For other versions of this document, see http://wikileaks.org/wiki/CRS-RL34667 ------------------------------------------------------------------------------ Order Code RL34667 Outer Continental Shelf Leasing: Side-by-Side Comparison of Five Legislative Proposals Updated September 17, 2008 Marc Humphries Analyst in Energy Policy Resources, Science, and Industry Division Outer Continental Shelf Leasing: Side-by-Side Comparison of Five Legislative Proposals Summary This report provides a side-by-side comparison of three bills and two proposals, each of which addresses oil and gas development in the outer continental shelf (OCS). None of the bills has passed its respective chamber. One of the proposals, H.R. 6899, the "Comprehensive American Energy Security and Taxpayer Protection Act," is expected to come to the House floor the week of September 15, 2008. The moratoria on oil and gas leasing in much of the OCS has become a major issue in Congress and also in the Presidential campaign. This report describes the background of OCS leasing and the various positions taken by proponents and opponents of leasing. It then compares the provisions of three bills that have been introduced with reported summaries of the House proposal and the Senate proposal, the "New Energy Reform Act of 2008." On September 16, 2008, the House passed H.R. 6899 by a vote of 236-189 and defeated an alternative bill, H.R. 6709, by a vote of 191-226. Contents Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 List of Tables Table 1. Comparison of H.R. 6566, H.R. 6670, H.R. 6709, H.R. 6899, and the Senate Draft Energy Reform Act of 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Outer Continental Shelf Leasing: Side-by- Side Comparison of Five Legislative Proposals This report provides a side-by-side comparison of three bills and two proposals -- H.R. 6566, H.R. 6670, H.R. 6709, H.R. 6899 (the House Leadership Proposal), and the Senate Draft Proposal -- which address oil and gas development in the outer continental shelf (OCS). None of the bills has passed its respective chamber. The text below provides background on the issues. The side-by-side table gives a description of selected sections of the bills. Recent Developments President Bush announced on June 18, 2008, that he would like to open areas of the Outer Continental Shelf (OCS) for oil and gas development currently under presidential and congressional moratoria (discussed in more detail below). The President stated that he would lift the executive branch moratoria only after Congress did so legislatively. But, on July 14, 2008, President Bush reversed his position and lifted the executive ban on the OCS imposed in 1990 by President George H.W. Bush. Senator John McCain, among others, has called on Congress to lift the offshore drilling moratoria as well. Further, the Administration proposes to begin planning its next five-year leasing program that would, if approved, be implemented as early as 2010 -- two years ahead of schedule. The proposed new five-year program would supersede the current five-year leasing program from 2007-2012. The Administration argues that a new five-year lease program beginning in 2010 would allow any newly opened OCS areas (if the congressional moratoria is lifted this year) to be offered in a lease sale sooner than if they remained on their current schedule. Since the President lifted the executive ban, members of Congress have introduced legislation that would lift the congressional prohibition (in part or completely) against leasing and development of oil and natural gas in the OCS. The legislation section of this report summarizes several of those bills, including the House Leadership proposal (H.R. 6899). Many in Congress, however, oppose lifting the offshore ban. They argue that there are still several million acres leased onshore and offshore but not yet producing and that production from these lands could increase U.S. oil supply. On September 16, 2008, the House passed H.R. 6899 by a vote of 236-189 and defeated an alternative bill, H.R. 6709, by a vote of 191-226. How much oil could be brought into production in the short-term (from non- producing leased lands or those under the moratoria) and its impact on price is CRS-2 uncertain. An attempt to lift the offshore moratoria with an amendment to the FY2009 Interior, Environment, and Related Agencies Appropriations bill during the House subcommittee markup was defeated by a vote of 6-9. Meanwhile, on June 26, 2008, under suspension of the rules (which requires a two-thirds majority for passage), the House defeated a measure (H.R. 6251) that would have increased rental fees on non-producing oil and gas leases, and denied new federal leases to those not diligently developing the leases they have. Background Oil and gas leasing has been prohibited on much of the outer continental shelf (OCS) since the 1980s. Congress has enacted OCS leasing moratoria for each of fiscal years 1982-2006 in the annual Interior and Related Agencies Appropriations bill (now the Interior and Environment and Related Agencies Appropriations bill), allowing leasing only in the Gulf of Mexico (except near Florida) and parts of Alaska. President George H.W. Bush in 1990 issued a presidential directive ordering the Department of the Interior (DOI) not to conduct offshore leasing or preleasing activity in areas covered