Offshore drilling proposal of intense interest to nation's heartland

WASHINGTON -- Strangers from the heartland, two businessmen share the hope that the energy resting beneath the deep blue waters of the central Gulf of Mexico might bring relief from high natural gas prices.

So, they wonder, why isn't it being pumped?

The Senate was expected to vote today on whether to expand oil and gas drilling to 8.3 million acres of Gulf waters off-limits to energy development for a quarter-century. The House has passed a broader bill dealing with offshore drilling.

Watching the developments closely are Tony Raimondo, owner of a metal fabricating company in Columbus, Neb., and Jay Bender, who runs a plastics plant in Brookings, S.D.

While they do not know each other, they have a common problem. Natural gas prices have soared and their companies are feeling the pain. These men believe the answer is more production, including in the restricted coastal waters.

"We're the only industrialized country that is not actively pursuing more natural gas resources. It makes no sense to me," Bender said in a telephone interview.

Bender, Raimondo and hundreds of business owners, in letters to members of Congress, have urged an end to the freeze that has barred oil and gas drilling off 85 percent of the country's coast. Lobbying powerhouses such as the Washington-based National Association of Manufacturers, U.S. Chamber of Commerce and National Chemistry Council have led the drive.

For the first time in a decade, Bender says, he has been forced to raise the price of the plastic components his plant molds into parts for such things as electronic scoreboards, medical equipment and printer cartridges. The cost of the raw plastic pellets has doubled in the past two years because those pellets are made of natural gas and oil.

Heating the warehouses by gas, Bender says, "costs two or three times what it did three years ago."

At his four metal fabricating plants, Raimondo's annual cost for natural gas has gone from $530,000 in 2000 to nearly $1.3 million -- an expense that is hurting his business.

Costing about $2 per thousand cubic feet only a few years ago, natural gas soared to as high as $15 late last year. This spring and summer it retreated to below $6, but has risen in the past month because of greater demand for air conditioning brought on by the intense heat across the United States.

The natural gas bill for chemical companies has jumped from $7.5 billion in 1999 to $30 billion last year, and some companies are expanding overseas where gas is cheaper, says Jack Gerard, president of the American Chemistry Council, the industry trade group.

Other energy-intensive business sectors including forest and paper, pesticide, aluminum and makers of carpets, bedding and furniture are being hit hard, he says.

The U.S. uses about 22 trillion cubic feet a year for everything from making plastics and fertilizer to producing electricity and heating homes. Supplies have struggled to keep up with demand.

Large amounts of gas are beneath offshore waters. But for 25 years lawmakers have feared tampering with the freeze on oil and gas drilling that Congress has put in place every year, covering 85 percent of the country's coastal waters -- almost everywhere outside the western Gulf of Mexico.

That may soon change.

Senators planned to vote on whether to expand oil and gas development in the east-central Gulf, opening up 8.3 million acres for drilling.

Last month, the House approved an even broader measure that would lift the quarter-century drilling freeze in Pacific and Atlantic coastal waters, although states could prohibit drilling if they choose to do so.

"In a nutshell, this bill is good for the people who are burdened with high cost of natural gas, the high cost of oil. It is their property. We ought to develop it and do it now," says Sen. Pete Domenici, R-N.M., the Senate bill's main sponsor.

Many environmentalists -- as well as senators from coastal states such as New Jersey, California and Florida -- fear the drilling will raise the risk of oil spills, and threaten fragile ecosystems and tourism.

David Alberswerth of the Wilderness Society says the question people "should be asking is why is the oil and gas industry sitting on large amounts of unproduced federal natural gas that they have leased already."

The Senate bill is limited to an area of the central Gulf that is 125 to 300 miles off Florida's coast. The plan has gained momentum with bipartisan support.

Largely at the insistence of Sen. Mary Landrieu, D-La., it sharply would increase the amount of federal royalties given to the four Gulf states -- Alabama, Mississippi, Louisiana and Texas -- that have drilling rigs off their shores.

Democrats, who once had threatened a filibuster fight over the bill, have backed off, wanting to give Landrieu a political victory that could prove important in her re-election bid in 2008 when Democrats hope to regain their majority in the Senate.

But many senators from coastal states worry about the push to open broader areas of the Outer Continental Shelf to energy development and pledge to block the broader House bill.

Senate Majority Leader Bill Frist, R-Tenn., said the Senate version was "a carefully crafted compromise" not to be tampered with. Sen. Harry Reid of Nevada, the Democratic leader, warned that if the House insists on broadening the measure, he will produce the votes needed to kill it.