The Road To Passing Energy Legislation (Part I of IV)

Discussion in 'Energy' started by JimofPennsylvan, Aug 11, 2008.

  1. JimofPennsylvan

    JimofPennsylvan VIP Member

    Jun 6, 2007
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    Section: One

    Members of Congress have to compromise on energy legislation and do so quickly, that is, before the upcoming November elections; otherwise, America’s economy is in real danger of falling into a “deep” recession, one in which there will be widespread pain felt by the American people. Many politicians and leaders in America have rightfully expressed that the legislation proposed by a group of U.S. senators nicknamed the “gang of ten” is a good starting point for that compromise. To have a responsible public discussion on our nation’s political impasse on energy one must focus on the essence of the parties’ different positions on the issue, the following may be an oversimplification of these positions but it defines it well enough to hold a responsible discussion. The Democrat Party position for solving high oil and gas prices is to have energy companies drill more on land already authorized for drilling whether leased or unleased and stop speculation abuse in the commodity markets, and the Republican Party position is to increase the supply of oil and gas by opening up currently unauthorized land, whether it be on-shore or off-shore, to drilling. What the nation has here is a polarizing of positions and the only way to overcome such an impasse is for the parties to try to meet somewhere in the middle. This is why the gang of ten’s initiative is such a good idea, it makes additional land available for energy drilling but not all the land available for drilling the Republicans’ want, it is a basic “meet somewhere in the middle” solution. The “gang of ten’s” initiative is to authorize additional land for drilling only off Florida’s coast in the Gulf of Mexico and off the east coast from Georgia to Virginia.

    What Congress needs to do here is to pursue this “meet somewhere in the middle” compromise legislation. Specifically, the majority leader and the minority leader in the House and the Senate need to sit down around a table and hammer out a “meet somewhere in the middle” bill that not only includes the compromise position on these key issues but also the many initiatives where there is broad bi-partisan support, they need to agree on the number and nature of amendments that will be allowed in the floor debate and voting on this bill, making sure they don’t allow amendments that will destroy the essence of the compromise. Once and if they can hammer out all these details they need to schedule the debate, amendment and voting process for this bill in the Senate, wisdom calls for the House to hold off until and if the Senate can pass this compromise energy bill this year because recent history has demonstrated that the Senate is the chamber that is the bigger bottleneck on contentious legislation. If Congressional leadership really wants to meet the hopes and needs of the American people on this issue, they will conduct and finish this negotiation on a compromise bill during the week beginning August 11 and schedule and finish Senate floor debate and votes on this bill during the week beginning August 18th and if the Senate passes a bill schedule and finish House floor debate and votes on this bill during the week beginning September 8 (deferring to the scheduling of the Democrat and Republican National conventions).

    The compromise omnibus energy bill should look like the following. As alluded to earlier the “gang of ten’s” legislation is a good starting point for the compromise energy bill but it needs to be strengthened to better answer America’s energy problems. The compromise bill should open up off-shore drilling on the entire coast of Florida and all the states from Florida up to and including Virginia and on the entire coast of California on the west coast, the west coast because one it is fair if the east is asked to help with energy production so should the west and because California needs the revenue that will come from off-shore drilling (California presently has a $15 billion dollar/year deficit, big yearly deficits are a longstanding problem for California and they unfortunately have no viable long-term solution to this problem available, prudent thinking indicates this would be a gift to California). The compromise bill should only allow drilling past fifty miles from the coast so that harm to the state’s interests from off-shore drilling will be dramatically mitigated. The compromise bill should require a state to opt in for off-shore drilling to occur off a state’s coast even for the state of Florida, a state can only opt-in by an act of its legislature signed by the Governor or an act that has passed by a bicameral super majority margin (Off-shore drilling profoundly affects the adjacent state’s interests, respect for our nation’s commitment to states’ rights compelling calls for a state opt-in approach). Some of the energy bills bantering around Congress call for a 37.5% split to the states on royalty and other revenue coming to the government from such off-shore leases, a state cut of anywhere from 37.5% to 45% seems fair and should be written into the bill. Members of Congress even from the states where off-shore drilling is being authorized with this bill should be able to find a way to support these provisions because for any off-shore drilling to occur the affected state has to opt-in so that affected state’s interest are not harmed by the bill itself; to reiterate, nothing happens off a state’s coast unless the affected state wants it to happen.