by the annual legislative moratoria until 2000. In 1998, President Clinton extended the offshore leasing prohibition until 2012. Proponents of the moratoria contend that offshore drilling would pose unacceptable environmental risks and threaten coastal tourism industries, whereas supporters of expanded offshore leasing counter that more domestic oil and gas production is vital for the nation's energy security. The Outer Continental Shelf Lands Act of 1953 (OCSLA), as amended, provides for the leasing of OCS lands in a manner that protects the environment and returns revenues to the federal government in the form of bonus bids, rents, and royalties.1 OCSLA requires the Secretary of the Interior to submit five-year leasing programs that specify the time, location, and size of the areas to be offered. Each five-year leasing program entails a lengthy multistep process that includes environmental impact statements. After a public comment period, a final proposed plan is submitted to the President and Congress. The latest plan went into effect July 1, 2002. Public hearings for the 2007-2012 leasing program are underway. States and interest groups are filing comments on future lease sale areas for the 2007-2012 leasing program.2 1 43 U.S.C. 1331 et seq. 2 Federal Register Notice, 70 FR 49669. CRS-3 States with energy development off their shores in federal waters3 have been seeking a larger portion of the federal revenues generated in those areas. They particularly want more assistance for coastal areas that may be most affected by onshore and near-shore activities that support offshore energy development. Proponents of these proposals look to the rates at which funds are given to jurisdictions where onshore energy development occurs on federal lands within those jurisdictions. Coastal destruction has received more attention in Louisiana -- especially hard-hit by hurricanes in 2005 -- where many square miles of wetlands have been lost to the ocean each year. Widespread energy-related development is thought to contribute to coastal losses. Currently, the affected states receive some revenue directly from offshore oil and gas leases in federal waters under section 8(g) of OCSLA and under the Gulf of Mexico Energy Security Act of 2006. (P.L. 109- 432).4 This is in contrast to the 50% share of direct revenues to states that have onshore federal leases within their boundaries. Opponents point out the budget implications that would result from such a loss of federal revenues. 3 State jurisdiction is typically limited to three nautical miles seaward of the baseline from which the breadth of the territorial sea is measured. However, the state jurisdiction off the Gulf Coast of Florida and Texas extends nine nautical miles and for Louisiana, three imperial nautical miles. Federal jurisdiction extends, typically, 200 nautical miles seaward of the baseline from which the breadth of the territorial sea is measured. One nautical mile equals 1.15 statute miles. 4 The 8(g) revenue stream is the result of a 1978 OCSLA amendment that provides for a "fair and equitable" sharing of revenues from section 8(g) common pool lands. These lands are defined in the amendments as submerged acreage lying outside the three-nautical mile state-federal demarcation line, typically extending to a total of six nautical miles offshore but that include a pool of oil common to both federal and state jurisdiction. The states' share of the revenue (27%) was established by the OCSLA amendments of 1985 (P.L. 99-272) and is paid directly to the states. Payments to the states previously had been placed in escrow, which were then paid out between 1986 and 2001. CRS-4 Table 1. Comparison of H.R. 6566, H.R. 6670, H.R. 6709, H.R. 6899, and the Senate Draft Energy Reform Act of 2008 H.R. 6899 Senate Draft Energy Provision H.R. 6566 H.R. 6670 H.R. 6709 (House-passed) Reform Act of 2008 Short Title American Energy Act Long-Term Energy National Conservation, Comprehensive New Energy Reform (Title I) Assurance and Security Environment, and American Energy Act of 2008 Act of 2008 Energy Act Security and Taxpayer (Title I) Protection Act Grants of Leases by Sec. 109. The Secretary No similar provision. No similar provision. No similar provision. No similar provision. Secretary of the Interior would (natural gas-only establish regulations for leases) natural gas-only leases in the OCS. The value of the leases for bidding purposes would exclude the value of any potential crude oil. However, oil could be produced if the adjacent state government did not object. Conservation of Sec. 109. An annual No similar provision. No similar provision. Sec. 131-134. Lessees No similar provision. Resources Fee conservation of without price threshold resources fee of $3.75 in their leases would per acre would be not be eligible for CRS-5 H.R. 6899 Senate Draft Energy Provision H.R. 6566 H.R. 6670 H.R. 6709 (House-passed) Reform Act of 2008 established and applied future leases in the Gulf to new and existing of Mexico unless they non-producing leases. amended lease to include price threshold levels, paid conservation of resources fees, or agreed to pay fees. Conservation of resources fees would be established at $9.00 per barrel of oil and $1.25 per million Btu of natural gas (in 2005 dollars). An annual fee of $3.75 per acre would be established on all nonproducing offshore