Democrats Hope to Take From Oil, Give To Green Energy

The most likely change in the Energy Policy Act of 2005 would be the repeal of a clause that allowed oil companies to deduct geological and geophysical exploration costs instead of treating them as capital expenditures to be amortized over a longer period of time, said congressional aides and environmental lobbyists. This change would generate less than $1 billion in revenue over 10 years, they estimated.

A variety of proposals would target the question of royalties on the 1998 and 1999 Gulf of Mexico leases. (The Justice Department is investigating possible relationships between Interior Department officials and oil companies that received the leases, said two sources briefed on the investigations last month.)

Five companies representing about a quarter of the leases in dispute agreed last month to insert price thresholds for future royalty payments, but another four dozen firms have not agreed to change the terms of those leases.

"There are a lot of issues with that, such as the sanctity of contracts," said API's Kibbe. "The API doesn't think it's a bad idea to renegotiate contracts, as long as both parties think it's a good idea. "

But Democratic and many Republican lawmakers are adamant on the issue. Markey and Hinchey would bar companies that refuse to renegotiate those leases from getting any future leases on federal lands or in federal waters. Pelosi's office has even discussed a proposal made last year by then-GOP congressman Richard W. Pombo, who wanted to impose a $9-a-barrel "conservation fee" on oil produced in federal waters by companies that refused to renegotiate the 1998 and '99 leases.

"It deprives the American people of the production they own," Hinchey said. "If they think it's too expensive, we should leave it there."

Many House Democrats also want to prod oil companies into making back payments on the disputed leases. Those back payments could amount to $900 million to $2 billion, according to the General Accounting Office.

Environmental groups were happy. "The oil and gas bill is a clear departure from the previous Congress's infatuation with oil and gas handouts," said Erich Pica of Friends of the Earth.

Staff writer Jonathan Weisman contributed to this article.