Bush administration opposes OCS drilling bill on revenue sharing

Washington (Platts)--29Jun2006

The Bush administration Thursday stated its opposition to a Republican
bill now being debated on the House floor that would partially lift the
Congressional ban on drilling offshore on the Outer Continental Shelf, citing
concerns about a plan to allow states to get a share of the revenues from
offshore activities.

The Statement of Administration Policy said the White House "strongly
opposes provisions to share revenue from existing leases, and to give states
up to 64% of the revenue from drilling in Federal waters three to 12 miles
from shore."

It further said it recommended revenue sharing be focused on new leases
in new areas only. "The administration strongly opposes the bill's
revenue-sharing provisions because of their adverse long-term consequences on
the Federal deficit."

The Congressional Budget Office estimated that the original version of
the bill would cost the federal treasury $11 billion over 10 years. But House
Resources Committee Chairman Richard Pombo of California said a new version of
the bill, released at the eleventh-hour, would reduce federal revenues by only
about $3.6 billion over 10 years.

The new version of the bill alters the revenue-sharing plans, including
by changing a provision that shares receipts from leases in federal waters
within 12 miles of state shores. The original bill required the federal
government to share 75% of revenues from these leases with states.

The manager's amendment delays the sharing for current leases where
production is already allowed. The new bill would allow 25% revenue sharing on
these leases initially through 2010, and would increase 5% thereafter until it
reached 50%. It could go higher under certain circumstances, but could never
exceed 75%.

The administration also said it was concerned about a provision in the
bill that would allow the granting of "natural gas only" leases, saying such a
measure "may prove impractical to administer."

--Cathy Landry, cathy_landry@platts.com

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