Week in News: October 1 – 7, 2007
Proposed wind farm gets gust of money Wilmington News Journal; September 28, 2007; http://www.delawareonline.com/apps/pbcs.dll/article?AID=/20070928/NEWS/709280334/1006/NEWS
Did oil producers know about Veco illegal acts? Anchorage Daily News; October 2, 2007; http://www.adn.com/news/politics/fbi/story/9348324p-9262039c.html
Reid wants to name Senate energy conferees this week E&ENews PM; October 2, 2007; http://www.eenews.net/eenewspm/2007/10/02/4/#4
Obstacles Ahead for Energy Conference Congressional Quarterly; October 3, 2007; http://www.cq.com/displayalertresult.do?matchId=47586994
Full Sale Ahead: Highly anticipated bidding for Gulf approaches record New Orleans Times-Picayune; October 4, 2007; http://www.nola.com/business/t-p/index.ssf?/base/money-1/119147974871700.xml&coll=1
Conference motion in Senate delayed until post-recess E&E Daily; October 5, 2007; http://www.eenews.net/EEDaily/2007/10/05/3/#3
Time to tap oil and gas tax revenue stream Shreveport Times; October 7, 2007; http://www.shreveporttimes.com/apps/pbcs.dll/article?AID=/20071007/OPINION03/710060316/1058/OPINION03
House Science panel to move on energy storage, oceans legislation E&E Daily; October 9, 2007; http://www.eenews.net/EEDaily/2007/10/09/#4
Proposed wind farm gets gust of money Wilmington News Journal; September 28, 2007; http://www.delawareonline.com/apps/pbcs.dll/article?AID=/20070928/NEWS/709280334/1006/NEWS
A proposed 150-turbine wind farm off Rehoboth Beach got a shot of financial steroids Thursday, after a global energy and investment company bought control of project developer Bluewater Wind LLC.
Australia-based Babcock & Brown acquired "a majority controlling stake" in Bluewater's business, according to both companies, giving the smaller Bluewater backing from a company with $50 billion in assets worldwide.
Word of the ownership change arrived as the Public Service Commission was slogging through Bluewater's proposal for a more than $1.6 billion, 450-megawatt project that would supply Delmarva Power under a long-term contract. The commission could issue a recommendation on Bluewater's proposal and a related plan for a backup natural gas power plant in Sussex County as early as mid-October.
"It certainly negates any fears that Bluewater Wind is an unknown or a fly-by-night," said Philip Cherry, a Department of Natural Resources and Environmental Control manager and one of four state agency representatives on a PSC review panel.
"Babcock & Brown is a huge company and a big wind developer," Cherry said. "I think clearly that enhances Bluewater Winds' proposal to have a company of this stature backing them and in partnership with them."
Although Bluewater has never built an offshore wind farm, its contractors and consultants have built offshore plants in Europe. Babcock & Brown brings wider experience to the table.
Delmarva Power pointed out late Thursday that Babcock & Brown recently abandoned a larger offshore wind project in Texas because of high costs and the availability of lower-priced alternatives, including land-based wind power. "We continue to be concerned about the cost of this project, because our customers would have to carry the cost in their monthly bills for 25 years," Delmarva spokesman Bill Yingling said. While Delmarva is still reviewing Bluewater's terms, Yingling said, "information continues to suggest that there are important alternatives that should be considered in this process."
Babcock & Brown owns or operates more than 1,700 megawatts of wind energy projects, including 850 megawatts in the United States. Another 4,200 megawatts are in development worldwide, the company said.
Approval in Delaware could make Bluewater this country's leading offshore wind producer. Another large-scale U.S. offshore wind project is under consideration in Massachusetts. Two others, including the Texas venture previously backed by Babcock & Brown, were shelved this summer because of high costs.
"Bluewater's success to date in Delaware and the positive feedback it has received in other states has convinced us that joining forces with Bluewater is the best course toward achieving our goal of commercializing offshore wind in the U.S.," said Hunter Armistead, head of Babcock & Brown's North American Energy Development Group.
State reviewing issue
Bluewater's original management team will continue to direct the Delaware project.
State officials were more cautious about the possible impact of Bluewater's purchase by Babcock & Brown.
"Certainly there are credit issues and project viability issues that play a role in the analysis," PSC Executive Director Bruce Burcat said. "I can't say without us doing a lot more review what kind of impact this will have."
Delmarva earlier this month said that it was unable to agree on key terms of Bluewater's latest offer, saying the plan appeared to create "unacceptable costs and risk" for its customers.
