The New York Times May 14, 2011

Obama Shifts to Speed Oil and Gas Drilling in U.S.

By JOHN M. BRODER

WASHINGTON – President Obama, facing voter anger over high gasoline prices and complaints from Republicans and business leaders that his policies are restricting the development of domestic energy resources, announced Saturday that he was taking several steps to speed oil and gas drilling on public lands and waters.

It was at least a partial concession to his critics at a time when consumers are paying near-record prices at the gas pump. The Republican-led House passed three bills in the last 10 days that would significantly expand and accelerate oil development in the United States, saying the administration was driving up gas prices and preventing job creation with antidrilling policies.

Administration officials said the president’s announcement, which included plans for expanded drilling in Alaska and the prospect of new exploration off the Atlantic coast, was intended in part to answer these arguments, signal flexibility and demonstrate Mr. Obama’s commitment to reducing oil imports by increasing domestic production.

But in fact the policies announced Saturday would not have an immediate effect on supply or prices, nor would they quickly open any new areas to drilling.

“These spikes in gas prices are often temporary,” Mr. Obama said, “and while there are no quick fixes to the problem, there are a few steps we should take that make good sense.”

The president’s turn to a domestic pocketbook issue comes after two weeks of intense focus on the killing of Osama bin Laden, terrorism more broadly and the multiple crises in the Middle East.

In his weekly radio and Internet address, the president said the administration would begin to hold annual auctions for oil and gas leases in the Alaska National Petroleum Reserve, a 23-million-acre tract on the North Slope of Alaska. The move comes after years of demands for the auctions by industry executives and Alaska’s two senators, Lisa Murkowski, a Republican, and Mark Begich, a Democrat.

The administration will also accelerate a review of the environmental impact of possible drilling off the southern and central Atlantic coast and will consider making some areas available for exploration. The move is a change from current policy, which puts the entire Atlantic seaboard off limits to drilling until at least 2018.

The president also said he would extend leases already granted for drilling in the Arctic Ocean off Alaska and the Gulf of Mexico that had been frozen after last year’s BP spill. The extension will allow companies time to meet new safety and environmental standards without having to worry about their leases expiring.

And the government will provide incentives for oil companies to more quickly exploit leases they already hold. Tens of millions of acres onshore and offshore are under lease but have not been developed.

The moves come after the House passed a series of bills that would force the administration to move much further and faster to open public lands and waters to oil and gas development. The administration formally opposed the bills as written, but officials said Friday that the White House might accept some provisions in the bills, like extending the frozen leases in the gulf and in Alaska.

Responding to the shift by the administration, Brendan Buck, a spokesman for Speaker John A. Boehner, said, “The president just conceded what his party on Capitol Hill still denies: more American energy production will lower costs and create jobs. This reversal is striking, since his administration has consistently blocked American-made energy.”

Although Mr. Buck characterized the policy changes as “not terribly substantial,” he added that they should “pave the way for legislation, like the bills the House passed in the past two weeks, to reduce the damage from the restrictions he imposed in the past.”

Congressional Democrats, who are largely united in their opposition to the Republican “drill here, drill now” legislation, said the president’s proposals made sense as part of a broader policy that includes revoking tax breaks for the oil industry and encouraging companies to drill on the public land they already control.

Representative Nancy Pelosi, the House Democratic leader, endorsed the measures Mr. Obama proposed on Saturday but also advocated selling some portion of the Strategic Petroleum Reserve, which today contains 727 million barrels of crude oil. The administration has so far resisted tapping the reserve, saying that it would have only a small and temporary effect on prices and was designed for critical supply shortages, which the country is not now experiencing.

The president, in his address, said he supported increased domestic oil and gas development, if done safely and responsibly. “Last year, America’s oil production reached its highest level since 2003,” he said. “But I believe that we should expand oil production in America, even as we increase safety and environmental standards.”

The Alaskan petroleum reserve was set aside in the 1920s as a source of oil for the Navy. There have been fewer than a dozen lease sales there; the most recent one, in 2010, drew only modest industry interest. The government has lowered its estimate of recoverable oil under that vast tract, and the Obama administration is leaving large areas untouched because of their ecological and wildlife value.