leases. Gulf of Mexico Energy Sec. 122. GOMESA Sec. 101. Amends Sec. 101. GOMESA No changes to Sec. 401. Would open Security Act of 2006 would be repealed. GOMESA to allow would be repealed. GOMESA. the Eastern Gulf of (GOMESA) (sec. 104 drilling in the Eastern Mexico in areas beyond (a) of P.L. 109-432) Gulf of Mexico beyond 50 miles off the 100 miles of the Florida coastline for oil and coastline. natural gas leasing, but CRS-6 H.R. 6899 Senate Draft Energy Provision H.R. 6566 H.R. 6670 H.R. 6709 (House-passed) Reform Act of 2008 only after consultation with the Secretary of Defense. Reservation of Lands Sec.111. Section 12 of Sec. 123. OCS Sec. 101. OCS Would allow states to Sec. 401. The and Rights OCSLA would be moratoria/withdrawals congressional moratoria "opt-in" to oil and gas southeastern states (establishing where amended (43 U.S.C. are terminated outside are repealed but leases development 50-100 (Virginia, North drilling can take place) 1341). Defines the Gulf of Mexico may not be issued miles off their coasts if Carolina, South presidential withdrawal beyond 100 miles of the within 25 miles of a a state legislature enacts Carolina, and Georgia ) authority and limits to coastline. A Governor state's coastline. The a state law authorizing may submit a petition 25% the amount of of a state outside the secretary may not issue oil and gas for approval to the acreage withdrawn Gulf of Mexico may leases in areas between development. Secretary of the Interior beyond 100 miles from submit a request to the 25-50 miles off a state's to conduct an oil and any coastline. The Secretary of the Interior coastline if the state Beyond 100 miles natural gas lease sale areas within 50 miles of to lease for oil and passes a law, within one offshore in areas now beyond 50 miles from the state's coastline natural gas between 25- year of enactment of under the congressional its coast. would be off-limits 100 miles of a state's this act, disapproving of moratoria would be unless states submit a coastline if the coastal such leases. open to oil and gas petition for leasing to state passes a law to development. the Secretary of the authorize such request. Interior. The acreage National Marine between 50 and 100 sanctuaries, national miles from the state's marine monuments, and coastline would be the Georges Bank (in available for leasing the North Atlantic unless the state Planning Area) would CRS-7 H.R. 6899 Senate Draft Energy Provision H.R. 6566 H.R. 6670 H.R. 6709 (House-passed) Reform Act of 2008 petitioned the Secretary remain off-limits. for a withdrawal from leasing for a five-year period. The state may request a five-year extension for withdrawal multiple times. There would be a prohibition of leasing east of the military mission line as defined in the bill unless a waiver is granted by the Secretary of Defense. CRS-8 H.R. 6899 Senate Draft Energy Provision H.R. 6566 H.R. 6670 H.R. 6709 (House-passed) Reform Act of 2008 Disposition of Receipts Sec. 110. A revenue Sec. 102. Revenue Sec. 102. Revenue No similar provision. Sec. 401. Revenue (Revenue Sharing for sharing plan for coastal sharing (with limits) sharing with states sharing provisions in new leases) states would include with the states would would include revenues the bill would allow for tracts within 100 miles include all qualified from qualified leases to Southeastern states - of the states' coastlines revenues to be be shared as follows: Virginia, North and tracts beyond 100 distributed as follows: 30% to the general fund Carolina, South miles of the states' 25% to the general fund of the U.S. Treasury, Carolina, and Georgia coastlines. There of the U.S. Treasury, 30% to producing to receive 37.5% of would be phased-in 25% to the Energy states, 40% split among revenues generated sharing and immediate Independence and several reserve accounts from leases 50 to 100 sharing for both areas. Security Fund that (e.g., Conservation off their coasts. If two Under the phased-in would be established by Reserve, Environment or more neighboring plan, the states' share the act, and 50% to a Restoration Reserve) states "opt-in," then the would eventually reach special account for the that would be revenue share would 42.5% of the revenues states. established under this increase to 50%. generated from offshore act. Florida would receive leases. Phased-in 37.5% of the revenues sharing would be generated off its coast different for those in the Eastern Gulf of leases held within 4 Mexico. marine leagues of a state's coastline. For all areas the phased-in sharing plan includes lease tracts available CRS-9 H.R. 6899 Senate Draft Energy Provision H.R. 6566 H.R. 6670 H.R. 6709 (House-passed) Reform Act of 2008 under the 2002-2007 leasing program in effect prior to enactment of this act, and those lease tracts in production prior to October 1, 2005, that were not available for leasing under the 2002- 2007 leasing program. Immediate revenue sharing of 42.5% would occur from offshore leases not under the phased-in plan. The allocation of royalty revenues for tracts between 4 marine leagues and 100 miles and those beyond 100 miles would be shared among producing states that have a coastline point within 300 miles CRS-10 H.R. 6899 Senate Draft Energy Provision H.R. 6566 H.R. 6670 H.R. 6709 (House-passed) Reform Act of 2008 of any portion of the leased tract: 1/3 to