Details on Bluewater's potential cost to Delmarva's customers have yet to be calculated or made public.
State lawmakers ordered Delmarva Power to seek new, in-state sources of electricity to stabilize prices and supplies last year. The move touched off a months-long frenzy of studies, bidding, reviews and quarrels over electricity supplies and the costs of energy sources cleaner than conventional coal, oil and natural gas.
Bluewater originally proposed a 200-turbine project, but scaled it back to 150 during talks with Delmarva following a vote by the PSC and four state agencies charged with selecting the project.
Markian Melnyk, a Washington, D.C., attorney who specializes in utility and regulatory issues and who is writing a book on the wind power industry, said Babcock & Brown could improve Bluewater's chances.
"I think Babcock & Brown, with its financial expertise, can contribute to making these projects work," said Melnyk, who is familiar with both companies. "If you have a partner that's an investment banker and active in energy markets, that's a nice combination."
Offshore, land projects in works
Babcock & Brown already has tested similar waters elsewhere. The company in May called off plans to build a 500- megawatt offshore wind farm in the Gulf of Mexico off Padre Island, while moving ahead aggressively on land-based wind farms. The company also said that East Coast projects might be more promising for offshore wind because of higher regional energy prices and a scarcity of suitable onshore locations.
Timothy J. Considine, a professor at Pennsylvania State University's Department of Energy and Geo-environmental Engineering, said that offshore wind projects were being driven in part by state efforts nationwide to mandate use of cleaner, renewable energy sources by utilities.
Some investors are likely to find the eastern United States and mid-Atlantic particularly attractive for renewable energy projects, Considine said, because prices for competing energy sources already are high in that region. "There have been studies that have shown that these renewable energy standards will lead to substantial increases in electricity prices in the United States," Considine said. "If people want green power, they're going to have to open up their wallets and pay for it."
Did oil producers know about Veco illegal acts? Anchorage Daily News; October 2, 2007; http://www.adn.com/news/politics/fbi/story/9348324p-9262039c.html
On June 6 of last year, with the state House of Representatives poised to adopt a new 23.5-percent tax on oil production, Veco Corp. chief Bill Allen placed a phone call to the president of Conoco Phillips Alaska. The FBI was listening in.
"If there's any way we can get this thing stopped, that's the best possible outcome," says Conoco Alaska president Jim Bowles.
"It's just between me and you, but I got Pete Kott and Ben doing it," Allen tells the oil company executive.
Bowles doesn't ask how or why. Instead he stresses the importance of getting the House to adjourn. Later in the call, Allen returns to Kott and Ben Stevens, who at the time was president of the state Senate, and boasts they planned to force adjournment in a way that can't be traced.
"Well, that's ideal," says Bowles.
There's nothing in the brief conversation to indicate that Conoco knew Allen had paid bribes to Kott and Stevens, as Allen admitted doing in Kott's corruption trial in federal court in September.
But the wiretap recording of the call, along with other audio and video evidence presented by prosecutors in the Kott case, has raised new questions about oil company lobbying in last year's tax debate, drawing attention to relations between Alaska's major oil producers, Veco and the still-unfolding federal corruption investigation.
Was Veco lobbying on its own behalf or under instructions from BP, Conoco and Exxon -- "the three big boys," as anxious Veco officials call them on surveillance tapes? Did Veco have a long-standing agreement by which it received benefits for its political work, such as North Slope oil field service contracts?
And did the companies, whose officers and lobbyists worked side-by-side with Veco on the big oil-tax and natural gas-pipeline bills of 2006, know how far the company was willing to go?
SUSPICIONS AROUSED
Allen and another former Veco executive, Rick Smith, have pleaded guilty to conspiracy, bribery and extortion, and a jury convicted Kott on those charges last week. Since the conviction, local blogs and talk radio have been filled with questions about how much the oil producers knew.
Democratic legislators jumped into the fray Friday, calling on oil company chiefs to spell out any "coordination" between their companies and Veco during the oil tax debate. They said it is important to clear the air before the Legislature convenes in special session Oct. 18 for another look at the oil tax system. Republican Gov. Sarah Palin has said the tax eventually passed last year was "tainted" by corruption.
Rep. Les Gara and Sen. Hollis French, both Anchorage Democrats, wrote oil companies a letter asking if their representatives "ever discussed whether Veco would seek to influence legislators with campaign donations or other payments." They cited evidence from the Kott trial.