Response from environmental advocates was relatively muted. Eric Myers, Alaska policy director for the National Audubon Society, said that conservationists were willing to see an increase in drilling in the Alaskan petroleum reserve as long as it did not threaten wildlife, waters or sensitive lands.

The more environmentally sensitive Arctic National Wildlife Refuge in Alaska will remain off limits to oil and gas drillers, administration officials said Friday.

Senator Mark Begich, Democrat of Alaska, who has been critical of the administration’s cautious approach to drilling in the Arctic, said he was pleased by much of the president’s announcement, including the adoption of his proposal to create a multi-agency task force to streamline decisions about oil development in Alaska and to extend the leases for companies planning to drill there.

The president noted in his address that the Justice Department had formed a task force to look into potential market manipulation or excessive speculation in oil, and he repeated his call for a repeal of the $4 billion a year in tax incentives the oil industry receives.

“In the last few months, the biggest oil companies made about $4 billion in profits each week,” Mr. Obama said. “And yet, they get $4 billion in taxpayer subsidies each year. Four billion dollars at a time when Americans can barely fill up their tanks. Four billion dollars at a time when we’re trying to reduce our deficit.”
Next week, the Senate will take up a Democratic bill to remove a portion of those subsides, but it is not expected to become law because of united Republican opposition in both chambers of Congress.

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Read more: http://www.politico.com/news/stories/0511/54969_Page2.html#ixzz1MMHnNgAS

POLITICO
Obama says drill
By: Darren Goode
May 14, 2011 07:03 AM EDT

President Barack Obama is looking to bolster U.S. oil drilling, announcing Saturday a preemptive strike against bolder efforts from Capitol Hill as consumer unrest deepens over the price at the pump.

The White House will move forward without congressional action on a set of ideas espoused by Republicans and oil-state Democrats to expand oil and gas drilling in the Gulf of Mexico, Alaska and potentially parts of the Atlantic seaboard.

It’s the closest Obama has come to rivaling his short-lived pro-drilling stance that ended with the BP oil spill.

At the same time, Obama is also firing up the liberal Democratic base by urging Congress to repeal billions of dollars in oil-industry tax incentives and to raise fees against companies that do not act quickly on drilling leases they own.

“Without a doubt, one of the biggest burdens over the last few months has been the price of gasoline,” Obama said in his fourth weekly address in a row and fifth in seven weeks to touch on energy issues.

Gas prices are now averaging more than $4 a gallon in many areas ahead of the start of the summer driving season, when prices usually peak.

The situation is precarious for Obama, who must balance the need to work with a starkly divided Congress against his own effort to win a second term.

“These spikes in gas prices are often temporary, and while there are no quick fixes to the problem, there are a few steps we should take that make good sense,” Obama said.

Attorney General Eric Holder is leading a task force investigating possible fraud, manipulation and illegal activity by traders and speculators that might be leading to the spike in prices.

But drilling is where the political problems lie for the White House. Republicans and oil-state Democrats have continued to criticize Obama and the Interior Department for what they say is a dramatic slowdown in new permits off and on shore.

“[W]e should increase safe and responsible oil production here at home,” Obama said. “Last year, America’s oil production reached its highest level since 2003. But I believe that we should expand oil production in America – even as we increase safety and environmental standards.”

Obama is now looking to give a blanket extension to all oil and gas leases in the Gulf of Mexico due to the disruption caused by last year’s Gulf spill and subsequent administration ban and slow-down of drilling permits. By doing so, Obama is at least touching on an idea advocated by Republicans as part of a three-part offshore drilling package the House approved this month.

A senior administration official told reporters Friday that the administration is also looking to complete by the end of the year the first new lease sale in the Gulf since the BP spill – and to have two combined sales finished in the western and central Gulf of Mexico by the middle of next year.

But the GOP-passed bills go further and would require lease sales off the coast of Virginia that the administration canceled in the wake of the BP spill. The measures would also require more areas off the Eastern Seaboard and the California and Alaska coastlines be opened to new drilling.

House Natural Resources Chairman Doc Hastings (R-Wash.) – the lead sponsor of the House-passed drilling bills – called Obama’s actions “baby steps.”