the adjacent state and 2/3 to each producing state inversely proportional to the distance to the nearest point of the coastline of the producing state and the geographic center of the leased tract. This section also includes language that would share only 25% of OCS revenues from lease tracts partially or completely beyond 100 miles if no leasing is allowed within any portion of a state's adjacent zone within 100 miles of its coastline. Diligent Development Sec. 121-124. Secretary of the Interior shall CRS-11 H.R. 6899 Senate Draft Energy Provision H.R. 6566 H.R. 6670 H.R. 6709 (House-passed) Reform Act of 2008 establish what constitutes diligent development. Secretary shall provide resource estimates for onshore and offshore oil and natural gas (on lease and unleased acreage) OCS Royalties Sec. 141-145. The Secretary may take royalty payments in-kind and work to ensure that royalty payments are accurate and timely. Ethics training and a gift ban would be implemented at the Minerals Management Service. Policy Sec. 102. states that it is No similar provision. No similar provision. No similar provision. No similar provision. U.S. policy that adjacent states commit significant resources to development of CRS-12 H.R. 6899 Senate Draft Energy Provision H.R. 6566 H.R. 6670 H.R. 6709 (House-passed) Reform Act of 2008 offshore oil and gas, thus those states should receive a portion of the revenues generated from offshore activities. Administration of Sec. 108. Amends No similar provision. No similar provision. No similar provision. No similar provision. Leasing Section 5 of OCSLA (43 U.S.C. 1334 ) and allows lessee to voluntarily release a portion of a lease in which it has no interest in producing and is deemed geologically prospective by the Secretary of the Interior. The lessee, in return would receive a royalty incentive on the portion retained. This section also establishes procedures for natural gas-only leases. OCS Leasing Program Sec. 112. Amends Sec. No similar provision. Sec. 102. See No similar provision. No similar provision. CRS-13 H.R. 6899 Senate Draft Energy Provision H.R. 6566 H.R. 6670 H.R. 6709 (House-passed) Reform Act of 2008 18 of 43 U.S.C. 1344. disposition of receipts Would make available section above. at least 75% of unleased acreage and establish a procedure for the preparation of a proposed leasing program, including the preparation of a draft Environmental Impact Statement (EIS). Would also estimate states' adjacent zones resources and share of OCS revenues. Environmental Studies Sec. 114. Amends No similar provision. No similar provision. No similar provision. No similar provision. Section 20(d) of OCSLA (43 U.S.C. 1346). Categorical exclusions (CE) for the need for an Environmental Assessment (EA) or EIS including seismic CRS-14 H.R. 6899 Senate Draft Energy Provision H.R. 6566 H.R. 6670 H.R. 6709 (House-passed) Reform Act of 2008 activities are established. Exploration plans would be no longer subject to an EIS and may be eligible for a CE. An EIS would be required only for the first development and production plan within each OCS Planning Area. Future plans for leased tracts within the Area would require an EA unless the EIS were over 10 years old. Termination of Effect Sec. 115. All provisions See Sec. 123 Similar provision. No similar provision. No similar provision. of Laws Prohibiting the of existing laws description above. Spending of prohibiting the Appropriated Funds for spending of Certain Purposes appropriated funds to conduct oil and natural gas leasing and preleasing activities in the OCS would no longer be in effect. CRS-15 H.R. 6899 Senate Draft Energy Provision H.R. 6566 H.R. 6670 H.R. 6709 (House-passed) Reform Act of 2008 Leases From Areas Sec. 120. Lessees may No similar provision. No similar provision. No similar provision. No similar provision. Located within 100 exchange their leases Miles of California or held within 100 miles Florida of the coast of Florida or California for oil and gas or natural gas leases in other parts of the OCS available for leasing. Coastal Impact Sec. 121. Would repeal No similar provision. No similar provision. No similar provision. No similar provision. Assistance Sec. 31 of OCSLA (43 U.S.C. 1356a), providing Coastal Assistance. Energy Independence No similar provision. Sec. 131. An Energy No similar provision. No similar provision. Sec. 401. An and Security Fund Independence and Alternative Fuel Trust Security Fund would be Fund would be established to fund established to conduct energy research and research, development, development projects and commercialization including but not programs in alternative limited to wind, solar, fuels and alternative geothermal, advanced fuel technologies. vehicles, and carbon CRS-16 H.R. 6899 Senate Draft Energy Provision H.R. 6566 H.R. 6670 H.R. 6709 (House-passed) Reform Act of 2008 capture and storage. National Commission No similar provision. No similar provision. No similar provision. No similar provision. Sec. 101. Would on Energy establish a National Independence Commission on Energy Independence to examine technical and policy obstacles to achieving U.S. energy independence and make recommendations to Congress and the President. ------------------------------------------------------------------------------ For other versions of this document, see http://wikileaks.org/wiki/CRS-RL34667