June 26, 2008 / 9:50 PM / 11 years ago

House rejects bill to deny future drilling leases

WASHINGTON (Reuters) - The House of Representatives on Thursday rejected legislation that would have required energy companies to develop oil and natural gas supplies on federal leases they have held for years or be denied future drilling access on government acres.

The legislation was an effort by the Democrats, who control the House, to show voters they were trying to do something to tackle record gasoline prices. Lawmakers will be on their Fourth of July holiday recess next week and will face angry constituents upset about pump costs.

The White House had threatened to veto the bill, saying the measure would discourage the development of domestic energy resources, drive up gasoline prices and harm U.S. energy security.

“By blocking some firms from competing for new leases, this legislation would further increase gas prices that already exceed $4 per gallon,” the White House said.

The vote was 223 to 195 in favor of the bill, but the measure fell short of winning the two-thirds “yes” votes necessary to clear the chamber as required when suspending the House’s rules to quickly act on legislation.

The bill would have allowed the Interior Department to lease both onshore and onshore federal tracts to energy companies for five years. A lease could have been renewed for additional 1-year periods as long as oil or natural gas production was occurring on the tract or the leasing company was making good-faith progress in finding supplies.

Republican presidential candidate John McCain and President George W. Bush want Congress to allow offshore drilling in those areas where energy exploration is now banned.

Democrats said companies hold millions of undrilled acres in federal leases and the legislation would have pushed firms to develop those potential energy supplies.

“We are saying drill it or lose it,” said Democratic Rep. Nick Rahall, the chairman of the House Natural Resources Committee. “Drill for oil and bring relief to Americans at the pumps.”

The administration slammed Democratic charges that oil companies have been sitting on leases instead of producing oil.

“This absurd claim ignores the tremendous incentive for a firm to drill when oil prices exceed $130 per barrel,” the White House said.

The price of oil actually hit a record of just over $140 a barrel on Thursday at the New York Mercantile Exchange.

A company that does not drill on a particular lease either can’t find oil there, believes it will extract oil elsewhere at a lower cost, or is still waiting for permits to drill, the administration said.

“Congress should be allowing firms to find oil where it will produce the least expensive gasoline for the American driver,” the White House said.

The House vote occurred as a new survey showed that a majority of Americans believe gasoline will hit $5 a gallon by the Labor Day holiday in September.

Reporting by Tom Doggett; Editing by Marguerita Choy

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