- The Washington Times - Thursday, July 20, 2006

U.S. petroleum imports last year exceeded 5 billion barrels, which reflected a 170 percent increase compared to 1985 and cost nearly a quarter of a trillion dollars. At an easily conceivable average price of $75 per barrel, the cost for that level of petroleum imports would rise by more than 50 percent, reaching $375 billion per year. Last weekend, even the disparate leaders of the Group of Eight reached a consensus projecting that worldwide demand for fossil fuels (e.g., oil, natural gas and coal) would increase by 50 percent by 2030.

To its great credit, the House recently reached a bipartisan agreement that has the potential to significantly increase production of oil and gas on the Outer Continental Shelf (OCS), where federal moratoriums have prevented drilling in most areas beyond the western Gulf of Mexico.

Last week, Senate Energy and Natural Resources Committee Chairman Pete Domenici apparently forged a more limited agreement that would open 8 million acres in the eastern Gulf to drilling, including a section known as Lease Area 181, which contains an estimated 1.25 billion barrels and 5 trillion cubic feet of gas. To achieve this limited step, Mr. Domenici said he agreed to provisions “granting coastal states” — i.e., a recalcitrant Florida — “a 125-mile buffer through the year 2022 and establishing a revenue-sharing system for the Gulf-producing states.”

We, of course, much prefer the far more expansive House bill. However, given the reasons outlined above, it is imperative that increased drilling on the OCS, which the politically based federal moratoriums have effectively precluded over the last 25 years, begin as soon as possible. Moreover, while there is no principled reason to lavish royalties on the coastal states for oil and gas production in federal waters, if increased royalties provide the grease to jump-start an expansion of OCS drilling, they are a price worth paying. Given the outstanding environmentally related performance of the Gulf’s oil and gas rigs during the Katrina and Rita hurricanes last year, we are confident that increased OCS drilling will replicate the environmental advancements that the greatly improved drilling technologies demonstrated last year.

We consider Mr. Domenici’s agreement to be an early investment whose almost-certain success will pay much greater dividends in the future. Mr. Domenici has labored mightily throughout this Congress to make whatever progress he could on multiple energy fronts (wind power, nuclear power, refinery construction, etc.). When he says that this is the “best single energy arrangement we can make for the American people this year,” we take him at his word. And when Mr. Domenici says his agreement can overcome a filibuster, we hope his vote-counting skills are as good as his legislative skills.

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