API chief sees energy bill deadlock in September

ST. PAUL (Reuters) - The U.S. Congress is unlikely to pass energy legislation this year to bring down high oil prices, despite intense interest for competing plans among Democrats and Republicans, American Petroleum Institute President Red Cavaney predicted on Tuesday.

With the Senate and House of Representatives set to return on Monday from a five-week break, lawmakers are expected to resume where they left off, in a high-pitched argument over how best to ease consumers' gasoline and heating worries, just two months before presidential and congressional elections.

This legislative session is expected to last only three weeks, likely leaving Congress dark until the next president takes over.

Cavaney, who is attending the Republican convention that will anoint Sen. John McCain as the party's presidential candidate, was skeptical of a compromise resulting in passage of legislation.

"While it would be great (to pass a bill)...I don't think it's realistic," he said. He had no prediction for next year's prospects, saying that depended on election results.

As Republicans have pleaded for lifting the national moratorium on off-shore oil drilling, including in sensitive Alaskan regions, many Democrats have pushed a different approach that aims to lower oil prices short-term while pressuring industry to drill on already leased acres. They also want to repeal some industry tax breaks and use the revenue to encourage alternative energy development.

A compromise crafted by a bipartisan group of senators, taking steps toward a limited number of states expanding offshore drilling (notably not California or Alaska), has been roundly criticized by Republican leaders in Congress and the oil industry.

Asked whether the API could embrace such a compromise if that was the best that could be achieved, Cavaney dismissed the initiative, saying it would "automatically levy taxes on industry" without guaranteeing additional acres of drilling offshore.

On other related topics:

-- He said the past three years of severe weather in Gulf Coast states "has sensitized people" to the oil industry's ability to operate offshore in adverse conditions. He noted growing public support for expanded offshore oil drilling.

-- He skipped over accusations that the oil industry could not handle a big increase in offshore drilling even if it was allowed because it lacks the equipment. "It's a little bit of a chicken and egg," he said, adding that if the U.S. opened up new offshore acres, it would "send a signal" and ultimately boost capacity.

-- He said that after eight years of close relations to the Bush administration, API is working with "both sides of the aisle." As evidence, he noted his attendance this year at both the Democratic and Republican conventions.

But the campaign contributions are not being spread evenly, according to watchdog groups, who say the U.S. oil and gas industry has given McCain $1.53 million so far, while Obama has gotten $422,865.

In 2000, Cavaney, from his position as a Republican convention official, helped walk Dick Cheney through a rehearsal for his vice presidential acceptance speech.

Asked about a McCain ad that promised the candidate will "battle big oil," Cavaney said "words like that flow from the campaign ... it resonates to a degree." But he said such claims, from either campaign, are sometimes said "in the heat of battle" and do not necessarily "translate into action."

(Editing by Jackie Frank)