US House Natural Resource Committee Republicans presented a fifth proposal at a June 14 hearing to change federal oil and gas policies that ostensibly would increase states’ involvement in federal oil and gas decisions. Democrats on the Energy and Mineral Resources Subcommittee quickly criticized the discussion draft’s plan to reward states that encourage more leasing and development and penalize states that do not.
The idea originated last fall after the US Department of the Interior announced 47 proposed federal offshore lease sales on every part of the US Outer Continental Shelf, Subcommittee Chairman Paul Gosar (R-Ariz.) said. Many coastal governors, municipalities, and congressional delegations vocally opposed the plan, and attempted to pass measures that prohibit or discourage development on the federally owned OCS, Gosar said.
“While states are highly involved in the offshore lease planning process already, they do not have a veto power over lease sales. Congress has seen various bills and amendments attempting to impose a moratorium on OCS leasing, essentially imposing the localized will on nationally owned, widely enjoyed assets,” Gosar said. “What seems to be lost in these initiatives is the acknowledgment that attempts to strand such assets comes at the expense of the American taxpayer.”
Title 1 of the proposal would let states assume exclusive jurisdiction over leasing on specific parcels of federally owned land, Gosar said. With the Interior secretary’s approval, states then could choose to increase or decrease production, or cease production on these parcels altogether.
“If a state increased production on federal lands, it would receive 60% of the mineral revenue compared to 50% currently provided under the Mineral Leasing Act. However, if a state reduces production, it will receive a reduced share of 20% and must pay a lost production fee to the federal treasury,” Gosar said.
Under Title 2, coastal states would be empowered to make intelligent decisions on allowing or prohibiting development in federal waters off their coasts, Gosar noted. Coastal states then would be able to determine whether specific blocks would be included in a final lease sale. The more blocks they allowed to proceed, the higher their shares of revenue would be. “Should a state choose to withhold a block from a sale, it would have to indemnify the US Treasury for the value lost to the taxpayers,” Gosar said.
Flaws to be addressed
The discussion draft had flaws, Gosar admitted. “For instance, it does not include the equitable redrawing of states’ administrative boundary lines. Calculations of reasonable indemnification to the federal government and revenue to the states also are not finalized,” he said. “We will continue to engage all stakeholders on this complex conceptual proposal, and we invite commentary and suggestions to ensure that the conversation is inclusive and well informed.”
Ranking Minority Member Alan Lowenthal (D-Calif.) was succinct in summarizing the proposal. “Title 1 is the bribe. Title 2 is the shakedown,” he said.
“Coastal recreation and tourism generate billions of dollars in revenue and employ millions of people. States recognize both the financial and social value of coastal resources, and no oil and gas development is worth the risk,” Lowenthal said. “I hope this discussion draft is more about trying to make a point than making a serious effort to legislate. The ideas behind this bill are flawed, and its enactment would be disastrous for everyone who uses and enjoys our public lands, our beaches, and our oceans.”
The four witnesses who testified offered differing assessments of the proposal. “If you look at the timeline trajectory for federal drilling permit applications, it’s above 220 days on average now, compared to days or weeks on state or privately owned lands. That’s a huge incentive to go toward those areas and away from federal lands,” said Nick Loris, the Herbert and Joyce Morgan Fellow in Energy and Environmental Policy at the Heritage Foundation in Washington.
“There are even cases where energy companies have told me they’ve even gone away from state and private land that’s adjacent or interspersed with federal land because they don’t want to deal with the federal government’s cumbersome process,” Loris said.
Matt Anderson, who directs the Coalition for Self-Government in the West at the Sutherland Institute in Salt Lake City, said, “No state is like one another. Furthermore, geography in each state is unique, and in a state like Utah, it can be very diverse—and difficult to manage under the federal government’s one-size-fits-all approach. When you bring in local factors and circumstances, you’re able to meet the needs of the people who live there. That doesn’t mean we have to have environmental or recreational degradation as a result.”
An improvement in some ways
Myron Ebell, who directs the Energy and Environment Center at the Competitive Enterprise Institute in Washington, noted, “One reason royalty sharing is a good idea is that it recognizes that offshore oil and gas development presents costs. The environmental permitting process for all sorts of projects tries to take that into account. The regulatory regime for offshore oil and gas production tries to minimize risks, but they do occur.” He said that the proposal is an improvement for states that do not want oil and gas activity off their coasts to actually prevent it directly “if they are willing to buy their way out.”
Nags Head, NC, Mayor Ben Cahoon said this could create serious problems where he works and lives. “That certainly seems like an inappropriate mechanism to me. It fundamentally ignores the question of making the decision about whether offshore drilling is the right thing to do,” Cahoon said. “More fundamentally as a mayor, I would wonder what our state would do to find those resources. We would certainly have a charged political discussion to find those funds, but they would need to come from somewhere. They may be taken from towns or from additional taxes that are imposed.”
Four discussion drafts that the subcommittee considered a week earlier have been introduced as bills and were scheduled for markup before the full committee on June 20.
HR 6087 would give the Interior secretary authority to recover the cost of processing administrative protests of lease sales, drilling permit applications, and pipeline right-of-way applications.
HR 6088 would amend the Mineral Leasing Act and allow lessees to file drilling notifications instead of drilling permit applications for activities which would not have a marked environmental impact.
HR 6016 would authorize additional categorical exclusions to streamline permitting decisions. HR 6107 would order that the US Bureau of Land Management not require permits on nonfederal land to reach subsurface deposits that are less than 50% federally owned.
Contact Nick Snow at [email protected].