WASHINGTON (AP) – Congress approved expanded offshore drilling in its final hours, giving energy companies access to oil and natural gas deposits in a vast area once off limits in the Gulf of Mexico.

President Bush, who is expected to promptly sign the legislation, said it “will help to reduce our dependence on imported sources of energy by increasing access to domestic sources of oil and gas (and) … strengthen our energy security.”

Opponents of the bill said its revised formula for sharing royalties from energy production in federal waters – which will funnel billions of dollars to four Gulf states – would cut into government revenue at a time when the federal government faces huge deficits.

The legislation opens 8.3 million acres of Gulf waters 125 miles from the Florida Panhandle. It was part of a massive tax package that cleared the Senate early Saturday shortly before the 109th Congress adjourned.

The House passed it on Friday. The bill calls for the Interior Department to begin offering leases within a year. Actual production likely would be at least four or five years beyond that.

The area is believed to have 1.3 billion barrels of oil and 6 trillion cubic feet of gas, enough to heat 6 million homes for 15 years. The country uses about 21 million barrels of oil a day.

The bill also will produce a revenue windfall for Louisiana and three other Gulf coast oil producing states. For the first time, the states will get 37.5 percent of future royalties from Gulf oil and gas production in federal waters off their coastlines. The money would be used for coastal restoration and hurricane recovery.

They now get royalties only from production in close-in state waters.

Louisiana, which has the most production off its coast, estimates it will receive more than $13 billion over the next 30 years as part of the revenue sharing, according to Sen. Mary Landrieu, D-La.

She called it a “fair share” to states adjacent to oil and gas producing waters and said it will assure “a dedicated stream of revenue” for wetlands restoration, flood control and recovery from Hurricane Katrina and future hurricanes that might hit the region.

But the revenue sharing was criticized by some lawmakers.

Rep. Ed Markey, D-Mass., called it a raid on the U.S. Treasury and Rep. Lois Capps, D-Calif., questioned sending so much money to four states in the face of government deficits.

Capps said the legislation “will cost taxpayers billions, weaken coastal protections (against drilling) in place for 25 years and does little to increase energy security.” She criticized GOP leaders for attaching it to a tax package that included numerous provisions lawmakers favored – ranging from extension of tax breaks for college costs to building more energy efficient homes and protecting Medicare funds.

Environmentalists maintained the expanded offshore drilling could be a first step toward lifting the long-standing drilling bans that have been in place along both the Pacific and Atlantic coasts.

Business groups embraced the drilling measure, hoping new domestic production might reduce natural gas prices.

Even though it will be a number of years before any of the oil or gas will be produced from the newly opened area, John Engler, president of the National Association of Manufacturers, called Congress’ action a “shot in the arm … critical to the U.S. economy.”

It “significantly increases the energy security for more than 200 million Americans,” added David Parker, president of the American Gas Association, the trade group that represents gas utilities.

AP-ES-12-09-06 1535EST


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