"How can you not ask the question with that evidence? Was Bill Allen their henchman?" said French.
In recent statements, all three oil companies denied knowing anything about the bribes or other crimes. Exxon, BP and Conoco said they have been told their employees are not under suspicion or being investigated.
"BP had no knowledge of any illegal activity that was taking place, and we condemn the behavior in the strongest possible terms," said BP Alaska spokesman Daren Beaudo .
Conoco Phillips Alaska president Bowles has declined to answer questions about Veco. His company released a statement that Bowles issued to company employees in the wake of the evidence presented in the Kott trial, in which he said he had no knowledge of illegal activities.
"Unfortunately, the government's corruption investigation of certain legislators and several former executives of Veco has cast a pall on the image of our company and our industry in Alaska," Bowles said. "It is impossible to prevent false rumors and innuendo, but times like these reinforce the importance of our absolute commitment to open, honest and ethical behavior."
As to any long-standing agreements with Veco about political influence, the companies declined to say anything.
CAMPAIGN MONEY TRAIL
Examination of the FBI recordings and trial testimony available so far in the federal corruption investigation reveals no clear evidence that the oil companies knew anything about bribed legislators.
That's not to say the record is complete, however. Recordings played for jurors in the Kott trial, relating specifically to the charges against him, add up to only a few hours. FBI officials say total intercepts in the Veco investigation, which covers other political figures as well, include more than 17,000 phone calls and at least 400 hours of video recordings from the company's bugged suite at Juneau's Baranof Hotel.
Veco, which started as an oil field services company, has been a prominent political player in Alaska for two decades.
The company has long been the biggest source of campaign money in Alaska, both on the state and federal levels. In the three campaign cycles before the 2006 tax fight, for instance, Veco officials donated five times as much money as officials from Conoco, Exxon and BP combined. Veco multiplied its influence by holding political fundraisers and bringing in checks from other sources.
Much of this money, Allen now admits, was reimbursed illegally to Veco officials through a special bonus program, in which the company provided executives money to give to favored candidates.
In the past, Veco officials said they were involved in campaigns because they wanted to see pro-development candidates elected. Allen offered a second reason for raising Veco's profile, when he testified in Kott's trial: growing competition for oil field work from Native corporations. And aside from its involvement in campaigns, Veco for many years had been a heavy, visible lobbying presence in Juneau, with Allen sometimes flying in to personally lobby lawmakers on bills affecting the oil industry.
But some dispute that Veco became a major political player strictly on its own.
Two former legislators told the Daily News in interviews last week they'd been told by Allen he answered to the major producers as he lobbied the Legislature -- at least in the years before 2006.
"There may be, and I think there is, culpability on the part of the producers," said Jim Whitaker, a former Republican state representative who is now the Fairbanks North Star Borough mayor and a proponent of a gas pipeline opposed by the major producers. "They were certainly aware of much of what Veco is doing. These are not naive people."
Whitaker recalled a conversation with Allen around 2000 about prospects for a gas pipeline.
"What Bill Allen told me in the course of that conversation was that the only person he listened to in regard to the gas line was the then-president of Arco Alaska, Kevin Meyers," Whitaker said. "He was the person that told Bill what to do regarding gas line issues."
Rick Halford, a longtime Eagle River lawmaker and former Senate president, said Veco's role was evident to most legislators.
"Everybody knew that Veco was representing the majors, but they were never saying it directly," Halford said.
Halford said he considered Allen a personal friend after taking him on a moose hunt, even though they clashed increasingly over oil policies. He recalled a meeting in his Senate office after BP proposed to buy Arco. Halford was a leader in the legislative opposition to the purchase.
"I can remember him telling me directly how much pressure BP was putting on him," Halford said. "Some people used to say Bill Allen was their designated hostage, to be tortured when the majors needed something. They tortured him with the contracts he needed to keep his people working."
Another perspective in circulation is that, by 2006, BP had come to view Veco with apprehension. Sen. Fred Dyson, R-Eagle River, said he heard as much from then-BP Alaska president Steve Marshall in a Capitol parking lot conversation during the oil-tax session. Dyson said he asked about the common perception in Juneau that Allen was working for the oil producers.
"He kind of scares us," Dyson recalled Marshall as saying. "We worry he'll screw up someday." The impression of Allen as chief political fixer was one promoted by Allen himself, the BP chief told him.
Dyson, who recently disclosed that he was working with the FBI during the 2006 sessions, added that he had no way of knowing whether Marshall's depiction was accurate, or an attempt to preserve a safe distance from Veco.