    The compromise bill should authorize the leasing of a specific large amount of Federal Land in the states of Colorado, Utah and Wyoming for oil shale drilling. The technology exists to do such drilling, such drilling only poses the same environmental danger as some types of currently seen drilling for oil and gas, the coastal states are being asked to help add production with this bill so non-coastal states should be asked to help it is only fair. Also, in the spirit of being fair there should be an opt-in requirement by the affected state for such oil shale drilling to occur. Technically, Congress isn’t breaking new ground here with this initiative; Congress with the Energy Policy Act of 2005 authorized the Secretary of the Interior to make such oil-shale leases (See 109 Pub. Law 58 Sec. 369). This compromise bill should mandate that all oil or gas produced on any lease of public lands initiated after the enactment of this bill whether or not on-shore or off shore produced cannot be exported; otherwise America’s goal of being energy independent will always be in jeopardy.

    Congressional leaders should drop any pursuit for drilling in the Artic National Wildlife Refuge in Alaska in this bill; the bill will have enough increasing supply provisions in it. Further reasons are; it invokes such passionate opposition amongst a high number of Americans, developing ANWR for energy production even under the best of conditions will have a negative environmental impact on the region (one will have to build all the roads needed for the oil production infrastructure and pipelines will need to be built), to build all the needed infrastructure will take at least eight to ten years (not exactly providing help for American families today) and the amount of oil likely to be produced is not that significant that it will have a profound price on petroleum prices the America people pay when it comes on line.

    On the flip side of the increasing supply issue, the compromise bill should contain provisions mandating energy companies initiate and maintain good levels of oil and/or gas production from the leases they currently have or lose those leases to other energy companies that will conduct such production. Currently, a lessee stays out of trouble in the area of production levels if the lessee is producing oil and/or gas from the lease in “(royalty) payable quantities”, this standard is too low, it does not factor in the production potential of the lease, the standard should be the lessee is required to exercise reasonable diligence to fully develop the lease for the production of oil or gas. The House’s bill called the “Drill Responsibly on Leased Land” Act, H.R. 6515, contains provisions directing the Department of the Interior to come up with standards on what reasonable diligence means, this should be done – this Federal organization should be experts in this area, they should be able to set minimum due diligence standards for all types of leases, defining how many test wells should be drilled how quickly and how quickly should full production be underway on a lease and what full production means in regard to how many wells drilled, etc. and remember this a minimum standard, this standard is only looking to have lessees act in the realm of reasonableness. The compromise bill should require these due diligence requirements and standards be made part of every lease entered into by the Federal Government going into the future and the Federal government to terminate all non-compliant leases, this is clearly fair because the energy companies will be on clear notice of what is expected of them in the future and if they are not interested in abiding by the due diligence standards they can just not bid on the leases. With respect to past leases the Federal government should apply these standards to any lease that is ten years or older (this time frame provides for fair treatment of the lessee) and the lessee should be given seven years to get in compliance (this is only for lessees that are currently meeting the payable quantity standard) or else be subjected to losing their lease for non-compliance on the condition of due diligence (If in noncompliance, they would be permitted to continue the lease until a new lessee is found and they would be given fair market value for any infrastructure remaining on the leased land that the new lessee uses.). This is fair to the energy companies because the current law authorizing off-shore leases spells out in the statute that there is a condition of due diligence for these leases and for on-shore leases, it is a lease, a contract and common law requires a condition of fairness goes with any contract and it is only fair on a contract to extract minerals from public lands there would be a condition to exercise reasonable diligence on the lessee’s part in conducting that extraction. Strict due diligence requirements aren’t a novel concept with mineral leases, Congress in the Energy Policy Act of 2005 stated the Secretary should establish work requirements and production milestones on lessees for oil shale leases (See 109 Pub. Law 58 Sec. 369).

  2. Mr. H.

    Mr. H. Diamond Member

    Aug 19, 2009
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