Washington (Platts)--8Sep2009/526 pm EDT/2126 GMT

US Senate and House subpanels will hear testimony this week on two bills that would significantly alter oil and natural gas drilling on public lands. The Senate Finance Committee's subcommittee responsible for energy and natural resources revenues will hold a hearing Thursday to examine a range of oil and gas tax increases proposed by President Barack Obama in his fiscal 2010 budget. The hearing is intended to inform a yet-to-be written energy tax package, which could be combined with either a climate and energy bill or an energy bill later in the year. The Energy, Natural Resources and Infrastructure panel, which is chaired by Senator Jeff Bingaman, Democrat-New Mexico, will hear testimony on the benefits and drawbacks of a variety of tax increases for the petroleum industry. One of the most significant items proposed by the White House is an excise tax aimed at recovering lost royalties from faulty 1990s Gulf of Mexico leases, which would be paid only by companies that hold royalty-free leases from those years. The administration also suggested excluding petroleum producers from a valuable manufacturing tax credit, which critics argue was never intended for them. Bingaman supported similar policies in committee last Congress, but spokesman Bill Wicker noted Tuesday that the administration's proposals went farther and said the hearing would allow for an open exchange of viewpoints. The hearing will include testimony from witnesses within the administration, energy advocacy and the petroleum industry. Meanwhile, on Wednesday, a subcommittee of the House Natural Resources panel will look at a bill that would expedite planning for offshore leases in still-undeveloped areas of the Outer Continental Shelf while providing that drilling revenues be shared with states and with a range of environmental, renewable and alternative energy programs. Though the bill has been granted a hearing by Energy and Mineral Resources subcommittee Chairman Jim Costa, who is supportive, full Committee Chairman Nick Rahall's opposition casts some doubt over its eventual prospects. The bill would give congressional approval to a 2010-2015 OCS plan drafted by the Minerals Management Service under the Bush administration. The plan is being reviewed by the Interior Department after a federal court ruled last month that MMS' plans for drilling in Alaska were written without adequate environmental review. The bill, which is sponsored by Pennsylvania Republican Tim Murphy and Hawaii Democrat Neil Abercrombie, would also give states authority over waters up to 12 miles from their coast, compared with the 3 miles granted them under current law. It would allow for drilling 20 miles from shore throughout the OCS. Twenty percent of the revenue raised from offshore leasing would go to develop renewable energy, while an additional 10% would go to clean coal programs and 5% to nuclear energy. This would represent a dramatic expansion of offshore development, which is currently limited to very few areas of the OCS, including Alaska, the Gulf of Mexico and California. Abercrombie spokesman Dave Helfert argued that it would actually expand protection for US coastlines, which became technically open for drilling after a moratorium on much of the OCS expired last October. "Today you could drill right up to the lifeguard stand, just about," he said, noting that only the three miles from shore controlled by the states is now permanently off-limits. MMS has made no plans to lease most of these areas, however, a fact that has been criticized by many Republican lawmakers. Jill Strait, a spokeswoman for Natural Resources Republicans, noted Tuesday that the bill did not open the Alaska National Wildlife Refuge and makes other adjustments favored by the Republican minority. Abercrombie eventually supported a carbon reduction and energy bill passed by the House in June, and Helfert said his boss' bill could complement the other measure by generating revenue for some of its programs. Though the bill faces an uphill battle even with Costa's support, supporters note that Rahall plans to take up other energy bills in committee this autumn and suggested that some portions of the bill could be part of the eventual package. --Jean Chemnick, jean_chemnick@platts.com