PRESSURE IN JUNEAU
In 2006, with oil taxes and a gas line deal looming, the oil companies hired additional lobbyists and sent officials to Juneau. Exxon reported spending more than $500,000 that year on lobbyists, Conoco $750,000, BP $1.2 million.
One picture that emerges from the FBI recordings is of Allen and Veco vice president Rick Smith, wound tight with anxiety as they weighed how their actions might be perceived by the oil companies. Plotting votes on the oil tax, they seem afraid to budge from the 20 percent tax to which they are somehow bound -- even when Kott, in May, says it would be good damage-control strategy to move higher.
"Pete, you might be right as rain, but how do we make a living?" Smith asked the legislator. Smith called their inability to move "a huge predicament."
The Veco bosses expressed resentment when other industry lobbyists take credit for their access to key legislators on Capitol Hill.
"They forget how they got introduced to them," Smith lamented in May.
"I think ol' Jim Bowles will remember me," Allen said. "That's all I care about, is ol' Jim Bowles."
Veco was pushing for a long-term tax deal on oil, which the major oil producers described as an essential step toward winning their support for a gas line.
A gloomy late-night conversation between Allen and Smith over drinks in the Baranof suite back in March seemed to set the tone for the months to come.
"Me and you, we have to f---ing produce. Right now," Allen says.
"Have to get dirty and have to produce. I understand that," Smith says.
"But our clients have to know what we've done," Allen says. "... Because it's so important to us. Your life and my life. Whatever the f--- I got to do, I'll do it. Right here, we've got to produce."
The recordings are revealing in subtle ways too, with Allen being deferential to Bowles just as Kott was deferential to Allen. In both relationships, the man higher up the food chain directs the conversation, the lower one listens for cues, seems to crave recognition and makes sure to claim credit.
Two days after his conversation with Bowles, the Legislature adjourned its first special session without a bill and Allen called the oil company president back. He left a voice mail message, mentioning Kott and Stevens again. "Remember what I told you," Allen said. "We got it done."
CASHING POLITICAL FAVORS
Critics, including French and Gara, have homed in on Allen's comments to Bowles about leaving no trace of who was responsible for killing the bill.
"There were rumors around the session that Veco was involved in vote-buying," Gara said. "Why would Jim Bowles be concerned about a legislator leaving fingerprints on a bill? That is an indication that somebody knew something was going on."
The secret recordings also turn up evidence of how political influence was seen by Veco as a kind of currency. In March, Smith received a call from Kott, who was in Washington, D.C., having drinks with Marathon Oil's director of government affairs. Marathon, with oil and gas operations in Cook Inlet, was concerned about how new oil taxes aimed at the North Slope would affect them.
"We've got to take care of Marathon in this deal. We can carve them out something," Kott says.
Smith evades the subject at first, then sternly tells Kott not to promise anything to Marathon.
"We went to bat for those guys in Cook Inlet, and they dumped us on the maintenance contract," Smith says.
Kott seems to snap to attention. "All right, you know where my allegiance is," he says.
As the basis for a criminal charge of wire fraud, the recording fell flat. Kott later voted in favor of a Cook Inlet deal helping Marathon, and this was the one count on which the jury acquitted Kott. But it seems revealing as a window into Veco's motivations and the dog-yard hierarchies among the companies.
OIL COMPANIES RESPOND
Exxon responded tersely to inquiries about the investigation with a written response that said only, "To the best of our knowledge, ExxonMobil is not the subject of any inquiry and we have received no indication from the government or other sources to suggest any actions by company employees were unlawful."
Exxon noted that Veco had contracts with the company cleaning up after the Exxon Valdez oil spill and on oil projects in Sakhalin, Russia. The company declined to answer specific questions.
BP was more forthcoming. Beaudo, the company spokesman, said federal investigators have been in touch with BP Alaska employees as part of the broader inquiry into Veco. Federal officials have indicated that no one at BP is under investigation or suspicion, he said.
"There has been a level of contact as part of the investigation," he said. "Any further detail about the extent of those contacts is best left to the investigating agencies."
As operator of most North Slope oil fields, BP had "significant" contracts with Veco, said Beaudo. Their lobbyists talked, and BP's name appears to have been on Veco's lips frequently. But the company had not asked Veco to do anything in Juneau on its behalf regarding the 2006 oil tax, he said.
"We were not asking others to carry our water," Beaudo said. "No one should be surprised that there was an exchange of information on an important policy position like this."
