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US Congress Opens 8.3 Million Acres in Gulf of Mexico to Oil and Gas Drilling

In its last roll call vote of the 109th Congress, the US Senate on Saturday passed by a 79-to-9 vote final legislation that includes the Domenici-Landrieu Gulf of Mexico Energy Security Act, S. 3711. The House had passed its version of the bill on Friday with a 367-45 vote.

Coauthored by Sen. Mary Landrieu (D-LA) and Senate Energy Committee Chairman Pete Domenici, (R-NM), and endorsed by the White House in July, the plan opens 8.3 million acres in the Gulf of Mexico to new oil and natural gas production and shares 37.5% of the new revenues with Louisiana, Texas, Mississippi and Alabama.

The funds are specifically dedicated to coastal wetlands restoration, hurricane protection, levee and flood control projects in the four energy-producing states. An additional 12.5% is dedicated to the state side of the Land and Conservation Fund, which funds the acquisition of parks and green spaces across the country.

The legislative package also includes several key tax provisions, including a two-year extension of the Gulf Opportunity (GO) Zone tax incentive that provides strong motivation to invest in the Gulf Coast. The measure will now go to President Bush for his signature.

The area opened by the legislation for drilling is projected to produce enough natural gas to sustain more than 1,000 chemical plants for 40 years, and enough oil to keep 2.7 million cars running and 1.2 million homes heated for more than 15 years, according to the bill’s sponsors.

The Gulf Opportunity (GO) Zone tax incentive passed in 2005 allows businesses to take a 50% tax reduction for new facilities or equipment in areas impacted by Hurricanes Katrina and Rita. Current law requires that businesses put new facilities or equipment in place by the end of 2008, but the package will extend the benefit until 2010.

Other energy tax provisions in the legislative bundle included:

  • Extending of credit for electricity produced from certain renewable resources. This Section 45 extension for one-year is critical to continued installation of commercial electricity generation projects from wind and solar sources.

  • Extending of tax credit to holders of clean renewable energy bonds.

  • Modifying of the clean coal gasification tax credit by providing a technical fix to the 2005 Energy Policy Act by setting a different reduction target for sulfur dioxide emissions from sub-bituminous coal in order to qualify for investment tax credits for installing clean coal technology.

  • Extension of deduction for energy efficient commercial buildings extending for one year a deduction for energy-efficient commercial buildings that reduce annual energy and power consumption by 50 percent.

  • Extension for one year of a business credit to eligible contractors for building energy efficient new homes.

  • Extending for one year a residential credit of 30% for purchasing qualified photovoltaic property and solar water heating property, and for qualified fuel cell power plants.

  • Extending for one year a 30 % energy credit for the business installation of qualified fuel cells, stationary microturbine power plants, and solar equipment.

  • Extending a reduced excise tax rate for qualified methanol or ethanol fuel produced from coal.

  • New special depreciation allowance for cellulosic biomass ethanol plant property.

  • Modification of the coke and coke gas production tax credit.




The bill is long on words and I'm short on time and expertise.

What did the major environmental groups say about the bill? What are the good bits? The bad bits?

I'm not thrilled about the Gulf states getting a far bigger piece of the pie (at the expense of the residents of the other 46 states), but if that money is being used to repair and protect the coastal environment for both flora, fauna, and people, then I'm not so upset by it. I do know that the wetland erosion is a big factor in the damage caused by hurricanes and floods, and so restoration of those areas will be a big factor in a long term plan for preserving that area for people.

So -- anybody know what the major eco-politico groups are saying about this bill?


Talk about your Christmas tree. While I generally favor tax credits that encourage renewable energy, as usual the congress seems to take the approach that our dependence upon fossil fuels only requires one year credits for renewable fuels. I suspect they don't want people seeing the long term deficit impact of these various initiatives. Unfortunately, the one year approach hampers long term and continuing investments in solar and wind. We need 10 or 20 year time horizons, not one.

As an aside, while I favor credits for renewable energy, I don't favor congress' irresponsible approach of not raising offsetting taxes or expenditure reductions. But I guess the American people are so used to the free lunch approach to governance that they would never put up with a responsible fiscal policy. There is no evidence that the Democrats will change this disastrous approach.

Note to younger generations: Speak up now or expect to be screwed for decades to come.


It amazes me that an industry that made more than $100B in profits last year would need even more incentives to drill in the Gulf of Mexico. It is not like they do not want to make more money.

"The legislative package also includes several key tax provisions, including a two-year extension of the Gulf Opportunity (GO) Zone tax incentive that provides strong motivation to invest in the Gulf Coast."


"Louisiana, Texas, Mississippi and Alabama."
This is great! All Red states.


They still have to pay back the bonds, loans, and debt they took out 5-20 years ago. After which they have investor dividends, capital investments, and other costs. The double shocks of 1986 and 1998, also have many middle and top industry executives looking in the rear mirror.
__That said, I do wish they invest much their new profits (after taxes and obligations) to diversify their company into the renewables sectors. BP is one example, with their solar operations. Perhaps instead of a profit windfall tax, Congress can pursue a higher corporate profit tax rate, WITH tax breaks on reinvestment of profits.


That way, you can carrot and stick them.


Oil guys know finance. They are long term player extraordinare. They know their bond picture and they know that tripling the price of oil on the futures markets with world uncertainty has made them very rich. They just don't know when to stop when it comes to enough. Lobbying has become a way of life for them.


The best news of this is the natural gas exploration, since it is a much cleaner enery source.

The continuation of incentives for clean coal gasification is good news too.
The 1 year extensions mentioned sure aren't ideal, but they are better than nothing. Besides, I'm sure they'll be extended again.



There are sizeable oil reserves off California and New York shores. For some reasons, these states prefer not to explore it.

Max Reid

No other go, we have to drill wherever little Oil is found.

But some day, more energy will be input to get oil than what it yields, and on that day the Oil companies will rush into Ethanol, Bio-Diesel, CNG, etc.

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