Ken Silverstein EnergyBiz Insider Editor-in-Chief

Both measures would ease restrictions on drilling in the Gulf of Mexico, although the House version is more aggressive and would also allow for discovery in the Atlantic and Pacific coasts. While key House members say that the Senate's version does not go far enough, it is abundantly clear that enough senators use legislative stall tactics to kill any broader legislation. And with the clock ticking, the Senate holds all the cards.

"A compromise is certainly going to happen," says Senator Mary Landrieu, D-La., who spoke to reporters on Capitol Hill. The passage of any off-shore drilling bill would come alongside a huge discovery by Chevron, Devon Energy and StatOil in the Gulf of Mexico -- but one that won't start pumping oil and gas for a few years.

Specifically, the Senate passed a bill on August 1 that would open 8.3 million acres in the Gulf of Mexico to oil and gas drilling. But, it would place a buffer zone of between 125 miles and 300 miles near Florida's coastlines. That concession was to appease Florida lawmakers, who have argued vociferously that anything closer would harm its beaches and vitally important tourism industry.

The Senate's legislation, meantime, would allocate 37.5 percent of all production royalties to Alabama, Louisiana, Mississippi and Texas -- money to be used to help rebuild after Hurricane Katrina. Those states now get 2 percent of all such royalties.

The House has produced a bolder measure. In June, it voted to lift the moratorium on drilling in most parts of the Atlantic and Pacific coasts as well as most of the Gulf. The drilling could occur in areas that are at least 100 miles from the shore unless state legislatures allow producers to come closer -- but no closer than 50 miles.

"I'm skeptical that they can reach an agreement," says former Louisiana Senator John Breaux, who spoke at an industry conference. "I'm just really concerned we'll end up with nothing but a political debate about why nothing was done."

Most off-shore drilling now takes place in the Gulf of Mexico. The U.S. Interior Department estimates that if areas now closed to drilling were accessed, 85.9 billion barrels of oil and 419.9 trillion cubic feet of natural gas are technically recoverable.

If just the areas included in the Senate version were accessed, then Senate Energy Chairman Pete Domenici says that 1.26 billion barrels of crude oil and 5.83 trillion cubic feet of natural gas are present.

Intense Lobbying

Current law says that the states control oil and gas drilling within three miles of their borders. Beyond that, the U.S. Minerals Management Service regulates drilling -- a law that has been in place since the mid 1980s. It has the right to grant leases to the highest qualified responsible bidder.

Currently, about 35 percent of the natural gas consumed in the United States each year is produced off-shore. But proponents of greater drilling rights say that about 85 percent of all off-shore areas are off-limits to production. If more supplies came to market, oil and gas prices would fall, they add.

Despite the lobbying efforts, challengers abound. The central test for those supporting increased off-shore drilling is persuading environmental activists that off-shore drilling would leave unnoticeable footprints.

Opponents of allowing greater drilling rights off America's coastlines note that 191,000 barrels of oil have already found their way into the Gulf of Mexico by way of damaged pipelines and hurricane-torn oil facilities. They also point out that the U.S. Mineral Management Service says that drilling is already permitted where 80 percent of all economically-recoverable natural gas is located in the Outer Continental Shelf.

"The hurricanes exposed how vulnerable offshore oil and gas drilling infrastructure is, yet the knee-jerk reaction to throw up more offshore rigs continues," says a press statement released by the Sierra Club, the Natural Resource Defense Council and others.

Oil and gas producers, as well as major industrials counter that consumers have paid about $200 billion more for natural gas when compared to the previous five years. The U.S. natural gas crisis is now it in its sixth year and there is no end in sight, says the Industrial Energy Consumers of America.

The issue materializes as natural gas production declines while consumption is projected to increase. And when demand exceeds supply, prices rise: December futures for natural gas on the New York Mercantile Exchange are at $11 per million BTUs -- four times the average price paid by consumers in the 1990s.

"If recent geopolitical events have taught us anything, it is that our nation must develop energy supplies right here in America," says Paul Cicio, president of the industrial energy group. "Our country's economic success and quality of life are dependent upon a robust, diverse and affordable supply of energy. We cannot increase our energy security by denying access to much of the country's offshore natural gas and oil resources."

That argument now holds more sway among the general populace and their federal and state representatives. But if more drilling rights are granted, it will be in moderation and along the lines of what the U.S. Senate has offered. Oil and gas discoveries are important. But, so too, is the pristine nature of America's shorelines.

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