Beaudo declined to answer questions about pre-2006 relationships between his company and Veco regarding campaign finance and lobbying.
Reid wants to name Senate energy conferees this week E&ENews PM; October 2, 2007; http://www.eenews.net/eenewspm/2007/10/02/4/#4
Senate Majority Leader Harry Reid (D-Nev.) has not given up on a major energy bill this year and said today he intends to name conferees this week.
"Before the end of the week, I am going to move to go to conference on the energy bill," Reid told reporters in the Capitol this afternoon.
A Reid spokesman explained that the majority leader plans to offer a motion to appoint conferees.
Reid added that Sen. Maria Cantwell (D-Wash.) has surveyed GOP senators and determined "they want to go to conference on this." He was hoping to discuss the issue with House Speaker Nancy Pelosi (D-Calif.) today.
The Senate passed a major energy bill in June, and the House followed with its own broad package in August. The bills differ in several key respects. The Senate measure would raise auto efficiency standards and greatly expand the national renewable transportation fuels mandate. The House-passed bill would create a national renewable electricity standard and includes a package of renewable energy and efficiency tax incentives funded through higher taxes on oil companies.
Senate Energy and Natural Resources Committee Chairman Jeff Bingaman's (D-N.M.) staff recently held "walk- throughs" of the measure for House and Senate staff.
"The next thing up is to begin discussion on those provisions we hope we can get agreement on," Bingaman said today, adding that he is optimistic a bill can be completed this fall.
Asked if he thought there would be a formal conference on the bill, Bingaman said, "I just don't know."
Top Senate Democrats in recent weeks have said they want a formal conference but suggested Republicans would block the effort (E&E Daily, Sept. 12). But Sen. Trent Lott (R-Miss.), the minority whip, today said he does not believe this is the case.
"I think the problem is the Democrats can't figure out what to do because the two bills were absolutely diametrically opposed," he said. "Reconciling the two bills is going to be very tough, but I don't know of any effort to block it."
Lott also criticized what he called Democrats' unwillingness to seek greater conventional energy production alongside renewables and conservation.
Sen. Pete Domenici (R-N.M.), the ranking member of the Senate Energy and Natural Resources Committee, said he sees a chance for progress.
"If the Democrats want to sit down with Republicans and say let's try something, something might come up. I'm not blocking it," he said. "With the passage of each day, it's looking more and more like we want to salvage something."
Hoyer sees progress
Across the Capitol, House Majority Leader Steny Hoyer (D-Md.) told reporters today he thinks progress has been made on negotiations between the chambers, even without a formal conference. He wants to complete the conference before Congress adjourns for the year.
"I would think that we would have very significant progress if not completion on an energy conference report within the next six weeks," Hoyer said. Hoyer called the renewable electricity standard and fuel economy the two main differences. Bingaman similarly cited auto efficiency and the renewable electricity provisions as the most controversial issues. Bingaman favors a renewable power standard but the issue stalled in the Senate amid GOP opposition during the energy bill debate in June.
Obstacles Ahead for Energy Conference Congressional Quarterly; October 3, 2007; http://www.cq.com/displayalertresult.do?matchId=47586994
Senate Democratic leaders plan to begin formal discussions soon with the House over a comprehensive energy bill, despite procedural and substantive hurdles that could make it difficult to reach a compromise.
“Before the end of the week, I’m going to move to go to conference on the energy bill,” Majority Leader Harry Reid, D-Nev., said Tuesday.
The House and Senate passed major energy bills this year. However, they were separate measures (HR 6, HR 3221) instead of different versions under the same bill number. As a result, Republicans are questioning how the two chambers will be able to start a conference committee.
Democrats did not elaborate on the procedural steps they would take to appoint conferees, which can happen only if both chambers have passed measures with the same bill number.
“It’s still not clear exactly how it’s going to proceed,” said Jeff Bingaman, D-N.M., who chairs the Senate Energy and Natural Resources Committee.
Any motion to appoint conferees would likely require unanimous consent in the Senate, which Republicans could easily block. But Reid said he was confident that there would be a way to move the bill forward. “There are other ways of doing it if they won’t let us go to conference,” he said, but he wouldn’t elaborate.
House Democrats appear to be mulling their options while they wait to see if Reid is successful. “They’re moving forward, and we hope this will give us an idea of what’s feasible in the Senate,” said a Democratic aide.
