OIL AND GAS:

'Gang of 10' nears roll out of energy plan as floor talks collapse

The collapse of Senate leadership negotiations over energy legislation is prompting greater attention on a bipartisan group planning to roll out a proposal they say would require concessions from both sides.

The so-called Gang of 10 is planning to unveil a framework this week that relaxes oil-and-gas leasing bans on the outer continental shelf (OCS), coupled with conservation and alternative energy measures. The group, led by Sens. Kent Conrad (D-N.D.) and Saxby Chambliss (R-Ga.), has been meeting frequently in recent days and weeks.

"I think they have become very important," said Sen. Lamar Alexander (R-Tenn.), the chairman of the Senate Republican Conference.

Members of the Gang of 10 also have called for a bipartisan energy summit. Majority Leader Harry Reid (D-Nev.) yesterday wrote to Minority Leader Mitch McConnell (R-Ky.) stating they should together take the group up on its call for a summit to address various dimensions of energy policy, such as economic security, global warming and our "addiction to oil."

Reid cited the current impasse over the speculation bill, S. 3268, which Republicans want to amend with offshore drilling and other production measures -- and extension of renewable energy tax credits. "Given we have been unable to make progress on these measures, I think it is important that we both look at other ways to break the current legislative impasse on energy," Reid wrote.

Other members of the Gang of 10, which is modeled on the Gang of 14 that in 2005 that helped broker a deal on judicial nominees, are Sens. John Thune (R-S.D.), Ben Nelson (D-Neb.), Lindsey Graham (R-S.C.), Blanche Lincoln (D-Ark.), Mary Landrieu (D-La.), Johnny Isakson (R-Ga.), Bob Corker (R-Tenn.) and Mark Pryor (D-Ark.).

A Democratic aide close to the process said it was a serious effort, with daily meetings at the member level. "I don't want anyone to have the misconception that is some show caucus that announces something and then has their LAs [legislative assistants] talk from time to time," the aide said.

Oil taxes, royalties in play?

Lawmakers and aides say the Gang of 10's plan will be comprehensive, encompassing domestic production, alternative transportation fuels and measures to reduce energy demand.

"Hopefully, we can get something out there that can be talked about over the August break," Thune said yesterday. "We will continue to build support and expect that when we get back, the leaders ought to move on this and give us a chance to debate it and get it voted on."

The framework is expected to include changes to the structure of drilling bans that currently cover both coasts and the eastern Gulf of Mexico.

The Democratic aide, stressing the plan is not finalized, said OCS proposals floated in the negotiations have included a systems in which the bans would change depending on the distance from shore.

For instance, one approach includes a zone closest to shore where they are retained, followed by an area where states would have discretion over whether to OCS leasing would be allowed, while the bans would be lifted even further out.

"The consistent theme to all the zone proposals is a system by which the state authority diminishes and the federal authority increases the further you get offshore," the aide said. Another idea floated would create compacts of coastal states that would make decisions jointly about leasing in the region.

The expanded leasing would be coupled with a share of offshore oil-and-gas development revenues for the states that have leasing in adjacent OCS regions.

This aide also said that repealing a moratorium on commercial leasing for oil shale in Western states, which Republican leaders have been pushing for, was not expected to be included, nor is drilling in the Arctic National Wildlife Refuge.

Offshore drilling is one of the stickiest issues because relaxing leasing bans faces heavy -- though not unanimous -- opposition in the Democratic caucus. Thune said yesterday that the proposal is being crafted with the goal of winning 60 votes in mind (E&ENews PM, July 30).

But "there will be some pain in this for Republicans, too," he added.

Another Senate aide said one idea being explored would repeal the Section 199 deduction on domestic manufacturing for oil producers, which would raise billions of dollars, while the Democratic aide said changes in royalty rates is also under consideration.

To date, most GOP lawmakers have strongly opposed repealing oil industry tax incentives.

The brewing Senate effort comes as a bipartisan group of 13 House members is also proposing a plan that links wider offshore drilling with renewable energy. But a proposal to ease OCS leasing bans faces very high hurdles due to opposition by Democratic leaders, especially House Speaker Nancy Pelosi (D-Calif.), who has not allowed a vote on the issue.

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