Obama's offshore conversion: helps but battles loom

Democratic presidential candidate Senator Barack Obama delivers a speech during the 2008 National Urban League annual conference in Orlando, Florida August 2, 2008.

WASHINGTON (Reuters) - Sen. Barack Obama's conversion in favor of offshore drilling on the road to the White House will ease the standoff in the U.S. Congress over energy but forging a veto-proof bill still faces big hurdles.

The Democratic presidential candidate said he would back limited offshore drilling as part of a broader package, signaling support for legislation unveiled by a bipartisan group of senators just before Congress recessed on Friday.

"My interest is in making sure we've got the kind of comprehensive energy policy that can bring down gas prices," Obama told The Palm Beach Post in Florida on Friday.

"If, in order to get that passed, we have to compromise in terms of a careful, well thought-out drilling strategy that was carefully circumscribed to avoid significant environmental damage -- I don't want to be so rigid that we can't get something done."

After long deriding calls for more drilling from President George W. Bush and other Republicans, the Illinois senator is signaling he has one eye on the polls as he calls for compromise.

"Senator Obama's campaign staff has clearly concluded the current 'no drilling, no bill' strategy is unsustainable and damaging to the senator's election prospects in November," wrote economist John Kemp of the commodities firm RBS Sempra.

"So the senator has indicated he is open to a compromise, even if this angers the hard core environmental vote."

Obama's change of heart will attract charges of flip-flopping from opponents but could gladden the hearts of Democrats worried about campaigning without any bills purported to help bring down gasoline from around $4 a gallon.

"Well, I think what's going on here is that Barack Obama is not afraid of working in a bipartisan way to find a real solution," cheered Sen. Claire McCaskill, a Democrat from Missouri, on CNN's "Late Edition."

'BEING PRACTICAL'

Another Democratic heavyweight, Sen. John Kerry of Massachusetts, said on NBC's "Meet the Press" that Obama was just being practical.

"He has not changed -- what he's prepared to do is break America's gridlock by honoring a bipartisan effort if that is the only way to move us towards alternative and renewable fuels and ... an energy policy that's comprehensive," said Kerry, the 2004 Democratic presidential nominee.

Energy bills have been flying fast and furious though the halls of Congress in recent months as the price of oil zoomed to near $150 a barrel before retreating. But the bills -- aiming at everything from reining in the speculators to allowing the rigs in a pristine Alaskan reserve -- have all failed in the chasm that divides Republicans and Democrats.

But last week a group of senators calling themselves the "Gang of 10" introduced legislation they hoped could finally bring the two sides together. The bill would allow drilling in new areas in the eastern Gulf of Mexico and southeastern Atlantic, while raising taxes on the major oil companies.

While Obama's support will help, hurdles remain. House of Representatives Speaker Nancy Pelosi, a California Democrat, seemed lukewarm to more drilling in comments on ABC's "This Week." And moves to raise taxes for Big Oil will likely spark White House veto threats.

Kevin Book, Senior Analyst with Friedman, Billings, Ramsey & Company, Inc, is not convinced Obama's move will amount to much. "First, Barack Obama's political team is savvy enough to know the same guy who pumps his gas on Monday votes on Tuesday, and energy policy is really an economic issue, not a social value, because happy polar bears don't pay the rent.

"Second, the terms Obama has offered -- windfall taxes for more energy -- virtually guarantee inaction given narrow political divisions and a Bush veto, so this seems a lot more like a free point than an actual about-face."

And with Congress away for the rest of August, time is also running out to do anything before November elections, although calls could grow to bring the lawmakers back to Capitol Hill.

"We're out of session -- we're out of business -- on energy when we should be in session doing the American people's business," Republican Sen. Lindsey Graham of South Carolina told "Fox News Sunday."

"Pick up the phone and tell Nancy Pelosi, who says offshore drilling is a hoax, Harry Reid, who says drilling is a red herring -- call the Congress back in session," Graham said, referring to Senate majority leader Reid of Nevada.

(Additional reporting by Ayesha Rascoe; editing by Mohammad Zargham)