Washington Watch: Oil-and-gas revenue ‘sledding’ tough

Washington Bureau writer Jordan Blum
Washington Bureau writer Jordan Blum

It gets repeated ad nauseam in Louisiana, but the state is losing more than a football field an hour through coastal erosion.

This is not a new issue and the fight to help fund coastal restoration by using revenue sharing dollars from offshore oil-and-gas drilling has gone on for decades as well.

In 1949, President Harry S. Truman offered Louisiana a deal to send the state roughly one-third of the future federal royalties from oil production off of the state’s coast in the Gulf of Mexico. But then-Gov. Earl Long infamously held out for 50 percent revenue sharing, which is the share inland states get from onshore oil, gas and coal production on federal lands. The deal was promptly taken off the table and never came particularly close to returning again until after Hurricane Katrina.

In 2006, Congress finally passed the Gulf of Mexico Energy Security Act by Sen. Mary Landrieu, D-La., for Louisiana and other Gulf states to receive 37.5 percent of the royalties the federal government gets from new drilling in 8.3 million acres in the Gulf. Then-Congressman Bobby Jindal led the effort in the U.S. House.

But, unfortunately for the impacted states, those dollars don’t really kick in until 2017 and, even then, there is a $500 million cap on the revenue sharing for the states.

If the law was fully in effect now, for instance, Louisiana, Mississippi and Alabama would be about to receive roughly $400 million from a Gulf lease sale this past week. Instead, almost all of it is going to the federal Treasury.

Last year, Landrieu proposed the OPEN Act to accelerate the states receiving the royalties and to open up more offshore drilling along the Atlantic and Pacific coasts. Last month, Sen. David Vitter, R-La., proposed a more comprehensive bill to similarly expand drilling access and to increase the revenue sharing cap, among other things.

Landrieu’s OPEN Act went nowhere and died at the end of the year, and Vitter has acknowledged his bill is destined for a similar fate under the Democratic-led Senate unless he can amend parts of his bill onto other pieces of legislation.

The reason? The expansions of drilling access, which are nonstarters with many Senate Democrats.

So Landrieu and Sen. Lisa Murkowski, R-Alaska, last week filed the Fixing America’s Inequity with Revenues Act, or FAIR Act, that they proposed as a more practical bill that could see “the finish line.” The legislation speeds up revenue sharing and lifts the $500 million cap, but it does not expand drilling access beyond what President Barack Obama has proposed. Murkowski is on board because Alaska is about to have more offshore energy production.

The FAIR Act also includes state revenue sharing for alternative and renewable energy production both offshore — such as wind and wave energies — and on land to entice more Democrats to join in support.

Another positive sign is that U.S. Senate Energy and Natural Resources Committee Chairman Ron Wyden, D-Ore., repeatedly has expressed an interest in finding a national solution to state revenue sharing for offshore energy production. While Wyden isn’t ready to support the FAIR Act, he’s indicating he wants to see movement on the issue.

But that doesn’t mean the FAIR Act is on the verge of becoming law. As Landrieu acknowledged with her Alaska colleague, “This is going to be very rigorous debate. We do not expect the sledding on this to be easy, to borrow an Alaska term.”

Critics contend that more state revenue sharing will deplete federal revenues, motivate more states to sign off on offshore drilling and lead to more messes like the 2010 BP oil tragedy that Louisiana is still feeling.

Earlier this month, eight Senate Democrats already sent a letter to Wyden asking him to oppose such revenue-sharing plans. Most of those senators hail from coastal states like California and New Jersey that don’t want to see oil messes on their shores. Sen. Robert Menendez, D-N.J., for instance fears his state suffering from a BP-like spill if offshore drilling is approved off of Virginia’s shores.

So, there’s much work to be done, and the “sledding” certainly won’t be easy.

Jordan Blum is chief of The Advocate Washington bureau. His email address is jblum@theadvocate.com.