“One weekend address announcing minor policy tinkering, while positive, does not erase the administration’s long, job-destroying record of locking-up America’s energy resources,” Hastings said in a statement.

Obama received a more favorable initial response from a critic in his own party.

“I’m cautious, implementation will be the key,” Sen. Mark Begich (D-Alaska) told POLITICO Friday. “It’s preemptive but I think he’s hearing Š from his own folks in his own party.”

Begich and Sen. Mary Landrieu (D-La.) have been highly vocal in criticizing the administration for its pace of expanding production in both the Gulf and the Arctic.

Obama is now expediting the completion of an initial environmental analysis of potential oil and gas resources in the mid-Atlantic and southern Atlantic coastline.

The review is on schedule to be finished in a little over a year and would be a first step in determining where production could be viable and worthwhile, a senior administration official said. “We want to get that answer as quickly as possible,” the official said.

It is possible that this could lead to areas off the Atlantic coast to be added at some point to the administration’s still evolving leasing strategy that runs through 2017, the official said.

Obama also announced he is directing the Interior Department to conduct annual lease sales in Alaska’s National Petroleum Reserve “while respecting sensitive areas.” The idea is to “regularize” what have been periodic lease sales there, a senior administration official said.

Alaska’s Arctic National Wildlife Refuge – long a symbolic centerpiece over the fight to expand domestic drilling – remains “off the table, and we do not support development there,” a senior administration official said.

The administration also will put together what one senior official deemed a “high-level interagency group” to expedite permitting off the coastline of Alaska.

Begich has offered legislation that would establish a federal coordinator to expedite permitting of offshore leases in the icy Arctic waters off Alaska.

But in a move sure to rankle Republicans and some Democrats, Obama is continuing his push to add pressure on companies to use existing leases they own, considering a new “graduated fee” structure that essentially rewards those who act on their leases quickly, a senior administration official said.

Final details were not provided and may not be settled. “There could be a sliding scale of royalties” companies would have to pay, the official said. For instance, companies could pay a lower royalty if they develop their leases within the first three years.

Obama also railed against the need for oil-industry tax incentives ahead of Senate action Wednesday on an effort to repeal $21 billion in incentives over 10 years for the five biggest private integrated oil firms.

“The American people shouldn’t be subsidizing oil companies at a time when they’re making near-record profits,” Obama said. “As a nation, we should be investing in the clean, renewable sources of energy that are the ultimate solution to high-gas prices.”

The Senate Democratic plan would put the money saved toward reducing the deficit and not direct it toward programs aimed at reducing oil dependence.

Despite Obama’s backing, opposition from Republicans and Democrats like Begich and Landrieu is likely to derail the measure in the Senate, and it would be dead on arrival in the GOP-controlled House.

Special thanks to Richard Charter

http://www.latimes.com/business/la-fi-lazarus-20110513,1,524134.column

The Chevron ads are blatent lies. Why am I not surprised? DV

John Watson, chief executive officer of Chevron Corp., waits for the start of a Senate Finance Committee hearing. “Don’t punish our industry for doing our job well,” he said. (Andrew Harrer, Bloomberg / May 12, 2011)
In its ‘We Agree’ ads, Chevron takes credit for ‘reinvesting over $7 billion into the state.’ Guess how it got that number.

By David Lazarus
May 12, 2011, 8:10 p.m.

It’s easy to get cheesed about high gas prices when oil companies are raking in billions of dollars in profit. Chevron, for one, wants you to know that it’s thinking the same.
“Oil companies should put their profits to good use,” the company declares in recent newspaper ads. And in response to that laudable sentiment, Chevron’s chief financial officer, Patricia Yarrington, says, “We agree.”

The ads go on to say that “California’s economy needs energy to grow. And we’re providing it. Reinvesting over $7 billion into the state over the past 5 years. Bringing new energy to market, helping support thousands of jobs, and boosting small businesses. We’re making every penny count.”

Considering that Chevron has reported $6.2 billion in profit for the first three months of the year, up 36% from a year earlier – and $19 billion for last year, nearly double its 2009 earnings – that’s a bold statement.

