Outer Continental Shelf Leasing: Side-by-Side Comparison of Five Legislative Proposals

Outer Continental Shelf Leasing: Side-by-Side
Comparison of Five Legislative Proposals
Updated September 17, 2008
Marc Humphries
Analyst in Energy Policy
Resources, Science, and Industry Division



Outer Continental Shelf Leasing: Side-by-Side
Comparison of Five Legislative Proposals
Summary
This report provides a side-by-side comparison of three bills and two proposals,
each of which addresses oil and gas development in the outer continental shelf
(OCS). None of the bills has passed its respective chamber. One of the proposals,
H.R. 6899, the “Comprehensive American Energy Security and Taxpayer Protection
Act,” is expected to come to the House floor the week of September 15, 2008.
The moratoria on oil and gas leasing in much of the OCS has become a major
issue in Congress and also in the Presidential campaign. This report describes the
background of OCS leasing and the various positions taken by proponents and
opponents of leasing. It then compares the provisions of three bills that have been
introduced with reported summaries of the House proposal and the Senate proposal,
the “New Energy Reform Act of 2008.”
On September 16, 2008, the House passed H.R. 6899 by a vote of 236-189 and
defeated an alternative bill, H.R. 6709, by a vote of 191-226.



Contents
Recent Developments..............................................1
Background ......................................................2
List of Tables
Table 1. Comparison of H.R. 6566, H.R. 6670, H.R. 6709, H.R. 6899, and the
Senate Draft Energy Reform Act of 2008...........................4



Outer Continental Shelf Leasing: Side-by-
Side Comparison of Five Legislative
Proposals
This report provides a side-by-side comparison of three bills and two proposals
— H.R. 6566, H.R. 6670, H.R. 6709, H.R. 6899 (the House Leadership Proposal),
and the Senate Draft Proposal — which address oil and gas development in the outer
continental shelf (OCS). None of the bills has passed its respective chamber. The text
below provides background on the issues. The side-by-side table gives a description
of selected sections of the bills.
Recent Developments
President Bush announced on June 18, 2008, that he would like to open areas
of the Outer Continental Shelf (OCS) for oil and gas development currently under
presidential and congressional moratoria (discussed in more detail below). The
President stated that he would lift the executive branch moratoria only after Congress
did so legislatively. But, on July 14, 2008, President Bush reversed his position and
lifted the executive ban on the OCS imposed in 1990 by President George H.W.
Bush. Senator John McCain, among others, has called on Congress to lift the offshore
drilling moratoria as well. Further, the Administration proposes to begin planning
its next five-year leasing program that would, if approved, be implemented as early
as 2010 — two years ahead of schedule. The proposed new five-year program would
supersede the current five-year leasing program from 2007-2012. The
Administration argues that a new five-year lease program beginning in 2010 would
allow any newly opened OCS areas (if the congressional moratoria is lifted this year)
to be offered in a lease sale sooner than if they remained on their current schedule.
Since the President lifted the executive ban, members of Congress have
introduced legislation that would lift the congressional prohibition (in part or
completely) against leasing and development of oil and natural gas in the OCS. The
legislation section of this report summarizes several of those bills, including the
House Leadership proposal (H.R. 6899). Many in Congress, however, oppose lifting
the offshore ban. They argue that there are still several million acres leased onshore
and offshore but not yet producing and that production from these lands could
increase U.S. oil supply.
On September 16, 2008, the House passed H.R. 6899 by a vote of 236-189 and
defeated an alternative bill, H.R. 6709, by a vote of 191-226.
How much oil could be brought into production in the short-term (from non-
producing leased lands or those under the moratoria) and its impact on price is



