Democrats' offshore drilling plan would give states nothing

WASHINGTON

Even as House Democratic leaders handed Republicans a symbolic victory this week in their long fight for new offshore oil development, critics charged that the fine print in the plan probably will continue to keep drillers out of the Atlantic.

While lifting a 25-year federal ban on most offshore oil and natural gas drilling, the legislation would block Virginia and other coastal states from sharing in a $2.6 trillion bonanza of tax revenue expected to flow from offshore fields. A Senate bill still in the works would give states part of the money.

Unless states stand to profit from offshore development, they almost surely would exercise their right under the bill to block any drilling within 100 miles of their shores, critics of the House initiative charged.

"With no financial incentive, no state will choose to 'opt in,' " House Republican leader John A. Boehner of Ohio told reporters, "and this bill will result in little or no new American energy production."

Rep. Thelma Drake, a Norfolk Republican who has taken a prominent role among pro-drilling forces, was even more critical.

The new bill "appears to be little more than a political ploy," Drake charged in a prepared statement. Democrats intend to "tell the American people that they voted to go after more American energy while winking to the environmentalists to say that this increased production will never happen," she said.

House Speaker Nancy Pelosi told reporters that sharing royalties with the states would force Congress to overhaul the entire budget, an impossible task just three weeks before the beginning of a new fiscal year.

Pay-as-you-go rules adopted by lawmakers require them to offset any surrender of federal revenue with cuts in spending, she said.

Republicans scoffed at the explanation, noting that Democrats have not invoked "pay-go" in signing off a multi billion-dollar bailout of mortgage giants Freddie Mac and Fannie Mae.

The tax revenues in the Democratic plan actually would be royalties paid by oil companies as part of their leasing of offshore areas. If the take was shared with coastal states, Virginia could realize $200 million annually, state Sen. Frank Wagner, a Virginia Beach Republican, has estimated.

Wagner, the state's most vocal advocate for drilling, said Thursday that offshore oil would be a boon to Virginia even if the state is cut out of the royalties. Building the infrastructure ashore needed to support drilling at sea would create thousands of new jobs for Virginians and add valuable properties to local tax rolls, Wagner said.

"I'd like to see anything pass," he added. But the House bill's omission of state royalties is "a poison pill," designed to block offshore development while seeming to permit it, Wagner said.

The federal government already allows states bordering the Gulf of Mexico to keep slightly more than one-third of the royalties paid for oil fields there.

Those payments last year totaled about $9 billion, the Government Accountability Office reported Friday.

The Democratic proposal was unveiled amid fanfare at mid-week by Pelosi, D-Calif., a longtime foe of offshore drilling. It followed weeks of Republican protests over congressional inaction on energy legislation as summertime gas prices topped $4 per gallon.

With GOP candidates nationwide running on the slogan of "Drill Here. Drill Now. Pay Less," Pelosi was under pressure from many Democrats to bring an energy bill to the floor this fall. A group of House Democrats led by Neil Abercrombie of Hawaii, a confidant of presidential nominee Barack Obama, joined in July with some Republicans to sponsor a pro-drilling bill.

Pelosi signaled her willingness to lift the ban soon after that.

She told reporters last week that she was willing to endorse drilling as part of a comprehensive effort to boost U.S. energy production, lower prices and spur the development of alternative power sources like solar and wind energy.

Pelosi called the bill a "reasonable compromise" that "will protect consumers and taxpayers with strong action to lower the price at the pump and end taxpayer giveaways to big oil. "

"It will ensure a clean, green future through energy efficiency and conservation," Pelosi said, "and it will commit America to renewable energy and help create millions of good-paying green jobs."

Abercrombie's Web site described him as "heavily involved" in developing the Democratic leadership's plan and said it will include many provisions sought by him and other pro-drilling Democrats.

But Rep. John Peterson, a Pennsylvania Republican who partnered with Abercrombie on the bill announced in July, said the new Democratic initiative "does absolutely nothing to increase the domestic production of oil and natural gas and decrease our dependence of foreign imports.

"In fact, doing nothing at all would better than supporting this legislation," Peterson added.

Democratic leaders have promised that the minority will have an opportunity to offer an alternative plan when the new Democratic bill comes to the House floor next week.

The debate could be one of the sternest tests to date of Pelosi's ability to hold Democratic members in line.

Meanwhile in the Senate, participants in a bipartisan "energy summit" continued work Friday on a package of legislation that apparently will include permission for drilling off the coasts of Virginia, Georgia and the Carolinas, as well as proposals to extend tax breaks for the development of renewable energy sources.

The Senate proposals, some of which could be voted on next week, reportedly also would open new areas in the Gulf of Mexico to drilling.

Dale Eisman, (703) 913-9872 or dale.eisman@pilotonline.com