Congress inches towards renewables-offshore drilling deal

The House of Representatives took Congress a step closer to extending renewable tax credits while also allowing further offshore drilling this week, passing the Comprehensive American Energy Security & Taxpayer Protection Act.

The legislation opens up 319 million acres on the outer continental shelf for drilling, and also makes 85 million acres closer to the shores open to drilling subject to state-level agreement.

However, the Act also provided a sweetener for environmentalists and renewable energy project owners by extending tax incentives for projects that were due to expire at the end of this year. Solar energy providers receive an extension of the tax break programme to 2017, while wind project owners get an extra year.

The bill also repealed tax incentives for the big five oil companies that were legislated in 2004, and forces oil firms to pay about $15bn (£8.2bn) in royalties on drilling leases in the Gulf of Mexico.

Greenpeace slammed the legislation, calling it purely a political move rather than an environmental one. "Increased drilling will help no one but Big Oil. Even with additional access to thousands of miles of public land, Big Oil wants more. It is time Congress stood up and said enough is enough," said the organisation in a statement.

The bill now passes to the Senate where it is likely to face opposition from Republicans on the grounds that it continues to prohibit drilling between three and 50 miles offshore.

Meanwhile, the Senate is continuing to put together its own energy package, overseen by the so called "Gang of 10", which last week grew to a Gang of 20 featuring 10 Democrats and 10 Republicans. That proposal similarly seeks to extend renewable tax credits while opening up areas for offshore drilling, but it too has faced criticism from both environmentalists and oil companies.

Supporters of renewable energy have repeatedly argued that unless a compromise is reached and the package of tax credits is extended before the end of the year, confidence in the sector would plummet, putting up to $19bn in investment and 116,000 jobs at risk.

Offshore drilling has become a major political issue in the run-up to the US election as both sides seek to marry environmental concerns with the need to increase domestic oil supply and reduce reliance on imports.

Oil giants have been pushing hard for an expansion in offshore drilling that would allow them to tap new reserves. Such a move could also allow them to ease their current reliance on tar sands developments, which this week faced fresh criticism over attached regulatory risks.

A report from Greenpeace UK highlighted current and potential new regulations in the US that apply constraints on the carbon emissions allowed during the production of fuel. Tar sands operations produce between three and five times the carbon emissions used in conventional extraction, said the report, meaning that there were considerable financial and regulatory risks attached to their continued development.