uncertain. An attempt to lift the offshore moratoria with an amendment to the
FY2009 Interior, Environment, and Related Agencies Appropriations bill during the
House subcommittee markup was defeated by a vote of 6-9. Meanwhile, on June 26,
2008, under suspension of the rules (which requires a two-thirds majority for
passage), the House defeated a measure (H.R. 6251) that would have increased rental
fees on non-producing oil and gas leases, and denied new federal leases to those not
diligently developing the leases they have.
Background
Oil and gas leasing has been prohibited on much of the outer continental shelf
(OCS) since the 1980s. Congress has enacted OCS leasing moratoria for each of
fiscal years 1982-2006 in the annual Interior and Related Agencies Appropriations
bill (now the Interior and Environment and Related Agencies Appropriations bill),
allowing leasing only in the Gulf of Mexico (except near Florida) and parts of
Alaska. President George H.W. Bush in 1990 issued a presidential directive ordering
the Department of the Interior (DOI) not to conduct offshore leasing or preleasing
activity in areas covered by the annual legislative moratoria until 2000. In 1998,
President Clinton extended the offshore leasing prohibition until 2012.
Proponents of the moratoria contend that offshore drilling would pose
unacceptable environmental risks and threaten coastal tourism industries, whereas
supporters of expanded offshore leasing counter that more domestic oil and gas
production is vital for the nation’s energy security.
The Outer Continental Shelf Lands Act of 1953 (OCSLA), as amended,
provides for the leasing of OCS lands in a manner that protects the environment and
returns revenues to the federal government in the form of bonus bids, rents, and1
royalties. OCSLA requires the Secretary of the Interior to submit five-year leasing
programs that specify the time, location, and size of the areas to be offered. Each
five-year leasing program entails a lengthy multistep process that includes
environmental impact statements. After a public comment period, a final proposed
plan is submitted to the President and Congress. The latest plan went into effect July
1, 2002. Public hearings for the 2007-2012 leasing program are underway. States
and interest groups are filing comments on future lease sale areas for the 2007-2012
leasing program.2


1 43 U.S.C. 1331 et seq.
2 Federal Register Notice, 70 FR 49669.

States with energy development off their shores in federal waters3 have been
seeking a larger portion of the federal revenues generated in those areas. They
particularly want more assistance for coastal areas that may be most affected by
onshore and near-shore activities that support offshore energy development.
Proponents of these proposals look to the rates at which funds are given to
jurisdictions where onshore energy development occurs on federal lands within those
jurisdictions. Coastal destruction has received more attention in Louisiana —
especially hard-hit by hurricanes in 2005 — where many square miles of wetlands
have been lost to the ocean each year. Widespread energy-related development is
thought to contribute to coastal losses. Currently, the affected states receive some
revenue directly from offshore oil and gas leases in federal waters under section 8(g)
of OCSLA and under the Gulf of Mexico Energy Security Act of 2006. (P.L. 109-
432).4 This is in contrast to the 50% share of direct revenues to states that have
onshore federal leases within their boundaries. Opponents point out the budget
implications that would result from such a loss of federal revenues.


3 State jurisdiction is typically limited to three nautical miles seaward of the baseline from
which the breadth of the territorial sea is measured. However, the state jurisdiction off the
Gulf Coast of Florida and Texas extends nine nautical miles and for Louisiana, three
imperial nautical miles. Federal jurisdiction extends, typically, 200 nautical miles seaward
of the baseline from which the breadth of the territorial sea is measured. One nautical mile
equals 1.15 statute miles.
4 The 8(g) revenue stream is the result of a 1978 OCSLA amendment that provides for a
“fair and equitable” sharing of revenues from section 8(g) common pool lands. These lands
are defined in the amendments as submerged acreage lying outside the three-nautical mile
state-federal demarcation line, typically extending to a total of six nautical miles offshore
but that include a pool of oil common to both federal and state jurisdiction. The states’ share
of the revenue (27%) was established by the OCSLA amendments of 1985 (P.L. 99-272) and
is paid directly to the states. Payments to the states previously had been placed in escrow,
which were then paid out between 1986 and 2001.