Equally bold was the testimony of oil industry leaders Thursday in Congress. They were making the case for why some $4 billion in annual federal subsidies and tax incentives should remain in place despite the companies’ bulging pockets.

“Don’t punish our industry for doing our job well,” said John Watson, Chevron’s chief exec.

OK, then perhaps Chevron can tell us how exactly it’s reinvested $7 billion into California. Was it in building new facilities and creating new jobs? Was it in developing alternative energy sources? Investing in solar companies? Or was it something as mundane as simply paying its taxes?

I’ll get to what Chevron had to say – and why the company isn’t fooling anyone. But first, let’s take a closer look at this ad campaign the company’s running.

The “We Agree” newspaper ads and radio and TV commercials debuted in October. According to the company, they highlight “the common ground Chevron shares with people around the world on key energy issues.”

The campaign was launched just few months after the BP oil spill in the Gulf of Mexico and four months before Chevron was hit with a $9.5-billion judgment in a long-running lawsuit alleging that the company was responsible for poisoning the Ecuadorian rainforest. The oil giant is appealing the judgment.

Chevron’s ad campaign was spoofed in a video by the website Funny or Die: Actors portraying company execs happily sign on to the “We Agree” concept after realizing they can claim credit for being socially aware while committing to nothing.

So in California’s case, what has Chevron actually done to put its profits to good use?

When I spoke this week with Brent Tippen, a Chevron spokesman, he asked how detailed a response I wanted. Very detailed, I told him. Let the people of California know exactly where that $7 billion went.

The next day, Tippen said by email that the $7 billion cited in the “We Agree” ads “represents our combined capital investments in our business between 2005 and 2009.”

“The majority of those investments went to maintaining and expanding our major business assets in California, including oil and natural gas production in the San Joaquin Valley, as well as our manufacturing centers in El Segundo and Richmond,” he said.

“It also includes smaller capital investments in our technology and service businesses in California. These capital investments help sustain our business in California, which produces jobs, tax revenues and economic output.”

Hmm. Not so detailed after all. Tippen declined to elaborate, saying that “specific capital expenditures are proprietary information.”

I went online to see if I could find any additional info about Chevron pumping billions of dollars into its California oil and gas facilities. All I found were plans for a major expansion of the company’s refinery in Richmond, across the bay from San Francisco.

But that project came to a halt in 2009 when the California 1st District Court of Appeal ruled that Chevron had botched its environmental impact report. The project remains in limbo.

Tippen sent me a Chevron-funded report by the Milken Institute showing that the oil company employed almost 10,000 California workers in 2007 (before the recession hit; there have since been layoffs). Those workers, the report said, earned about $1.2 billion and accounted for about $4.5 billion in productivity.

The report also said that when you factor in state income taxes paid by Chevron workers, plus corporate, property and sales taxes, Chevron accounted for just under $2 billion in total taxes paid in 2007.

Moreover, it said, smaller businesses get a boost from all the money spent not just by Chevron workers but also by workers at stores and restaurants patronized by Chevron workers.

In other words, if a Chevron employee leaves a tip at a restaurant, and the restaurant server then spends that tip elsewhere, that’s an example of Chevron reinvesting in California.

Is that what the company seemed to be implying with its “We Agree” ads when it talked about oil companies putting their profits to good use? No.

The clear implication of the ads is that Chevron believes it has a responsibility to spend its massive profits on good works. Examples of this might include hefty investments in green energy and technology, contributions to schools, social programs and other community resources, even support for the arts.

Maintaining and possibly expanding existing facilities, giving your workers a steady paycheck and paying your taxes – these don’t seem to be examples of a company that’s going above and beyond the call of corporate duty.

I don’t knock Chevron for wanting to burnish its image at a time when oil companies are seen as bloated ticks on the American hide. But if you’re going to spend millions of dollars on an ad campaign centered on being a sensitive and socially conscious member of society, you’d better have the goods to back it up.
Can we agree on that much?

David Lazarus’ column runs Tuesdays and Wednesdays. He also can be seen daily on KTLA-TV Channel 5. Send your tips or feedback to david.lazarus@latimes.com.