The two chambers have held informal talks on the legislation. They recently completed a “walk-through” to familiarize staff with the two bills. Republicans initially refused to attend because of concerns about the procedural situation, but they eventually came to some of the walk-through talks.
“We do not have a conferenceable bill here because of the approach the Democrats have chosen to take,” said Matt Letourneau, communications director for Republican Pete V. Domenici of New Mexico, the ranking member on the Senate Energy and Natural Resources Committee.
In addition, the policy differences between the bills are substantial enough that reaching an agreement probably will be difficult.
The Senate bill would tighten fuel-economy standards for vehicles; the House version would not. The House legislation would set a new mandate for utilities to generate some electricity from renewable sources; the Senate bill would not.
Reid said those were the two most important issues in the bill. “But there’s dozens of others that are very important and sometimes very non-controversial things that we need to work toward,” he said.
But the ranking Republican on the House Energy and Commerce Committee said Democrats would be wise to simply start over.
“What’s passed the House and Senate I don’t think deserves to be conferenced,” said Joe L. Barton, R-Texas.
Full Sale Ahead: Highly anticipated bidding for Gulf approaches record New Orleans Times-Picayune; October 4, 2007; http://www.nola.com/business/t-p/index.ssf?/base/money-1/119147974871700.xml&coll=1 Rising oil prices, newly available acreage and recent discoveries made the federal Minerals Management Service's Gulf of Mexico oil and gas sale Wednesday the biggest in 24 years, with high bids totaling $2.9 billion, an amount exceeded only by the very first areawide lease sale in 1983, when high bids totaled about $3.4 billion.
Interior Secretary Dirk Kempthorne, who opened the sale Wednesday morning at the Sheraton New Orleans, compared the anticipation for the sale to the Oscars.
"We couldn't have come to this day at any more appropriate time," Kempthorne said, pointing to a growing world appetite for energy.
The secretary, who was attending his first lease sale, surprised Minerals Management Service staff by asking to read some of the bids. He further surprised the audience of more than 700 people as he kicked off the lease sale out of order, reading the bids for the most highly coveted block on Walker Ridge that garnered a $90.48 million bid from Shell Offshore.
Thirteen companies bid for that single block, but Shell trumped the next highest bid by more than $62 million. The block and several other nearby tracts leased Wednesday are in the area in which Chevron last year announced a discovery that could hold as much as 15 billion barrels of oil and natural gas.
Shell came out on top overall in Wednesday's sale, with 69 apparent high bids totaling $554.56 million.
"We're really happy," said Alex Herger, Shell's manager for Gulf of Mexico exploration. Herger and others at Shell have been preparing for Wednesday's sale for two years. "It's really nice to see Shell at the forefront of the Gulf again."
Herger said that the fierce competition for the blocks reinforced the company's research that the tracts were valuable.
The addition of the new tracts gives Shell a strong portfolio for the next decade, Herger said.
The competition among the 84 companies that participated in the sale surprised even Chris Oynes, association director of offshore minerals management for the Minerals Management Service, who served for 13 years as the regional director of the Gulf. A total of $5.25 billion was bid.
Of the 723 tracts receiving bids, more than one company bid on 286 of those tracts and 56 tracts received five or more bids.
Several things helped push the sale to the near record level, Oynes said.
The main factor, though, was that so much new land was available. An area of the eastern Gulf, a section of what is known as Area 181, was made available for the first time in 24 years, Oynes said.
Additionally, more than 1,000 blocks whose previous lease terms had expired were made available again. If a company has not had activity on a tract when the lease term expires, the tract is put up for lease again.
BP Exploration and Production, which had the highest number of high bids in the lease sale, made several bids to retain tracts it hasn't drilled, said Marti Powers, a spokeswoman for BP.
BP faced competition on 50 of the 125 blocks it bid on, Powers said. It was the apparent high bidder in only seven of those competitive bids.
Also driving activity was the technology that has allowed companies to drill deeper. The last time many of the tracts were available for lease, the technology wasn't available to drill to the necessary depths, Oynes said.
Advancing seismic technology also has allowed oil and gas companies to see the reserves under thick salt sheets for the first time, said Lars Herbst, regional director for the Minerals Management Service's Gulf region. Another factor encouraging deep-water activity is that pipelines and platforms that have been built in the deep- water Gulf make discoveries that might have been marginal more economical because the cost to get product to shore is reduced, Oynes said.
Higher oil and gas prices and the unstable politics of areas including South America and Russia are encouraging more activity in the Gulf, said Stephen Allred, assistant secretary of the Interior Department for lands and minerals management.