CRS-4
Table 1. Comparison of H.R. 6566, H.R. 6670, H.R. 6709, H.R. 6899, and the
Senate Draft Energy Reform Act of 2008
ProvisionH.R. 6566H.R. 6670H.R. 6709H.R. 6899(House-passed)Senate Draft EnergyReform Act of 2008
American Energy ActLong-Term EnergyNational Conservation,ComprehensiveNew Energy Reform
(Title I)Assurance and SecurityEnvironment, andAmerican EnergyAct of 2008
Act of 2008Energy ActSecurity and Taxpayer
(Title I)Protection Act
iki/CRS-RL34667Sec. 109. The SecretaryNo similar provision.No similar provision.No similar provision.No similar provision.
g/wof the Interior would
s.oras-onlyestablish regulations for
leaknatural gas-only leases
in the OCS. The value
://wikiof the leases for bidding
httppurposes would exclude
the value of any
potential crude oil.
However, oil could be
produced if the adjacent
state government did
not object.
ation ofSec. 109. An annual No similar provision.No similar provision.Sec. 131-134. LesseesNo similar provision.


conservation ofwithout price threshold
resources fee of $3.75in their leases would
per acre would benot be eligible for

CRS-5
ProvisionH.R. 6566H.R. 6670H.R. 6709H.R. 6899(House-passed)Senate Draft EnergyReform Act of 2008
established and appliedfuture leases in the Gulf
to new and existingof Mexico unless they
non-producing leases.amended lease to
include price threshold
levels, paid
conservation of
resources fees, or
agreed to pay fees.
iki/CRS-RL34667Conservation of
g/wresources fees would be
s.orestablished at $9.00 per
leakbarrel of oil and $1.25
per million Btu of
://wikinatural gas (in 2005
httpdollars). An annual fee
of $3.75 per acre would
be established on all
nonproducing offshore
leases.
ySec. 122. GOMESASec. 101. AmendsSec. 101. GOMESANo changes toSec. 401. Would open
Act of 2006would be repealed.GOMESA to allowwould be repealed.GOMESA.the Eastern Gulf of
drilling in the EasternMexico in areas beyond
432)Gulf of Mexico beyond50 miles off the
100 miles of the Floridacoastline for oil and
coastline.natural gas leasing, but



CRS-6
ProvisionH.R. 6566H.R. 6670H.R. 6709H.R. 6899(House-passed)Senate Draft EnergyReform Act of 2008
only after consultation
with the Secretary of
Defense.
ation of LandsSec.111. Section 12 ofSec. 123. OCSSec. 101. OCSWould allow states to Sec. 401. The
htsOCSLA would bemoratoria/withdrawalscongressional moratoria“opt-in” to oil and gassoutheastern states
whereamended (43 U.S.C.are terminated outsideare repealed but leasesdevelopment 50-100(Virginia, North
can take place)1341). Definesthe Gulf of Mexicomay not be issuedmiles off their coasts ifCarolina, South
iki/CRS-RL34667presidential withdrawalauthority and limits tobeyond 100 miles of thecoastline. A Governorwithin 25 miles of astate’s coastline. Thea state legislature enactsa state law authorizingCarolina, and Georgia )may submit a petition
g/w25% the amount ofof a state outside thesecretary may not issueoil and gasfor approval to the
s.or
leakacreage withdrawnGulf of Mexico mayleases in areas betweendevelopment.Secretary of the Interior
beyond 100 miles fromsubmit a request to the25-50 miles off a state’sto conduct an oil and
://wikiany coastline. TheSecretary of the Interiorcoastline if the stateBeyond 100 milesnatural gas lease sale
httpareas within 50 miles ofto lease for oil andpasses a law, within oneoffshore in areas nowbeyond 50 miles from
the state’s coastlinenatural gas between 25-year of enactment ofunder the congressionalits coast.


would be off-limits100 miles of a state’sthis act, disapproving ofmoratoria would be
unless states submit acoastline if the coastalsuch leases. open to oil and gas
petition for leasing tostate passes a law todevelopment.
the Secretary of theauthorize such request.
Interior. The acreageNational Marine
between 50 and 100sanctuaries, national
miles from the state’smarine monuments, and
coastline would bethe Georges Bank (in
available for leasingthe North Atlantic
unless the statePlanning Area) would

CRS-7
ProvisionH.R. 6566H.R. 6670H.R. 6709H.R. 6899(House-passed)Senate Draft EnergyReform Act of 2008
petitioned the Secretaryremain off-limits.


for a withdrawal from
leasing for a five-year
period. The state may
request a five-year
extension for
withdrawal multiple
times. There would be a
iki/CRS-RL34667prohibition of leasing
g/weast of the military
s.ormission line as defined
leakin the bill unless a
waiver is granted by the
://wikiSecretary of Defense.
http

