The Week in Washington Energy Policy

by William Yeatman on July 21, 2008

President George W. Bush this week rescinded the executive order that his father President George Bush signed in 1990 prohibiting oil and gas exploration in 85% percent of the Outer Continental Shelf surrounding the lower 48 States.  He then challenged Congress to remove the congressional moratorium on oil and gas exploration in those OCS waters that has been in place since 1982.  He should have done this a long time ago, but now it’s up to Congress to drop the moratorium and then up to the next administration to put some offshore leases up for bid.  Don’t hold your breath (see next four items).

House Appropriations Committee Chairman David Obey (D-Wisc.) said this week that he didn’t see any point in trying to pass appropriations bills for the various departments of government until the Republicans on the committee led by Rep. John Peterson (R-Penna.) dropped their demands to hold a vote on lifting the congressional moratorium on OCS oil and gas exploration.  The fact is that the House Democratic leadership opposes increasing domestic oil production and favors importing more and more of the oil that we consume.  They also support higher gasoline prices in order to reduce greenhouse gas emissions, but of course that is not something they can say out loud.

The House again failed to pass the Drill Responsibly in Leased Lands (or DRILL) Act, H. R. 6515, by a vote of 244 to 173.  The Democratic leadership brought the bill up under suspension of the rules, which requires a two-thirds vote.  They did that so Republicans could not offer an amendment to open OCS areas to oil and gas exploration.  The DRILL Act would prevent oil companies from bidding on new federal leases unless they were producing oil on the leases that they already hold.  With oil at $140 a barrel, the oil companies have every incentive to produce as much oil on the leases they have already paid for as they can.  But there are obstacles: it takes years to get through the permitting process before you can start drilling and then environmental pressure groups file lawsuits, which can take years to resolve.  And even after exploratory wells are drilled, there is another frequent obstacle to producing oil: no oil is discovered.  See Oil Leasing 101 below.

Senate Majority Leader Harry Reid (D-Nev.) is going to try to bring a bill to the Senate floor next Tuesday that would go after oil speculators who, it is claimed, are driving up the price of oil.  Republican leaders are demanding that votes be allowed on amendments to open OCS areas to oil and gas exploration, so my guess is that it’s unlikely that Reid will move forward.  I don’t know what role speculators have played in driving up the price of oil, but there is a simple way to end any speculative bubble: open up federal OCS areas and ANWR to oil and gas exploration.  The prospect of increased oil production would bankrupt speculators who have bet the farm on ever higher oil prices.      

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