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La. renews call for 'fair share' of offshore oil royalties

The devastation Hurricanes Katrina and Rita heaped upon Louisiana's coast and levees may have brought national attention to an issue state politicians have been pushing for years: getting Louisiana's "fair share" of royalties from oil and gas drilled off the state's coast to pay for coastal restoration and hurricane protection.

The politicians have renewed their efforts to get Louisiana a percentage of the approximately $6 billion a year the federal government receives from companies drilling for oil and gas in the Gulf of Mexico.

That effort got a significant boost this week when Gov. Kathleen Blanco put the federal government on notice that if the state doesn't begin getting a cut of the federal royalties, it might oppose future federal leases off Louisiana's coast.

"It is abundantly clear that allowing development to occur where inadequate provisions are made for the protection of that development is irresponsible," Blanco wrote. "The amount of oil and gas activity off our coast means little if we have no coastal communities to take advantage of this activity."

The state's congressional delegation wants 50 percent of the royalties now paid to the federal government for oil and gas produced from 6 miles to about 200 miles off Louisiana's coast. The state's share of the $6 billion could bring $2 billion or more to Louisiana each year. Some legislators call this Louisiana's "fair share" of revenues, the equivalent of what inland states get when drilling occurs on federal lands within their borders.

The push for revenue sharing has been made countless times before, but the hurricanes have brought a new urgency to the request, a new twist to the politicians' message and renewed hopes for getting approved by Congress this year.

Former Sen. John Breaux, who pushed for the revenue sharing during his 32 years in Congress, said things look better than they ever have for legislation approving a split of the federal money.

"Perhaps this may be the time that the stars may come into alignment and we may get something done," Breaux said.

All or nothing

The stars have been out of whack for Louisiana since 1945, when President Truman gave the federal government jurisdiction over all offshore resources. The government began leasing those lands about a decade later, charging companies a 12 percent to 16 percent royalty on what they produce. It has since collected about $160 billion from offshore drilling. This year the federal government is expected to earn $6 billion in royalty payments from federal lands in the Outer Continental Shelf, called OCS.

The Truman administration initially offered Louisiana control of the first three miles off its shores and a share of royalties beyond that. But, according to Sen. Mary Landrieu, D-La., Plaquemines Parish boss Leander Perez demanded all of the royalties or nothing -- and the state got nothing.

Under mounting pressure in 1953, Congress gave coastal states the rights to the waters up to 3 miles off their coasts. Texas and Florida were given control of about 9 miles in the Gulf of Mexico because they had established those boundaries before becoming states.

About 30 years later, states began collecting 27 percent of the federal royalties for production from 3 to 6 miles offshore to compensate for oil and gas that might be siphoned out of pools closer to shore.

Those two concessions have amounted to billions for the state. For its own leases in waters up to 3 miles out, Louisiana in 2004 collected close to $852 million in severance taxes and royalties for offshore drilling, and about $38 million from drilling that occurred in waters from 3 to 6 miles from shore.

But state politicians, pointing to how money is divided for states with onshore drilling on federal lands, say Louisiana's share is not equitable.

They highlight Western states, one of which receives more than 20 times what Louisiana does from federal royalties for onshore mineral extraction, as proof that the scales are tipped against the Pelican State.

States began receiving royalty money from the federal government after the Mineral Leasing Act of 1920. The West lobbied for a share of those royalties and was the primary beneficiary of the law because of the large amount of federal lands in Western states and the minerals beneath. Louisiana has some federal lands within its borders, and last year collected about $1.6 million in onshore federal royalties -- just a fraction of what interior states, such as Wyoming and New Mexico, collected from the federal government for drilling and mining. In 2005, Wyoming collected $878 million and New Mexico got $444 million.

Before 1920, Western states argued they deserved a portion of the royalties because they provided the infrastructure needed for drilling and mining to take place. That argument can also be applied to states supporting offshore drilling, Landrieu said.

"The impacts to the land are similar: the pipelines, all the support services come from Louisiana. If the state was not acting as a host, offshore drilling could not occur," Landrieu said.

Part of the problem

As more attention has been paid to Louisiana's coastal erosion over the past decade, there's been a greater focus on offshore royalties as a way to rebuild what some scientists say was damaged by oil- and gas-related development, along with other manmade and natural forces.

In a Jan. 30 letter to the Minerals Management Service, Blanco wrote, "It is apparent that OCS development has a significant impact on the Louisiana coastal zone and the fragile wetlands in the area. Numerous onshore support bases and extensive oil and gas infrastructure are located in Louisiana's Coastal Zone, through which OCS waterborne traffic and petroleum pipelines must pass. Consequently, Louisiana suffers disproportionate impacts resulting from development of oil and gas resources in the Gulf area."

At least a half-dozen attempts have been made since 2000 to get revenue sharing approved in Congress. All have failed. Some revenue-sharing provisions included in the annual energy bills passed the Senate, but weren't included in the corresponding House bill and didn't make it out of conference committees. Legislators opposing the measures have called them entitlements, and argue there is no question that offshore lands belong to the federal government.

Others are opposed to revenue sharing because it would give states an incentive to allow drilling off their coasts. But primarily, legislators have been uncomfortable giving up control of such a large chunk of revenue. And this summer, the Bush administration opposed revenue-sharing legislation by U.S. Sen. David Vitter, R-La., and Landrieu.

