boehner of Ohio said “it made no sense” to keep the Pacific Coast, Alaska and parts of the Gulf of Mexico under “lock and key” when gas prices are rising.
Oil prices have swung from less than $20 a barrel in 2001 to a record $147.27 in July 2008 as investors bet demand growth would outstrip new fields. Crude, which surged 1.7 percent yesterday to a 17-month high, extended the gains, climbing $1.14, or 1.4 percent, to $84.90 at 11:44 a.m. in New York trading.
T. Boone Pickens, the billionaire energy investor, endorsed the offshore drilling plan and cast doubt on how much fuel can be produced in the near term. Pickens said the market’s reaction had little to do with Obama’s announcement.
“Whatever dent it makes will not be for 10 years,” Pickens said in a Bloomberg Television interview broadcast today. “The market does not pay any attention to something 10 years out.”
Republicans, Environmentalists
Representative Joe Barton, a Texas Republican and ranking member of the Energy and Commerce Committee, said the proposal is “a step in the right direction,” and Senator Lisa Murkowski, an Alaska Republican, praised the decision to let companies proceed with existing leases in Alaska’s Chukchi and Beaufort seas.
Environmental groups that usually back the president also split in their reactions.
Obama’s drilling plan threatens “beaches, wildlife and tourism with oil spills and pollution,” Anna Aurilio, director of the Washington office of Environment America, said in a statement.
The Washington-based World Wildlife Fund welcomed the decision to shield Bristol Bay, about 375 miles southwest of Anchorage and home to the world’s largest wild sockeye salmon runs, and urged the administration to declare the area permanently off limits.
‘Meaningful’ Path
Among energy producers, Exxon Mobil said Obama offered a “meaningful” potential path toward adding production, said Cynthia Bergman, a spokeswoman for the Irving, Texas-based producer. “We support measures that align our economic-recovery and energy-security goals,” she said.
Houston-based ConocoPhillips, the third-largest U.S. oil company, expects to be allowed to proceed with exploration on its Chukchi Sea leases off the northwestern Alaska coast, spokesman Charlie Rowton said. The company invested $506 million in February 2008 and its first well is scheduled to be drilled in 2012, he said.
In December, Interior Secretary Ken Salazar conditionally approved Royal Dutch Shell Plc’s plan to drill three exploratory wells in the Chukchi Sea after the company spent $2.1 billion. The Chukchi Sea is estimated to hold 15 billion barrels of recoverable oil and 77 trillion cubic feet of recoverable natural gas reserves.
Gulf Moratorium
Obama needs congressional support to lift the moratorium on drilling close to Florida’s west coast, which is in place until 2022. The administration hasn’t sent language to Congress for the change, Republican members of the House Natural Resources Committee said in a statement.
Obama proposes to change a 2007-2012 offshore plan while devising a new blueprint for drilling through 2017. In announcing the plan at Andrews Air Force Base in Maryland, Obama warned that the U.S. may fall behind nations such as China and Germany in a race to lead in development of clean energy.
“This announcement is part of a broader strategy that will move us from an economy that runs on fossil fuels and foreign oil to one that relies more on homegrown fuels and clean energy,” the president said. “The answer is not drilling everywhere all the time.”
The administration didn’t spell out any plan to share revenue from offshore leasing with nearby states. Senator Mary Landrieu, a Louisiana Democrat, is among lawmakers who have said they won’t support climate-change legislation unless it gives states a substantial share of the proceeds from drilling.
State Control
“The governors really do control their coastlines to the point where the federal waters won’t be worth the companies’ time if the states don’t want to go along with it,” Book said.
Salazar said Obama’s plan to study exploration in the Atlantic south of Delaware doesn’t “necessarily mean there will be development there.” Opposition by states from New Jersey to Maine ensures they will be exempt from development plans under the new proposals, he said.
Offshore drilling has been a subject of dispute for years. Obama opposed more drilling as a presidential candidate. In August 2008, he said he would support a proposal for increased exploration as long as it was “careful and responsible.”
Republicans, led by vice presidential nominee Sarah Palin, the former Alaska governor, called for more exploration with chants of “drill, baby, drill.”
Obama’s approach is more “drill where it’s responsible, promote efficiency, invest in clean energy and create jobs,” White House spokesman Bill Burton said yesterday. “I know that doesn’t fit on a t-shirt quite as well, but that’s a lot more about what President Obama thinks is the right direction.”
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