Senate rejects bid to expand federal OCS revenue sharing beyond Gulf

The US Senate rejected an effort on Apr. 2 to extend federal Outer Continental Shelf revenue sharing beyond the US Gulf Coast to other coastal states and communities by 61 to 36 votes.

Apr 10th, 2009

The US Senate rejected an effort on Apr. 2 to extend federal Outer Continental Shelf revenue sharing beyond the US Gulf Coast to other coastal states and communities by 61 to 36 votes.

The vote on the proposed amendment to the fiscal 2010 budget, which the Senate subsequently passed by 55 to 43 votes, indicated that senators weren't yet ready to adopt the revenue-sharing formula for future federal OCS oil and gas activity outside the Gulf of Mexico.

"I have always found the thought of taking revenue from the OCS, which is owned by all Americans and which is not part of any state, and dedicated the revenue to just a handful of states to be unfair. To make additional OCS revenue sharing budget-neutral, we would have to either raise taxes on all American or cut worthwhile programs. That makes this proposal even more unpalatable to me and my colleagues," Senate Energy and Natural Resources Committee Chairman Jeff Bingaman (D-NM) said following the amendment's defeat.

Sen. Mary L. Landrieu (D-La.), who sponsored the amendment with Sen. Mark Begich (D-Alas.), said that it was important that OCS revenue was shared equitably and fairly not only with the US Treasury but also with states and local governments which provide operating bases for offshore oil and gas development.

She said that the amendment would set aside 50% of future OCS revenue in the manner established for Texas, Louisiana, Mississippi and Alabama under the 2006 Gulf of Mexico Energy Security Act. The law mandated that some of the money would go to the Land and Water Conservation Fund and to energy research as well as to state and local governments directly feeling OCS development impacts.

"This amendment does not say where we are going to drill. It does not authorize drilling. It says when those decisions are made that the revenue should be shared with state and local governments appropriately, to enter into strong, reliable and mutually beneficial partnerships for increased drilling domestically," Landrieu said.

But Senate Finance Committee Chairman Max Baucus (D-Mont.) said that the proposal would have significant consequences for all states. "A very small number, a handful, will get a windfall. All of the rest of the states will have money raised from mineral leasing royalties not go to them at all," he said. The proposed amendment also would set the stage for a $110 billion tax increase because it was a revenue-neutral provision requiring an offset for money paid to coastal states, he continued.

Senate Budget Committee Chairman Kent Conrad (D-ND) suggested that Landrieu probably would propose the idea again. "One thing I have learned about the senator from Louisiana: She is persistent with a capital 'P.' If I wanted someone to represent me here in this capitol to get a result, I would pick her because never have I seen someone more indefatigable in defense of their state, and I mean that with the highest praise," he said.

Contact Nick Snow at nicks@pennwell.com

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