CONGRESSWOMAN ELISE STEFANIK
On Wednesday, June 26, 2013 the House will begin consideration of H.R. 1613, the Outer Continental Shelf Transboundary Hydrocarbon Agreements Authorization Act, under a rule. H.R. 1613 was introduced on April 18, 2013 by Rep. Jeff Duncan (R-SC), and has 17 cosponsors. H.R. 1613 was ordered to be reported by the Committee on Natural Resources, as amended, on May 15, 2013 by a vote of 25-16.
H.R. 1613 gives the Secretary of the Interior authority to implement an agreement reached between the United States and Mexico in February of 2012 governing the development of oil and natural gas in hydrocarbon reservoirs that span the U.S. maritime boundary with Mexico. The bill also establishes a process for approving future transboundary hydrocarbon agreements, ensuring congressional oversight of the process.
For resource extraction companies acting under transboundary hydrocarbon agreements, H.R. 1613 provides an exemption from a Dodd-Frank provision that requires them to disclose payments made to a foreign government. “The agreement signed by the Obama Administration and Mexico specifically provides what royalty payments Mexico would receive from energy developers. However, under [Dodd-Frank], companies that commercially develop oil, natural gas or minerals are required to disclose payments made to a foreign government. This could create a potential conflict because Mexico has yet to decide how they will collect royalties and could potentially set regulatory measures that prohibit disclosure of payments.”
 A hydrocarbon reservoir, or oil and gas reservoir, is a subsurface pool of resources “trapped” in a rock formation to create a reservoir. These naturally occurring reservoirs form due to the geologic conditions in the earth, and fail to conform to a geopolitical boundary which establishes the need for the legislation being considered.
The maritime boundary between the U.S. and Mexico was established in 1978 and extends to the 200-nautical-mile limit of the nation’s exclusive economic zone. However, two enclosed areas that extend beyond the 200-nautical-mile jurisdiction of each country were excluded: the Western Gap and the Eastern Gap. The U.S.-Mexico Maritime Boundary Treaty, which was signed in 2000, divided the area of the Western Gap between the two countries and established a moratorium on hydrocarbon development within 1.4-nautical-miles on either side of the boundary. In addition to the official moratorium within the Western Gap area, oil and gas exploration and development also have stalled along other areas of the U.S.-Mexico maritime border, due to legal uncertainty about how transboundary reservoirs will be treated.
The U.S. and Mexico reached an agreement in February of 2012, establishing a legal framework to guide commercial energy development in the Western Gap area and along the U.S.-Mexico maritime boundary. Specifically, the agreement governs exploration, development, and revenue sharing from oil and natural gas reservoirs that span the maritime border between the countries. H.R. 1613 is needed to provide the Secretary with the legislative authority to implement the agreement. Approximately 20% of the available acreage in the U.S. portion of the Western Gap area is under lease and awaiting certainty to move forward, and these areas are expected to contain significant hydrocarbon resources. In fact, the areas that would be opened to development under the February 2012 Agreement are estimated to contain as many as 172 million barrels of oil and 304 billion cubic feet of natural gas.
According to CBO estimates, “enacting H.R. 1613 would increase offsetting receipts from lease sales in the Outer Continental Shelf (OCS) by $25 million over the 2014-2023 period, thus reducing direct spending by a corresponding amount. Enacting H.R. 1613 would not affect revenues. H.R. 1613 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act (UMRA) and would impose no costs on state, local, or tribal governments.”
1) Rep. Grayson (D-FL) Amendment #5 - Ensures that no portion of this legislation is construed as affecting the right of any state to prohibit the management, leasing, developing, and use of lands (including offshore oil drilling) beneath navigable waters within its boundaries.
For more information, see the resource page on H.R. 1613 provided by the Committee on Natural Resources.