CRS-8
ProvisionH.R. 6566H.R. 6670H.R. 6709H.R. 6899(House-passed)Senate Draft EnergyReform Act of 2008
sposition of ReceiptsSec. 110. A revenueSec. 102. RevenueSec. 102. RevenueNo similar provision.Sec. 401. Revenue
evenue Sharing forsharing plan for coastalsharing (with limits)sharing with statessharing provisions in
leases) states would includewith the states wouldwould include revenuesthe bill would allow for
tracts within 100 milesinclude all qualifiedfrom qualified leases toSoutheastern states -
of the states’ coastlinesrevenues to bebe shared as follows:Virginia, North
and tracts beyond 100distributed as follows:30% to the general fundCarolina, South
miles of the states’25% to the general fundof the U.S. Treasury,Carolina, and Georgia
coastlines. Thereof the U.S. Treasury,30% to producingto receive 37.5% of
iki/CRS-RL34667would be phased-in25% to the Energystates, 40% split amongrevenues generated
g/wsharing and immediateIndependence andseveral reserve accountsfrom leases 50 to 100
s.orsharing for both areas.Security Fund that(e.g., Conservationoff their coasts. If two
leakUnder the phased-inwould be established byReserve, Environmentor more neighboring
plan, the states’ sharethe act, and 50% to aRestoration Reserve)states “opt-in,” then the
://wikiwould eventually reachspecial account for thethat would berevenue share would
http42.5% of the revenuesstates.established under thisincrease to 50%.
generated from offshoreact. Florida would receive
leases. Phased-in37.5% of the revenues
sharing would begenerated off its coast
different for thosein the Eastern Gulf of
leases held within 4Mexico.


marine leagues of a
state’s coastline. For all
areas the phased-in
sharing plan includes
lease tracts available

CRS-9
ProvisionH.R. 6566H.R. 6670H.R. 6709H.R. 6899(House-passed)Senate Draft EnergyReform Act of 2008
under the 2002-2007
leasing program in
effect prior to
enactment of this act,
and those lease tracts in
production prior to
October 1, 2005, that
were not available for
iki/CRS-RL34667leasing under the 2002-
g/w2007 leasing program.
s.orImmediate revenue
leaksharing of 42.5% would
occur from offshore
://wikileases not under the
httpphased-in plan.
The allocation of
royalty revenues for
tracts between 4 marine
leagues and 100 miles
and those beyond 100
miles would be shared
among producing states
that have a coastline
point within 300 miles



CRS-10
ProvisionH.R. 6566H.R. 6670H.R. 6709H.R. 6899(House-passed)Senate Draft EnergyReform Act of 2008
of any portion of the
leased tract: 1/3 to the
adjacent state and 2/3 to
each producing state
inversely proportional
to the distance to the
nearest point of the
coastline of the
iki/CRS-RL34667producing state and the
g/wgeographic center of the
s.orleased tract. This
leaksection also includes
language that would
://wikishare only 25% of OCS
httprevenues from lease
tracts partially or
completely beyond 100
miles if no leasing is
allowed within any
portion of a state’s
adjacent zone within
100 miles of its
coastline.
ent DevelopmentSec. 121-124. Secretary
of the Interior shall



CRS-11
ProvisionH.R. 6566H.R. 6670H.R. 6709H.R. 6899(House-passed)Senate Draft EnergyReform Act of 2008
establish what
constitutes diligent
development. Secretary
shall provide resource
estimates for onshore
and offshore oil and
natural gas (on lease
and unleased acreage)
iki/CRS-RL34667S RoyaltiesSec. 141-145. The
g/wSecretary may take
s.or
leakroyalty payments
in-kind and work to
://wikiensure that royalty
httppayments are accurate
and timely. Ethics
training and a gift ban
would be implemented
at the Minerals
Management Service.
Sec. 102. states that it isNo similar provision.No similar provision.No similar provision.No similar provision.