"You have to look at all of these things and perhaps surmise why bidding was more intense," Allred said.
Other companies that had a lot of winning bids included Cobalt International, a two-year-old company that had 53 high bids totaling $211.3 million; Chevron U.S.A., which had 44 high bids totaling $283.35 million; LLOG Exploration Offshore, a company based in Covington that had 28 high bids totaling $98.75 million; Marathon Oil, with 27 high bids totaling $221.71 million; Murphy Exploration and Production, with 26 high bids totaling $161.05 million; and Eni Petroleum, which recently purchased Dominion Exploration and Production's Gulf of Mexico assets, with 26 bids totaling $47.83 million.
"The main thing is the industry is out there trying to produce hydrocarbons, and this is one of the areas where there are still hydrocarbons available," said Tom Fry, president of the National Ocean Industries Association.
In a related matter, Kempthorne, in an interview Wednesday, said the department is still reviewing a report released late last month by the department's inspector general that was highly critical of the Minerals Management Service's handling of the royalty payments from oil and gas companies.
Kempthorne said that the review, which he requested, is being handed over to an independent commission led by former U.S. senator and Nebraska Gov. Bob Kerrey and former U.S. Sen. Jake Garn of Utah. The seven-member commission, appointed by Kempthorne this spring, is charged with reviewing mineral revenue collection practices on federal and Indian land.
Allred and Kempthorne said they expected results from that commission before the end of the year.
Conference motion in Senate delayed until post-recess E&E Daily; October 5, 2007; http://www.eenews.net/EEDaily/2007/10/05/3/#3
Senate Majority Leader Harry Reid (D-Nev.) has delayed efforts to launch a House-Senate conference on energy until after next week's Columbus Day recess.
Reid had hoped to offer a motion to appoint conferees before the end of this week, but that motion never came to pass. The Senate is only in pro-forma session today, with no official business expected, and is scheduled to reconvene Monday, Oct. 15.
A Reid spokesman last night confirmed the energy conference effort would not proceed until after the recess.
Procedural questions remain when the full Congress comes back into session Oct. 15 (the House is in next week). The Senate energy bill is technically that chamber's revision of H.R. 6, a bill the House passed in January. But the House energy bill approved in August is a separate measure. Capitol Hill sources say lawmakers must take steps on the floor to have different versions of the same bill before them to proceed with a formal conference.
Also in play is the idea of avoiding a formal conference in favor of a bicameral deal between Democratic leaders. A House Democratic leadership aide said Wednesday that this tactic would likely be employed if Senate GOP lawmakers object to launching a conference. Key Democratic senators have also called this a possibility.
Major pieces of legislation, such as lobbying reform, have recently passed Congress without a formal House-Senate conference. A Senate GOP leadership aide yesterday deflected questions about whether there would be objections to going to conference.
"We don't have a vehicle to go conference on right now," the aide said. The House and Senate both passed broad energy measures last summer that differ in key respects. The Senate bill would raise auto efficiency standards and expand the national biofuels mandate. The House bill would create a national renewable electricity standard, along with renewable energy and efficiency tax incentives funded through higher taxes on oil companies.
Time to tap oil and gas tax revenue stream Shreveport Times; October 7, 2007; http://www.shreveporttimes.com/apps/pbcs.dll/article?AID=/20071007/OPINION03/710060316/1058/OPINION03
Foster Campbell, a candidate in the race for governor, recognizes the need to obtain revenue from oil and gas brought into Louisiana from foreign sources and produced offshore in the federal zone. His proposal deserves serious consideration. It makes sense to derive revenue from these sources.
In 1982, during my term as governor. I proposed a revenue-raiser termed the Coastal Wetlands Environmental Levy. As most of us know, we cannot tax oil and gas production off our coast in the federal zone. That zone begins three miles off our coast. We cannot even impose a tax on material and supplies originating in Louisiana that is sent to rigs in the federal zone. CWEL received 58 votes in the House, a majority, but since it proposed a tax it required a two-thirds vote. We did not have a fiscal crisis at the time and a number of legislators were concerned about being tagged as "taxers" in the elections the following year.
This is how CWEL would work: A tax would be imposed on oil and gas that crossed our Coastal Zone (a federally recognized area, roughly the area south of Interstate 10). That tax would apply to oil and gas produced in Louisiana's Coastal Zone as well as oil and gas produced offshore in the federal zone. In order to pass constitutional muster the levy must apply to oil and gas produced within the state. The Legislature under the previous governor, Edwin Edwards, passed what was called the First Use Tax, in an effort to gain revenue from production in the federal zone which was brought into Louisiana. The United States Supreme Court declared the tax unconstitutional because it exempted production in Louisiana. Thus, the CWEL proposal had to be even-handed with respect to production both offshore and inshore.
