ENERGY POLICY:

Obama admin, Congress focus on offshore drilling and renewables

Senior Interior Department officials will be on Capitol Hill tomorrow to discuss oil and gas drilling and renewable energy development on land and offshore as momentum builds toward possible comprehensive energy bills in the House and Senate.

In the House, the Energy and Mineral Resources Subcommittee will hold the latest in a series of hearings on petroleum development on the outer continental shelf, or OCS, that will feature an official with the Minerals Management Service, Interior's acting inspector general and a Government Accountability Office expert.

The House hearing is expected to explore allegations that oil companies are failing to produce energy from tens of millions of acres of existing leases on federal lands and waters even as the industry is pressing for new areas to be made available, among other OCS drilling issues.

Interior Secretary Ken Salazar is slated to appear tomorrow before the Senate Energy and Natural Resources Committee, where Chairman Jeff Bingaman (D-N.M.) plans to introduce and mark up a broad-based energy bill before the Easter recess. Bingaman's bill is expected to cover a range of energy efficiency, transmission, research and development issues.

But it remains unclear how Bingaman will address regulations that cover oil and natural gas on land or offshore. "The comprehensive energy bill we are working on will have an oil and gas supply component to it," said Bingaman spokesman Bill Wicker, declining to provide further details.

It appears unlikely the bill will try and redraw lines regarding where leasing can and cannot occur, which is in flux following the expiration of OCS leasing bans last year.

The Obama administration is still formulating its position on where new leasing may be allowed. In February, Salazar delayed a Bush-era proposal to allow much wider coastal leasing to study the issue further, while Bingaman in January said he would "like to know what their view is before we settle on ours."

Beyond leasing questions, a host of royalty and other issues surrounding oil and gas development are in play.

President Obama's fiscal 2010 budget plan calls for several changes, including new fees on nonproducing Gulf of Mexico leases, part of a "use it or lose it" strategy Democrats say is needed to encourage production from acreage already offered for leasing.

House Natural Resources Chairman Nick Rahall (D-W.Va.) has championed plans that would prevent companies from obtaining new federal leases unless they are already producing from their current leases or "diligently developing" them.

Industry officials have derided the idea as a gimmick. A top Chevron Corp. executive, in testimony to Rahall's committee last month, said the "existing regulatory process and basic economics ensure that leases are developed in a diligent manner."

Other plans in Obama's budget include new fees on companies to fund processing of permits for oil and gas drilling on public lands, and increasing the return from oil and gas production by revising the royalty system and adjusting rates.

Tough questions

Salazar will likely face some tough questions about onshore energy development from Republicans, who say his early moves as secretary have all been aimed at slowing production.

In early February, Interior canceled oil and gas leases on 77 parcels of federal land in Utah and launched a review to see whether they were appropriate for leasing. Also last month, Salazar halted Bush administration oil shale research and development leasing efforts, saying he would offer "new and fair" lease terms after seeking public input.

Salazar is still reviewing commercial oil shale regulations for millions of acres in the West that were put in place months before Bush left office, but he has been openly critical of them.

Senate Energy and Natural Resources Committee ranking member Lisa Murkowski (R-Alaska) used the confirmation hearing for Interior deputy secretary nominee David Hayes last week to rail against Obama's energy policies, saying the administration's 2010 budget blueprint is "a war on domestic production." She said punishing the oil and gas industry will not bring the age of renewable energy any faster.

Murkowski said she hesitated to bring up the issue at a confirmation hearing, but that she did not get many opportunities to directly address administration officials about it. Having Salazar before the panel this week will provide her another chance.

At the same hearing, Sen. Bob Bennett (R-Utah) went on a self-described "rant" over the Obama administration deciding "by fiat" to pull back the Utah leases. He said the process had taken years and had full environmental review, and that the Obama administration is sending a message that it "doesn't really care" about the law.

Hayes said Salazar is committed "with vigor" to responsible oil and gas production on public land and said many contentious development issues can be resolved by reaching consensus and using tools such as land exchanges, habitat conservation plans and others. The committee will vote on his nomination Wednesday (see related story).

Salazar also has focused on renewable energy on public lands, which he likely will emphasize at the hearing. Last week he signed a secretarial order formally establishing a task force to help the department identify specific renewable energy zones on public lands.

Interior will also work with other federal agencies, tribes and states to determine where transmission corridors are needed, Salazar said. The department has already identified about 5,000 miles of transmission corridors in the West and needs to "move that forward to conclusion," he said last week.

Senate focus on offshore renewables

The Senate hearing is also slated to delve into years-old questions about how federal officials will oversee fledgeling efforts to tap offshore renewable energy such as wind and wave resources.

The 2005 Energy Policy Act handed leasing and oversight to the Minerals Management Service, but questions remain about whether MMS will work with the Federal Energy Regulatory Commission.

In addition to Salazar, the hearing will include FERC Commissioner Philip Moeller, and a partner with Pacific Energy Ventures, an Oregon-based company seeking to develop offshore renewables projects.

Bingaman's spokesman said it is possible that the upcoming energy bill could include clarification to end the inter-agency dispute between FERC and MMS but said it depends what lawmakers learn from Salazar and FERC at the hearing. In addition, MMS is currently working to finalize a rule on offshore renewable energy leasing.

Nine Northeastern lawmakers -- including Delaware's delegation and both Rhode Island senators -- wrote to Salazar last week asking for fast action to finish the regulation.

The letter also calls on Salazar to prevent "claim jumping" on rights to offshore tracts that could be used for wind projects. "Specifically, we are concerned that -- prior to the final issuance of the overdue offshore wind energy rule by the MMS -- those seeking to develop other renewable resources will effectively block access to areas that have been under study for years by offshore wind developers," the letter states.

The lawmakers say this is a problem because FERC today can issue offshore permits for ocean hydropower projects in waters that offshore wind developers have been studying for years, but the offshore wind developers cannot file applications absent the MMS final rule. The letter likens the issue to speculators scooping up domain names in the early days of the Internet and then reselling them at inflated prices.

Click here to read the lawmakers' letter.

Senate schedule: The Energy and Natural Resources Committee hearing is tomorrow at 10 a.m. in 366 Dirksen.

Witnesses: Interior Secretary Ken Salazar; Philip Moeller, commissioner, Federal Energy Regulatory Commission; Joanna Prukop, Cabinet secretary, Energy, Minerals, and Natural Resources Department, state of New Mexico; Dan Arvizu, director, National Renewable Energy Laboratory; Robert Bryce, author and energy journalist; George Cooper, Theodore Roosevelt Conservation Partnership; Steve Kopf, Pacific Energy Ventures.

House schedule: The Energy and Mineral Resources Subcommittee hearing is tomorrow at 10 a.m. in 1324 Longworth.

Witnesses: Chris Oynes, associate director, Offshore Energy and Minerals Management Program, Minerals Management Service; Mary Kendall, acting inspector general, Interior Department; Frank Rusco, director, Natural Resources and Environment, Government Accountability Office; and Tom Fry, president, National Ocean Industries Association.

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