Wednesday, April 20, 2005

Energy Bill Includes $2 Billion Incentive for Gulf Drilling

The New York Times
April 20, 2005
Energy Bill Includes $2 Billion Incentive for Gulf Drilling

WASHINGTON, April 19 - Backers of energy legislation that the House plans to take up Wednesday like to emphasize its potential benefits for consumers. It has substantial rewards for energy producers as well.

A little-noted provision backed by Representative Tom DeLay of Texas, the majority leader and an ally of the oil industry, would bypass Congress's normal spending process to funnel up to $2 billion over 10 years into research for recovering oil and gas from the deep waters of the Gulf of Mexico.

Supporters of what some lawmakers refer to as the "DeLay ultra-deep-water provision" say it is crucial to developing new technology to prevent the nation from becoming as dependent on foreign sources of natural gas as it is now for oil. The only way to undertake research of that magnitude, they said, is with a guaranteed flow of money over the long term.

Mr. DeLay's spokesman, Dan Allen, defended the move, saying, "American consumers will ultimately benefit from this provision because it will reduce our dependence on foreign energy and, more importantly, reduce personal energy costs."

But the direct spending on behalf of oil and gas companies, coming at a time when Congress is trying to tighten its belt and energy profits are up, strikes some as unjustified.

"It is really outrageous," said Jill Lancelot, president of Taxpayers for Common Sense, a budget watchdog group. "As the cost of oil is going up to consumers, the handouts to the industry are gushing forth."

The money for the research is just one of the benefits to energy companies that opponents of the measure are zeroing in on. The measure includes about $8 billion in tax breaks, most of which goes to oil and gas companies to encourage traditional domestic energy production. The United States Public Interest Research Group, an advocacy organization that opposes the energy bill, estimates that only about 5 percent of the tax advantages apply to renewable resources or energy efficiency.

Opponents intend to try to strip out some of the provisions during two days of House debate, but the energy measure is expected to pass, propelled in part by worry about rising gasoline prices.

Similar legislation has been stalled in Congress for four years despite volatile gas prices and a major power blackout along the East Coast, leaving prospects for a final legislative deal again uncertain.

Some of those following the legislation closely say the House measure has become so industry-friendly that they expect it to encounter trouble in the Senate, where a version of the legislation is developing more slowly and could be held up by a looming procedural fight over judicial nominations.

Mr. DeLay figures prominently in another potential sticking point between the House and Senate, a proposal to protect manufacturers of the gasoline additive MTBE from lawsuits over pollution. That provision was the chief reason the measure was blocked in the last session of Congress, and Mr. DeLay and Representative Joe L. Barton, another Texas Republican and chairman of the Energy and Commerce Committee, have kept the liability waiver in the new bill.

Opponents of the legislation are also trying to tie Mr. DeLay's close involvement with elements of the energy bill to heightened scrutiny of his ethical conduct. An advertisement underwritten by conservation groups that is scheduled to run Wednesday in a Capitol Hill newsletter urges a vote against what it portrays as the "MTBE-Tom DeLay bill."

Lawmakers and others say Mr. DeLay's influence clearly helped advance the deep-water research money, which has been proposed at lower amounts and which would have been subject to annual review by the appropriations committee. But the majority leader has gotten strongly behind the initiative as a potential boon to the Gulf of Mexico drilling business and as a way to increase domestic natural gas production and cut rising costs.

The energy industry has been a mainstay of Mr. DeLay's political support during his Congressional career, contributing more than $900,000 to his election campaigns since 1984, according to the organization Political MoneyLine, which monitors political fund-raising.

Under the deep-water proposal, a research consortium would receive up to $200 million a year in oil royalties over the next decade to develop new approaches to recovering gas and oil in waters deeper than 1,500 meters, or about 5,000 feet, in the central and western Gulf of Mexico, waters that oil companies believe hold huge reserves of natural gas.

C. Kyle Simpson, a former Clinton administration energy official who is a leading lobbyist on the provision, said federal help with the research was essential because smaller oil companies lacked the wherewithal to undertake it and the big companies would go in search of more accessible gas reserves overseas rather than devote resources to new research.

"If we want to maximize the use of our own domestic reserves, the government has to have some sort of incentive to get the companies to develop the technology to produce it," said Mr. Simpson, who represents the Gas Technology Institute, a research arm of the industry.

The guaranteed federal aid over 10 years is needed to attract interest in the type of long-term research that will be necessary, he said, adding that the electrical power industry and others also received direct aid in the House measure.

But Anna Aurilio, legislative director for the Public Interest Research Group, said the plan was a way for oil companies to get back part of the payments they were obligated to make for drilling on taxpayer-owned federal land.

"This is really an end-run around paying their fair share," Ms. Aurilio said. "These companies can and should do this on their own. They are laughing all the way to the bank."