Special thanks to Richard Charter

Massive giveaway opens pristine waters to drilling at half the price

Summary:

· The U.S.House of Representatives today passed the third bill in a series of three fast-track drilling pieces that favors Big Oil profits over safety of coastal communities and environments.

· H.R. 1231,The Reversing President Obama’s Offshore Moratorium Act, is a massive handout to the oil and gas industry. This legislation forces the federal government to take on 50% of the cost of seismic testing for oil and would require the administration to open up coastal and Arctic offshore drilling areas regardless of economic or environmental consequences. These areas would include the coasts of California, Massachusetts, North Carolina, Virginia, Florida and the fragile Arctic marine ecosystem off the coast of Alaska.

· H.R. 1231 does not solve our gas price problem, but it does put at risk hundreds of thousands of jobs that rely on clean coastal waters. It also threatens thousands of miles of coastal habitat and exposes countless bird and marine species to the dangers of offshore drilling.

WASHINGTON (May 12, 2011) – The following is a statement from Rodger Schlickeisen, president and CEO of Defenders of Wildlife:

“The House today rewarded Big Oil for carelessly causing the worst environmental disaster in U.S. history. After deliberately weakening safety practices on offshore drilling rigs only yesterday,the House’s vote to open America’s most fragile and beloved coasts to polluting drill rigs adds insult to injury.

“Big Oil has hit a trifecta this week. The House of Representatives had three chances to prove to the American public that it had their interests at heart, but instead chose to vote for Big Oil each time. By now there can be no doubt that the House majority’s interests lie not with what is good for the country but what is good for the wealthy and polluting oil industry.”

###

Defenders of Wildlife is dedicated to the protection of all native animals and plants in their natural communities. With more than 1 million members and activists, Defenders of Wildlife is a leading advocate for innovative solutions to safeguard our wildlife heritage for generations to come. For more information, visit www.defenders.org.

Contact: Caitlin Leutwiler, (202) 772-3226, cleutwiler@defenders.org

http://thehill.com/blogs/e2-wire/677-e2-wire/160965-overnight-energy
By Andrew Restuccia and Ben Geman- 05/12/11 07:44PM ET

EXCLUSIVE: Michael Bromwich, the Interior Department’s top offshore drilling regulator, is warning that a GOP-led bill to speed up Gulf of Mexico oil-and-gas lease sales is a recipe for a legal mess.

The House has passed a trio of bills over the last week aimed at speeding up offshore drilling permits, accelerating delayed Gulf of Mexico lease sales and opening big swaths of the Atlantic and Pacific coasts to drilling.

In an exclusive interview Thursday with The Hill,  Bromwich – who leads Interior’s Bureau of Ocean Energy Management, Regulation and Enforcement – had this to say about the bill that sets deadlines for Gulf sales:

“The one to accelerate lease sales … would be, I think, struck down by the courts because the [bill] mandates us to rely on pre-Deepwater Horizon NEPA,” he said in reference to National Environmental Policy Act analyses conducted before the BP oil spill.

“Well, that’s sort of a suicide pact, where we’re going to go in, we’re going to be forced to do lease sales with inadequate environmental analysis and we’ll be enjoined from those lease sales.Who wins then? Nobody,” he added of the bill that passed last week (more on the bills below).

Check out The Hill in print and online Friday for more from our exclusive interview.

Bromwich also went after the bill that sets new deadlines for his agency to act on industry offshore drilling permit applications. He defended the pace of deepwater permits the agency has been approving and noted that as of Thursday it has issued 14 permits for unique deepwater wells since Feb. 28.  “What [the GOP-led permitting bill] would do is it would tie our people up in paperwork because they have 30 days, and then if it’s not approved within 30 days they have to return it with a detailed explanation of why they turned it down, identifying the people who were involved in doing the analysis,” Bromwich said.

“That is a prescription for tying this agency up in red tape, when in fact our people are proceeding at a good and fair pace, and if you talk to people in industry candidly, they are quite pleased right now with the pace of our permitting. Of course they’d like it to speed up a bit. They always want it to speed up a bit,” hesaid.

The White House opposes the bills.

