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House & Senate Pass Bills Allowing for Greater Domestic Production in the Gulf Coast

August 8, 2006

Texas will benefit from expanded gulf coast drilling, say Bracewell & Giuliani partners

HOUSTON (August 8, 2006)- The United States Senate passed a bill that will allow the opening of new areas for oil and natural gas exploration along the eastern Gulf Coast. This landmark bill calls for drilling along 8.3 million acres of the Gulf of Mexico in the deep waters west of Florida.  The House passed a more extensive bill a month ago, which would allow drilling in substantially more locations.

The Senate Bill states that Texas, Alabama, Louisiana and Mississippi will initially share 37.5 percent of the federal leasing proceeds from new Gulf drilling.  "The Gulf Coast states are bearing the burden of developing these natural gas and crude oil reserves for the entire country,” said Andy Taylor, trial partner with Bracewell & Giuliani LLP, who practices in the Austin office.“It’s important and reasonable that the Senate recognizes and compensates these states, as they do bear the burden of producing and supplying resources to the rest of the country."

Drilling experts suggest that deep water reserves could hold the equivalent 1.26 billion barrels of recoverable oil and 5.8 trillion cubic feet of natural gas, providing much-needed supply relief.  The Gulf of Mexico also provides the ability for exploration to begin more quickly due to the fact that production already exists nearby, allowing it to come online much more quickly.

“This bill is an example of the type of legislation the United States needs to continue to adopt in order to make aggressive moves to increase domestic production and reduce reliance on foreign supplies of crude oil and natural gas,” said Taylor.  “Because of the increase in global consumption as well as the leveling-off of supply, consumers are paying the price.”

Additionally, a strong debate against the expanded exploration legislation was waged surrounding environmental protections along the Gulf of Mexico.  As such, lawmakers have agreed to bar exploration within 125 miles of Florida’s west coast or within 100 miles of the Florida panhandle.  “The oil and gas companies that operate in the Gulf of Mexico today, many of whom are our clients, are responsible citizens,” said Alan Rafte, energy, real estate and finance partner in the Houston office of Bracewell & Giuliani. “They respect the environment and follow the strict rules applicable to their drilling and maritime activity.”

Bracewell & Giuliani is among the nation's largest energy law firms with approximately 400 lawyers and 9 offices worldwide. Bracewell and its lawyers have been globally, nationally and regionally recognized as leaders in the field of energy.

The Senate and House will meet in September for the next phase of discussions to attempt to reconcile the two bills.