The U.S. House of Representatives passed an Interior Department budget for 2008 June 28 that could negatively effect oil and gas development.
The appropriations bill passed 272 to 155. Provisions in the legislation would delay planned exploration and production in Bristol Bay and force renegotiation of 1998-99 oil and gas leases that omitted royalty price thresholds.
The bill could delay oil and gas leasing in Bristol Bay by requiring further environmental impact studies.
The area, scheduled to be opened for leasing in the Minerals Management Service’s five-year lease sale plan, is estimated to hold approximately 23 trillion cubic feet of natural gas reserves, and millions of barrels of oil.
Bristol Bay, which is in Alaska’s North Aleutian Basin, is an important commercial fishing area with some of the world’s most coveted salmon runs. It was off limits to oil and gas leasing until January when President Bush lifted the restrictions.
Critics of the plan say the $7.5 billion in anticipated revenue from oil companies could be a poor trade-off for the $2.1 billion annual commercial fishing industry in Bristol Bay.
The bill calls for the MMS, the U.S. Geological Survey, the General Accounting Office and several other federal agencies to conduct in-depth analyses of exploration in the basin.
Price threshold omissions costly
House Democrats say the royalty price threshold omissions are costly mistakes.
The GAO estimates some $1 billion in royalties have already been lost, and the price threshold omissions could cost taxpayers another $9 billion in future royalties.
Six companies, including BP PLC, Royal Dutch Shell, ConocoPhillips and Marathon, have agreed to pay royalties on the leases for production from October 2006, but they represent only a fraction of the total number of lease holders.
About 40 companies, controlling 80 percent of total offshore oil and gas production, haven’t agreed to renegotiate their leases. They include Exxon Mobil Corp, Total SA, Chevron Corp. and Anadarko Petroleum Corp., according to the Interior Department.
The Senate Appropriations Committee voted against a similar provision in its Interior budget plan a few days before the House vote.
President Bush also has threatened to veto the bill, saying the proposed plan exceeds spending limits, and he is opposed to forced lease renegotiations.
Under the appropriations bill, companies that refused to renegotiate their leases wouldn’t be eligible for new federal lease sales.