U.S. policy that
adjacent states commit
significant resources to
development of

CRS-12
ProvisionH.R. 6566H.R. 6670H.R. 6709H.R. 6899(House-passed)Senate Draft EnergyReform Act of 2008
offshore oil and gas,
thus those states should
receive a portion of the
revenues generated
from offshore activities.
inistration ofSec. 108. AmendsNo similar provision.No similar provision.No similar provision.No similar provision.
Section 5 of OCSLA
iki/CRS-RL34667(43 U.S.C. 1334 ) andallows lessee to
g/wvoluntarily release a
s.or
leakportion of a lease in
which it has no interest
://wikiin producing and is
httpdeemed geologically
prospective by the
Secretary of the
Interior. The lessee, in
return would receive a
royalty incentive on the
portion retained. This
section also establishes
procedures for natural
gas-only leases.
ProgramSec. 112. Amends Sec.No similar provision.Sec. 102. SeeNo similar provision.No similar provision.



CRS-13
ProvisionH.R. 6566H.R. 6670H.R. 6709H.R. 6899(House-passed)Senate Draft EnergyReform Act of 2008
18 of 43 U.S.C. 1344.disposition of receipts
Would make availablesection above.
at least 75% of unleased
acreage and establish a
procedure for the
preparation of a
proposed leasing
program, including the
iki/CRS-RL34667preparation of a draft
g/wEnvironmental Impact
s.orStatement (EIS).
leak
Would also estimate
://wikistates’ adjacent zones
httpresources and share of
OCS revenues.
ironmental StudiesSec. 114. AmendsNo similar provision.No similar provision.No similar provision.No similar provision.


Section 20(d) of
OCSLA (43 U.S.C.
1346). Categorical
exclusions (CE) for the
need for an
Environmental
Assessment (EA) or
EIS including seismic

CRS-14
ProvisionH.R. 6566H.R. 6670H.R. 6709H.R. 6899(House-passed)Senate Draft EnergyReform Act of 2008
activities are
established. Exploration
plans would be no
longer subject to an EIS
and may be eligible for
a CE. An EIS would be
required only for the
first development and
iki/CRS-RL34667production plan within
g/weach OCS Planning
s.orArea. Future plans for
leakleased tracts within the
Area would require an
://wikiEA unless the EIS were
httpover 10 years old.
rmination of EffectSec. 115. All provisionsSee Sec. 123Similar provision.No similar provision.No similar provision.


aws Prohibiting theof existing lawsdescription above.
ofprohibiting the
spending of
appropriated funds to
conduct oil and natural
gas leasing and
preleasing activities in
the OCS would no
longer be in effect.

CRS-15
ProvisionH.R. 6566H.R. 6670H.R. 6709H.R. 6899(House-passed)Senate Draft EnergyReform Act of 2008
AreasSec. 120. Lessees mayNo similar provision.No similar provision.No similar provision.No similar provision.
ithin 100exchange their leases
held within 100 miles
orida of the coast of Florida
or California for oil and
gas or natural gas leases
in other parts of the
OCS available for
iki/CRS-RL34667leasing.
g/wastal ImpactSec. 121. Would repealNo similar provision.No similar provision.No similar provision.No similar provision.
s.or
leakSec. 31 of OCSLA (43
U.S.C. 1356a),
://wikiproviding Coastal
httpAssistance.
y IndependenceNo similar provision.Sec. 131. An EnergyNo similar provision.No similar provision.Sec. 401. An
FundIndependence andAlternative Fuel Trust
Security Fund would beFund would be
established to fundestablished to conduct
energy research andresearch, development,
development projectsand commercialization
including but notprograms in alternative
limited to wind, solar,fuels and alternative
geothermal, advancedfuel technologies.


vehicles, and carbon

CRS-16
ProvisionH.R. 6566H.R. 6670H.R. 6709H.R. 6899(House-passed)Senate Draft EnergyReform Act of 2008
capture and storage.
missionNo similar provision.No similar provision.No similar provision.No similar provision.Sec. 101. Would
yestablish a National
Commission on Energy
Independence to
examine technical and
policy obstacles to
iki/CRS-RL34667achieving U.S. energyindependence and make
g/w recomme ndations
s.or
leakto Congress and the
President.


://wiki
http