What’s next for Bromwich? Here’s a bit more that didn’t make it into our piece coming out tomorrow:

Bromwich isn’t saying what he’ll do after the completion of Interior’s offshore structural overhaul, which is slated to occur by Oct. 1. BOEMRE will be cleaved into two separate agencies: one that promotes resource development offshore and a separate branch to enforce environmental and safety regulations.

“I’m focusedon making the reorganization be as successful as it could possibly be. We are on track to have the reorganization be complete by Oct. 1, but I’m really focused on that and have thought very little about what’s going to become of me and what I do after that,”  Bromwich said.

The internal reception: Bromwich, who was appointed last June,  has also faced challenges inside the agency that he’s tasked with reforming (and is careful to note that the level of corruption that existed inside the agency has been overstated).   “I became very quickly aware that my background caused people concern, and the way I was announced caused people some concern. I was going to clean up this agency,”  the former Justice Department inspector general said.

But Bromwich believes that the concerns have eased as the overhaul has taken root.   He said: “I think people have come to understand the rationale behind the reorganization, they understand its logic. What I think we encountered at the outset was a kind of defensive resistance you get to most proposals for major change in any organization, but as we have walked through and talked through the logic of the reorganization and people understand that it is designed to help everybody, it is designed to eliminate the institutional conflicts of interest that have existed for 30 years, and that people are going to be able to go about their daily work in an environment that is actually better to do the work than has been the case before, I think all of that has calmed things.”

NEWS BITES:

Republicans pass final component of offshore drilling package: House Republicans scored their final victory in a broad effort to pass legislation aimed at expanding domestic offshore oil drilling Thursday.

The House GOP approved the third bill in their three-part domestic oil production plan Thursday afternoon. The bill would open up new areas in the Pacific andAtlantic coasts, as well as off the coast of Alaska, to drilling.

Read more about the passage of the other two bills in the Republican drilling package here.

The bills, authored by House Natural Resources Committee Chairman Doc Hastings(R-Wash.),  have very little chance of passing the Senate and being signed into law by President Obama. But their passage represents a political victory for Republicans, who have long-criticized the Obama administration’s offshore drilling policies.

Shaheen, Portman introduce efficiency bill: Sens. Jeanne Shaheen (D-N.H.) and Rob Portman (R-Ohio) introduced energy efficiency legislation Thursday that would boost Energy Department loan guarantees for building efficiency and put in place new standards foroutdoor lighting and heating and cooling systems, among other things.  “This is a bipartisan effort to advance energy efficiency, one of the quickest and most affordable ways to lower energy costs for employers and consumers,” Portman said in a statement.

ON TAP THURSDAY:

* Energy Secretary Steven Chu will travel to Los Angeles Friday to “to celebrate the city’s success in electric vehicle and EV infrastructure deployment,” according to the EnergyDepartment.
* The House Science Committee will hold a hearing on “Nuclear Energy Risk Management.”
* EPA air chief Gina McCarthy will testify in front of the House Energy and Commerce Committee during a hearing on a bill to speed up permitting of drilling off Alaska’s coast.
* Bureau of Land Management Director Bob Abbey and Michael Bromwich, the Interior Department’s top offshore drilling regulator, are slatedto testify at a House Natural Resources Committee hearing on “roadblocks” to developing wind and solar on public lands.
* Reps. Mike Pompeo (R-Kan.) and Raul Labrador (R-Idaho) will hold a press conference with Grover Norquist of Americans for Tax Reform on their “opposition to all energy subsidies.”

IN CASE YOU MISSED ITŠ.

Here’s a quick roundup of Thursday’s E2 stories:

– Oil executives blasted an effort by Senate Democrats to cut tax breaks
– Senate Majority Leader Harry Reid (D-Nev.) accused the GOP of  ‘protecting’ oil companies
– The CEO of Exxon Mobil called Democrats’ effort to repeal oil industry tax breaks “misinformed and discriminatory”
– Senate Democrats slammed ConocoPhillips for calling the tax breaks plan “un-American”
– House Energyand Commerce Committee Chairman Fred Upton (R-Mich.) won’t rule out using the debt ceiling as a vehicle to thwart climate rules
– Senate Democrats clashed with oil executives over oil tax breaks
– House Speaker John Boehner (R-Ohio) said he would consider scrapping oil tax breaks as part of a broad effort to cut the corporate tax rate
– The House passed a bill to expand offshore drilling
Please send tips and comments to Ben Geman, ben.geman@thehill.com, and AndrewRestuccia, arestuccia@thehill.com.

