Gulf states battle for drilling proceeds

Gulf states battle for drilling proceeds

Gulf Coast lawmakers are up in arms over an Obama administration proposal to reduce the money that their states receive for offshore oil and gas drilling in the Gulf of Mexico.

President Obama proposed in his budget early in February to roll back a 2006 law that, beginning in 2017, would give the Gulf states up to $375 million a year out of the earnings federal government collects from drillers.

While the water is federal, the Gulf states delegation feels that the money is rightfully theirs, since they provide much of the infrastructure and workforce. They also bear the environmental risk for operations that bring in 17 percent of the nation’s oil and 5 percent of its natural gas, while the region refines more the half of its oil, the states argue.

To be sure, the proposal faces an uphill climb in the GOP-controlled Congress, but Gulf State lawmakers are worried enough to mount a full-scale attack in defense of their share of the money.

Sen. Bill Cassidy (R-La.) used a Feb. 24 budget hearing to tear into Interior Secretary Sally JewellSally JewellOvernight Energy: Rough hearing for Tillerson Interior proposes raising royalty rates on federal coal mining Overnight Energy: Former Exxon chief Tillerson takes the hot seat MORE for trying to take away money for which he and other lawmakers in the region had fought hard.

“I am incredibly — I can't put enough hyperbole in front of this — opposed to the department's budget proposal to deprive the Gulf Coast states of the revenue promised under the Gulf of Mexico Energy Security Act (GOMESA),” Cassidy said.

Louisiana’s constitution requires that any earnings from offshore drilling go directly to coastal restoration, repairing damage that Cassidy blames on the federal government for actions like channeling the Mississippi River.

“There is a headline recently I read, ‘Does President Obama hate Louisiana,’ ” Cassidy said. “That's a question you're asking when the money we were going to use to build back that wetlands is being taken away.”

The anger spreads across party and state lines, except for Florida, which doesn’t get money because of a moratorium on offshore drilling in the eastern Gulf.

“The Gulf states provide the personnel and expertise to develop the offshore resources, and more importantly, these states also absorb the potential risk of deep-water oil and gas development,” Rep. Gene GreenGene GreenLawmakers worry ObamaCare fight could suck air from other priorities Midwest Dems feel left out in cold Overnight Healthcare: Hospitals plot attack against ObamaCare repeal MORE (D-Texas) said in a statement.

“Given all these variables, the allocations devised in GOMESA are there to provide for the environment, economy, and citizens of the Gulf coast states,” he said.

The 2006 law provides for the first-ever state revenue sharing for deep-water oil and gas drilling, directing some of the revenues from leases to states. The Gulf has the only current oil and gas production in federal offshore waters, save for a small amount off the coast of California.

Former Sen. Mary LandrieuMary LandrieuFive unanswered questions after Trump's upset victory Pavlich: O’Keefe a true journalist Trump’s implosion could cost GOP in Louisiana Senate race MORE (D-La.), who was ousted by Cassidy last year, counted the revenue sharing law as one of her top accomplishments in Congress.

After the law passed in 2006, revenue sharing started for a single area’s production in the Gulf, which has brought $4 million so far to the states that is divided using a complex formula that accounts for the states’ coastal length and proximity to the wells.

The covered wells will expand dramatically in 2017. The money that goes to states will be capped at $375 million annually out of an estimated $22 billion, though the Interior Department projects that the funding will hit the cap the first year.

Obama’s fiscal 2016 budget request, released Feb. 2, asks Congress to repeal the law, leaving the states with a far smaller fraction of the proceeds.

The administration reasons that federal waters belong to the entire country, and no one area should benefit from their resources more than others.

“Of course I care about those families, as I do about many families in coastal communities that are experiencing dramatic impacts,” Interior Secretary Sally Jewell told Cassidy at the Feb. 24 hearing.

“The president's proposed budget says we should revisit the revenues from federal waters offshore, beyond state waters, for the benefit of all American people.”

Cassidy was not happy.

“Revisit means take it away from the coastline that will be rebuilt,” he responded.

The Interior Department was not specific about where the money would go, but said it might go to programs involve conservation efforts, grants to states or coastal restoration.

Autumn Hanna, senior program director at Taxpayers for Common Sense, defended Obama, saying the entire country should benefit from offshore drilling.

“For these waters that are many miles offshore, the impacts are spread across multiple states,” she said. “It’s also about that the federal government spends money monitoring and regulating these areas.”

To the lawmakers around the Gulf, it’s only fair that their states get a larger share of the money than others.

“I think it’s a terrible policy,” said Rep. Charles BoustanyCharles BoustanyIll. rep named new chairman for House tax-policy subcommittee Clay Higgins wins La. House seat Louisiana dishes last serving of political gumbo MORE (R-La.) “And it’s an unfair policy. Louisiana and Gulf coastal states have fought for 50 years to get this revenue sharing, and we finally got the door open on this. It would be a big step backwards in my mind if it were repealed.”

Sen. Thad CochranThad CochranGOP senators voice misgivings about short-term spending bill Trump's wrong to pick Bannon or Sessions for anything Bottom Line MORE (R-Miss.), who chairs the Appropriations Committee, said the revenue sharing law is important for state efforts to restore coasts and similar needs.

“I will actively oppose efforts to take resources away from these critical priorities for Mississippi and the entire Gulf,” he said in a statement.

Michael Rekola, a spokesman for Rep. Blake FarentholdBlake FarentholdWhy Republicans took aim at an ethics watchdog Report on warrantless surveillance shows Congress must update privacy laws A national law needed to protect online freedom of speech MORE (R-Texas), said his boss wanted simply to refer Obama to the Gonzales flag, a symbol of the 19th-century Texas Revolution that features only a cannon and the words: “Come and take it.”

Rep. Steven Palazzo (R-Ala.) called the proposal “highway robbery.”

“What the president calls for would steal from these states and local communities to be used on other ‘priorities’ that the president sees as more important,” he said in a statement.

Sen. Lisa MurkowskiLisa MurkowskiTrump, GOP set to battle on spending cuts What we learned from Rick Perry's confirmation hearing Perry regrets saying he would abolish Energy Department MORE (R-Alaska) and Rep. Rob BishopRob BishopPresident-elect Trump, don’t tamper with the successful Endangered Species Act Bears Ears National Monument designation a great way to end 2016 House GOP moves to ease federal land transfers MORE (R-Utah), chairmen of the committees that would have to approve the change, largely agree, and support the law on the books.

Luckily for the Gulf states, lawmakers think Obama’s proposal is doomed.

Rep. Bradley Byrne (R-Ala.) said the proposal was “dead on arrival,” a sentiment shared by Sen. Richard Shelby (R-Ala.).

“Not only is it a bad idea, it’s a non-starter and it’s unrealistic,” said Sen. Roger WickerRoger WickerTrump, GOP set to battle on spending cuts Senate confirms first nominees of Trump era Senate gears up for battle over Trump's CIA pick MORE (R-Miss.).