But the delegation managed to win approval of $1 billion for energy-producing coastal states over four years. Louisiana will get 54 percent of that amount, or $540 million.

The money will come from the general fund rather than being tied to offshore royalties. Landrieu and Breaux said the legislation indicates a willingness by Congress to consider direct revenue sharing.

"We do have very high hopes," Landrieu said.

More people see it now

Since Hurricane Katrina, the need to restore Louisiana's coast and beef up its hurricane protection has become more apparent to the rest of the nation, Landrieu said.

Using the hurricane damage to emphasize their message, the state's politicians are trying to sell revenue sharing as the best way to provide the state with a steady stream of money to pay for the estimated $32 billion to $40 billion needed to rebuild the state's barrier islands and levees.

On Jan. 26, Vitter and Landrieu sent a letter to President Bush urging him to support revenue sharing. "This is a unique opportunity to correct an historic injustice by providing parity with the revenues enjoyed by states allowing onshore drilling on federal lands. It will also provide the definitive revenue source to ensure the Gulf Coast's recovery."

On a recent bus tour of the heavily damaged Lower 9th Ward with six visiting senators, Vitter pitched the idea of using a share of the offshore royalties to finance rebuilding efforts.

"The most logical way to pay for it is to share revenues from offshore production. This is really the key in terms of federal policy," Vitter told the senators.

The delegation is getting help from a growing number of people. America's Wetland awareness campaign started a letter-writing drive in support of revenue sharing. The campaign's goal is 100,000 letters sent to Congress. So far, 20,000 have e-mailed letters of support. A group of more than 150 Louisiana women has gone to Congress this week to lobby for, among other things, the revenue-sharing proposal.

Breaux said he is trying to form a coalition of energy companies to support the legislation. Shell Oil Co. has publicly endorsed the proposal and Breaux is meeting with others in the industry.

"I think it's good for America's energy policy," Breaux said.

Jeff Copeskey of Louisiana Mid-Continent Oil and Gas Association, an association of energy-related industry in the state, said his group is actively supporting the state getting more money from offshore royalties.

"A lot of people are working at it, and they are working on it from different angles," he said.

Extending the state-controlled waters farther out into the Gulf of Mexico is one alternative, he said. Such measures have been proposed before, including legislation from Landrieu that would give Louisiana the same amount of coast as Florida and Texas. If states were given a straight 50 percent of the offshore royalties, Louisiana would get the lion's share of that money. The estimate used by Congress this summer to divide the $1 billion for the coastal states showed that 54 percent of the oil and gas produced in the Gulf of Mexico was found off Louisiana's shores. By other estimates, depending on how boundaries are drawn, Louisiana could receive 80 percent or more.

Recent administrative offshore boundaries released by the Minerals Management Service place more than 50 percent of the oil and gas producing sections of the Gulf inside the state's boundaries. The agency said that the map was drawn solely for planning purposes, but said the administration could use it to determine which states have the right to offshore production.

Not a sure thing

As in past attempts, revenue sharing legislation won't slide easily through Congress.

Though Landrieu, Vitter, Breaux and others say the bill has the best chance ever of getting approved, legislators outside of Louisiana are taking a wait-and-see attitude.

Landrieu said Sen. Jeff Bingaman, D.-N.M., and Sen. Pete Domenici, R-N.M., both of whom once steadfastly opposed revenue sharing, have changed their attitudes. But those senators' staff members said it's too soon to tell whether revenue sharing will be embraced, and whether their senators will support such legislation.

Bingaman would not back a 50-50 split of the money, spokesman Bill Wicker said. "Senator Bingaman does not support this approach," Wicker said.

Vitter said there may be some hesitation from Democrats in the House and Senate who previously opposed the measure.

But Breaux said he believes revenue-sharing legislation has a chance in Congress and the White House this year.

"I think the administration is sort of considering it," he said. "I am more encouraged than I was ever before."

Landrieu said she believes her fellow legislators will support revenue sharing, but that may not be enough.

"The administration has not come out and aggressively supported this effort. We need their aggressive support," she said.

In response to a call seeking comment from the White House, the administration sent the statement it released this summer opposing Landrieu and Vitter's attempt to pass revenue sharing.

Rep. Charlie Melancon, D-Napoleonville, also is concerned about the White House -- simply because Bush may not be aware of the revenue-sharing proposals.

During a recent meeting business leaders and politicians had with Bush in New Orleans, Melancon asked Bush to support the state's push for the royalties.

"I said, 'If you would help us get OCS revenue sharing, we could take care of our own problems,' " Melancon said.

Melancon said Bush responded by asking, "What's OCS?"

The America's WETLAND Foundation manages the largest, most comprehensive public education campaign in Louisiana's history, raising public awareness of the impact of Louisiana's wetland loss on the state, nation and world. The America's Energy Coast initiative works to sustain the environmental and economic assets of the Gulf Coast region. The initiative is supported by a growing coalition of world, national and state conservation and environmental organizations and has drawn private support from businesses that see wetlands protection as a key to economic growth. For more information, visit www.americaswetland.com or www.futureofthegulfcoast.org.

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