U.S.-Mexico accord on deepwater drilling in Western Gulf part of budget deal

12/11/2013

U.S.-Mexico accord on deepwater drilling in Western Gulf part of budget deal

CAITLIN WEBBER

WASHINGTON D.C. (Bloomberg) -- Deepwater oil and gas exploration would be allowed to proceed in parts of the western Gulf of Mexico as part of a budget compromise. Language in the legislation would implement a 2012 U.S.- Mexico agreement concerning hydrocarbon reservoirs in parts of the gulf that cross the international maritime boundary.

The measure would also lay out a process for submitting future transboundary hydrocarbon agreements to Congress. It has taken more than a year to finalize the U.S.-Mexico deal because it got caught up in a dispute over the Dodd-Frank financial oversight law.

The budget agreement negotiators struck yesterday would do that, along with easing automatic U.S. spending cuts for two years, removing the risk of a government shutdown and cutting the deficit by $23 billion.

The House, with the backing of the American Petroleum Institute, had moved legislation that would have both implemented the U.S.-Mexico agreement and given oil, gas and mining companies a waiver from a Dodd-Frank requirement that they file reports on payments made to a U.S. or foreign government related to “resource extraction.”

Erik Milito, director of upstream operations at the American Petroleum Institute, said in October that the group was dropping its opposition to the Dodd-Frank reporting requirements as a way to expedite the U.S.-Mexico agreement.

The bilateral agreement would remove a moratorium on 1.5 million acres of the western Gulf that has attracted interest from major oil companies such as Royal Dutch Shell, Chevron and BP, Bloomberg BNA reported.

The Interior Department’s Bureau of Ocean Energy Management estimates the border area contains as much as 172 MMbbl of oil and 304 Bcf of natural gas. The agreement was negotiated by then-Secretary of State Hillary Clinton and signed in February 2012. The House passed its version, H.R. 1613 on June 27 on a largely party-line vote. The White House preferred S. 812, a Senate-passed version with no Dodd-Frank waivers.

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