The Louisiana coast has been eroded for years largely because of pipelines and canals along the coast constructed to provide infrastructure for offshore oil and gas production. This environmental harm can be mitigated, but at significant cost. Some of the revenue produced by CWEL would be utilized for this purpose.
The amount of revenue produced by CWEL depends on the amount of the tax. I believe that a tax of $2 per barrel of oil and 30 cents per MCF of gas would be appropriate. Oil is now selling for over $80 per barrel and gas at over $6 per MCF. Thus, the rates I am suggesting are quite low. The tax on oil would produce approximately $700 million per year; the tax on gas would produce approximately $1,600 million per year. The two would total $2 billion $300 million per year!
The producing companies would probably absorb the taxes because competition would prevent them for passing the cost of the taxes onto consumers. However, even if the cost were passed on to consumers, over 80 percent of that cost would be borne by consumers outside Louisiana,
The revenue stream would permit us to finance a number of things of great importance to our state. We could meet the federal requirement of paying 10 percent of the cost of rebuilding our coastal area. We could abolish business taxes such as the tax on borrowed capital and the sales tax on the purchase of machinery and equipment.
The elimination of these taxes would make us much more attractive for businesses to come to Louisiana. We could finance the backlog of highway and bridge projects, the capital needs of our colleges and universities, raise teacher salaries, lower personal and corporate income taxes, and much more.
Whether it be Foster Campbell's processing tax or CWEL, it is time we take advantage of the stream of revenue which can be derived from the oil and gas industries. Those industries have had the advantage we have afforded them here in Louisiana for decades.
Dave Treen of Metairie is former governor of Louisiana.
House Science panel to move on energy storage, oceans legislation E&E Daily; October 9, 2007; http://www.eenews.net/EEDaily/2007/10/09/#4
Legislation dealing with energy storage technology, industrial energy efficiency and ocean exploration is on the markup agenda tomorrow in a House Science and Technology subcommittee.
One of the bills on the Energy and Environment Subcommittee's docket attempts to address what private sector experts have said is a major obstacle to further development of alternative energy: the availability of energy storage technology.
The subcommittee is slated to mark up the "Energy Storage Technology Advancement Act" of 2007, which would direct the Energy Department to establish both basic and applied research programs for energy storage, as well as create several demonstration projects, according to a draft version of the legislation.
The bill was drafted by Science Committee Chairman Bart Gordon (D-Tenn.) in consultation with committee Republicans.
The draft version of the bill authorizes $50 million each fiscal year through 2014 for basic research programs and $80 million through 2014 for advanced research projects.
Additionally, the draft bill directs DOE to carry out demonstration projects for energy storage systems that would focus on items such as improving electricity reliability in rural areas, integration with renewable energy sources and advance power conversion systems.
DOE would also launch a separate demonstration project for energy storage in transportation, focusing on high capacity, high efficiency storage systems, onboard energy management systems, technologies that can reduce manufacturing costs and hazardous materials in the supply chain among others.
The committee will also mark up the "Industrial Energy Efficiency Research and Development Act" of 2007, which would establish a DOE program to develop new innovations and technologies that would enhance industrial energy efficiency. The bill also directs DOE to fund research centers that would identify opportunities for medium-sized manufacturers to improve their energy efficiency and improve environmental performance.
The bill would authorize $150 million for the programs each year through fiscal 2013.
Ocean exploration bill on deck
The committee will also mark up a bill to formally establish ocean exploration and undersea research programs at the National Oceanic and Atmospheric Administration.
The Natural Resources Committee approved the bill, H.R. 1834, in June.
Sponsored by Rep. Jim Saxton (R-N.J.), the measure would authorize $486 million for ocean exploration and $265 million for undersea research between 2008 and 2017. Both programs have existed for years but had previously operated without formal authorization.
Saxton's bill would formally establish a coordinated national ocean exploration program at NOAA and a separate undersea research program that would include a network of extramural regional research centers and a national technology institute. The programs would also expand ocean exploration to look at shipwrecks and submerged sites by using undersea robots.
Schedule: The Energy and Environment Subcommittee markup will start at 2 p.m. on Oct. 10 in Rayburn 2318.