House Appropriations Committee Chairman David Obey, D-Wis., told reporters Tuesday that a provision continuing the moratorium will be dropped this year from a stopgap spending bill to keep the government running after Congress recesses for the election.
Republicans have made lifting the ban a key campaign issue after gasoline prices spiked this summer and public opinion turned in favor of more drilling. President Bush lifted an executive ban on offshore drilling in July.
"If true, this capitulation by Democrats following months of Republican pressure is a big victory for Americans struggling with record gasoline prices," said House GOP leader John Boehner of Ohio.
Democrats had clung to the hope of only a partial repeal of the drilling moratorium, but the White House had promised a veto, Obey said.
The House is expected to act on the spending bill Wednesday. The Senate is likely to go along with the House.
"The White House has made it clear they will not accept anything with a drilling moratorium, and Democrats know we cannot afford to shut down the government over this," said Jim Manley, a spokesman for Senate Majority Leader Harry Reid. "We look forward to working with the next president to hammer out a final resolution of this issue."
While the House would lift the long-standing drilling moratoriums for both the Atlantic and Pacific coasts, a drilling ban in waters within 125 miles of Florida's western coast would remain in force under a law passed by Congress in 2006 that opened some new areas of the east-central Gulf to drilling.
Just last week, the House passed legislation to open waters off the Atlantic and Pacific coasts to oil and gas drilling but only 50 or more miles out to sea and only if a state agrees to energy development off its shore. It quickly became clear that measure would not get the 60 votes needed in the Senate.
Republicans called that effort a sham that would have left almost 90 percent of offshore reserves effectively off-limits.
The Interior Department estimates there are 18 billion barrels of recoverable oil beneath the Outer Continental Shelf, about half of it off California.
While the ban on energy development will be lifted if the Senate goes along with the House action, it doesn't mean any federal sale of oil and gas leases in the offshore waters - much less actual drilling - would be imminent.
The Interior Department's current five-year leasing plan includes potential leases off the Virginia coast but probably would not be pursued unless the state agrees to energy development. And the state is unlikely to do so without Congress agreeing to share federal royalties with the state.
The congressional battle over offshore drilling is far from over. Democrats are expected to press for broader energy legislation, probably next year, that would put limits on any drilling off most of the Atlantic and Pacific coasts. Republicans, meanwhile, are likely to fight any resumption of the drilling bans that have been in place since 1981.
John McCain, the Republican presidential nominee, has promised to make offshore oil drilling a priority if elected president. He has called for developing the oil and gas resources along all of Outer Continental Shelf and for the federal government to share royalties with states who go along with drilling.
Democratic presidential rival Barack Obama has said he would support limited drilling in certain areas - possibly the South Atlantic region - if it is part of a broader energy plan to shift the U.S. away from oil to alternative fuels and more energy efficiency.
The debate over offshore drilling is not expected to subside in the first months of the next presidency - no matter who sits in the White House.
Lifting the drilling ban gives considerable momentum to the underlying bill, which includes the Pentagon budget, $24 billion in aid for flood and hurricane victims and $25 billion in loans for Detroit automakers in addition to keeping the government open past the Oct. 1 start of the 2009 budget year.
But Democrats decided not to use the must-pass measure as a battering ram to carry an extension of unemployment benefits for the long-term jobless past White House veto promises, prompting grumbling among some lawmakers. Efforts to boost food stamps and give states billions of dollars to help with Medicaid bills also fell through.
But the measure would double, to $5.2 billion, funding for heating subsidies for the poor, Obey said.
The measure also would provide more than $600 billion to fund the 2009 budgets for the Pentagon, Homeland Security Department and the Veterans Affairs Department. Nine other spending bills for the 2009 budget year starting Oct. 1 remain unfinished.
Bush had threatened to veto bills that don't cut the number and cost of pet projects known as "earmarks" sought by lawmakers in half from current levels or cause agency operating budgets, taken together, to exceed his request. Obey said, however, the White House would reluctantly sign the measure.