Washington (Platts)--14Jun2007

The US Senate late Thursday voted down a Republican-backed amendment to a
major energy bill that would have allowed Virginia to drill for natural gas
off of its coast.

     The amendment, sponsored by Virginia Senator John Warner, a Republican,
was defeated 44-43. But the losing margin was actually much wider than it
appeared, because under the rules of the Senate, the measure needed 60 votes
to pass.

     Warner argued that drilling should be allowed offshore of his state
because the US "is in a dire set of straits regarding its domestic energy
supply." Drilling on the Outer Continental Shelf has been prohibited under an
executive order that President George H.W. Bush instituted in 1991, but Warner
argued that the moratorium should be lifted because natural gas prices have
skyrocketed in recent years. 

     "When that moratorium was put in, we didn't have natural gas at its
all-time high," he said. "This is a changing world."

     Warner's amendment would have allowed energy companies to explore and
drill for gas offshore Virginia provided that the state legislature authorized
the process. The US government would have received 50% of the resulting
drilling royalties, while a smaller share would have gone to state coffers.
The plan also would have set aside royalty money to pay for any
drilling-related environmental damages, though Warner said any sort of mishap
would be "highly unlikely."

     Those assurances were not good enough for Democrats, who vigorously
opposed Warner's amendment. Senator Robert Menendez, Democrat-New Jersey, said
Warner's plan would allow drilling just 75 miles from his state's beaches. A
spill or another sort of mishap could have disastrous consequences for New
Jersey's economy and environment, Menendez said. 

     Menendez was also highly suspicious that the plan would forbid companies
from extracting any oil that they discovered in the course of looking for gas.
"It's unlikely that they would just plug it up" in such an instance, he said. 

     Other Republicans, including Senator Larry Craig of Idaho, have vowed in
recent days to introduce amendments to the bill to promote OCS drilling. But
so far, none have done so. 

     Senator Jeff Bingaman, Democrat-New Mexico, who is managing the bill
during the floor debate, said Thursday that he hopes to hold a final vote on
the package next week.

		--Brian Hansen, brian_hansen@platts.com