Follow us onTwitter: @E2Wire, @AndrewRestuccia, @Ben_Geman

 

Special thanks to Richard Charter

tp://www.businessweek.com/news/2011-05-12/house-passes-bill-to-add-u-s-areas-for-offshore-drilling.html

May 12, 2011,4:01 PM EDT

By Jim Snyder
(Updates with comment from Young in fourth paragraph.)

May 12 (Bloomberg) — The Republican-controlled U.S. House passed legislation to open areas to oil drilling along the Atlantic, Southern California and Alaska coasts, the third bill approved to boost output as gasoline prices reach $4 a gallon.

The legislation was approved by a 243-179 vote, with 21 Democrats in favor, hours after oil company executives appeared at a Senate hearing to defend $21 billion in tax breaks that Democrats want to repeal to reduce the federal deficit.

Republicans have focused on expanding offshore production to lower gas prices. The House bill would require the U.S. to increase production goals to 3 million barrels of oil a day by 2027, and open areas now off-limits to oil and gas companies.

“Even in the face of rising gasoline prices, the president wants to drill nowhere new,” Representative Don Young, an Alaskan Republican, said when debate on the measure began yesterday. “This bill says:’Let’s move forward with leasing and drilling in those areas where we know America has real and significant resources.'”

Congress let a drilling ban along much of the outer continental shelf expire in 2008 after gas prices exceeded $4 a gallon. President Barack Obama said in March 2010 that he supported expanding offshore drilling. He withdrew the plan after an explosion 20 days later aboard the Deepwater Horizon rig in the Gulf of Mexico killed 11 workers and triggered the BP Plc spill, the worst in U.S. waters.

Safety Reforms

Representative Edward Markey, a Massachusetts Democrat, said Congress should pass safety reforms in response to the spill. Residents in states where offshore drilling would be allowed “don’t want oil coming in the way it did in the Gulf of Mexico,” he said yesterday.

The House has now passed three measures aimed at expanding U.S. oil and gas production. Lawmakers last week passed a bill requiring lease sales in parts of the Gulf of Mexico and off of Virginia’s coastline. Yesterday, it passed legislation forcing the Interior Department to rule on drilling permits within 60 days. The permit would be approved if the deadline expired without action.

The administration said it opposes all three measures, without issuing a veto threat. The bills must pass the Democrat- controlled Senate to become law, and the chamber isn’t considering similar measures.

Expanding drilling won’t affect gas prices, which are set by a global market, Democrats said.

Senate Hearing

In the Senate today, executives from Exxon Mobil Corp., Royal DutchShell Plc, Chevron Corp., ConocoPhillips and BP said production costs may rise and gasoline prices increase if Democrats succeed in stripping the tax breaks, including a $13 billion credit for manufacturing.

The plan is “counterproductive,” Exxon’s Chief Executive Officer Rex W. Tillerson told the Senate Finance Committee at the hearing. More money could be generated through royalty payments to the government under new leases than in repealing the breaks, the executives said.

Senator Jay Rockefeller, a West Virginia Democrat, accused the officials of being “out of touch” in defending what Democrats say are unnecessary breaks given industry profits.
Exxon reported net income of $10.7 million during the first three months of the year.

The average gasoline price was $3.984 yesterday, up from $2.896 a year earlier, according to AAA’s daily fuel report.

–Editors: Steve Geimann, Larry Liebert
To contact the reporters on this story: Jim Snyder in Washington atjsnyder24@bloomberg.net.
To contact the editor responsible for this story: Larry Liebert atlliebert@bloomberg.net.

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http://www.myfoxchicago.com/dpps/news/house-votes-to-expand-offshore-drilling-dpgonc-20110512-ch_13176209

Special thanks to Richard Charter