Senate and House Fail to Reach Consensus on Gulf of Mexico Oil Drilling

Efforts to expand oil drilling in the Gulf of Mexico hinge on whether or not the House and Senate can reconcile their vastly different versions of the same bill. Negotiations to find a compromise bill have so far been unsuccessful and unofficial reports of an impasse between the U.S. Senate and House of Representatives have been welcomed by marine conservationists, local tourism groups and business groups in Florida.

Last month’s potentially massive oil discovery reported in the offshore waters of the Gulf of Mexico has Congressional lawmakers pressing the case for opening up more offshore areas to oil and gas leasing, exploration and development. The oil discovery, announced in September by Chevron and its partners, strengthens the case for enacting a version of US Outer Continental Shelf leasing reforms, S. 3711, which passed the full Senate by a 71-25 vote on August. 1. That bill needs to be reconciled in conference with the House version, HR 4761, which the House approved by a 232-187 vote on June 29.

The initial test results from a deep-water well in the Gulf of Mexico could indicate a significant oil discovery and eventually represent the nation’s biggest domestic energy find since production started from the Alaskan North Slope fields in the 1970’s. Chevron, along with Statoil ASA of Norway and Devon Energy Corporation, announced the promising oil find. Although the full potential of the field has yet to be fully defined, industry observers are saying that the discovery could boost U.S. oil and gas reserves by as much as 50 percent. The Wall Street Journal has reported that Chevron and Statoil officials had estimated that the region could hold more than 15 billion barrels of oil and gas reserves.

Reconciling the aggressive House version of the offshore drilling legislation with a more conservative Senate bill will not be easy. Also casting a long and early shadow on the negotiations is the call from Louisiana’s Governor for a marked increase in Louisiana’s share of royalties from offshore drilling. But, constituent anger over rising gasoline prices which rose to all-time highs this summer spurred, in part, both congressional houses to pass bills that would have allowed more oil exploration in the gulf. BP’s troubles in Prudhoe Bay with pipeline corrosion, effectively halving for a short period of time output from that field, also kept the issue on the front burner. The House version allows drilling much closer to Florida's coast, and also calls for the Atlantic continental shelf to be opened up to drilling. The Senate version proposes keeping drilling further offshore, and limits it to the gulf.

While there is still a chance that Congress could come up with a compromise package, it won’t happen before the November elections. Both houses are in recess until the midterm elections. The issue of drilling is simply too hot for legislators, some battling for their political lives, to expend political capital on. Frank Walker of Senator Mel Martinez’ (R-FL) office told MarEx on Wednesday that “Senator Martinez remains optimistic on the prospect of reconciling the two bills. We hope that once Congress returns, the House will be allowed a straight up-or-down vote on the Senate version.” Still, he allowed that the lame duck session in November would likely be a short one.

On the local level, Governors Mark Sanford of South Carolina, a Republican, and Mike Easley of North Carolina, a Democrat, have both come out against changing a 25-year-old moratorium on offshore drilling on the Atlantic coasts.