INTERIOR:

Budget request would boost conservation, increase OCS oversight

The Obama administration this morning proposed significant new funding for land and water conservation and offshore drilling oversight that would be counterbalanced by cuts to agency construction, the U.S. Geological Survey and some tribal programs.

The Interior Department's $12 billion request would roughly flat-line the agency's spending in fiscal 2012 as part of the administration's recent pledge to freeze discretionary spending for the next half decade.

Under the Obama proposal, new Interior revenues would be generated through mineral royalty reform and increased fees for oil and gas permitting, inspections and non-producing leases.

The revenue would help boost the Land and Water Conservation Fund to its maximum $900 million annual authorized cap, a level the fund has reached rarely since it was created in the 1960s. That contrasts sharply with a House Republican proposal to nearly gut the program entirely in the remaining 2011 fiscal year.

Obama's requested funding for renewable energy permitting at the Bureau of Land Management would remain at $73 million, which is designed to allow the agency to reach a goal of permitting 9,000 megawatts of renewable energy on public lands by the end of this year.

The budget also requests $500 million to fund three new agencies spun out of the former Minerals Management Service to strengthen oversight of offshore oil and gas development in the wake of last year's catastrophic BP PLC oil spill in the Gulf of Mexico.

The money would be used to complete the reorganization of the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) and implement a suite of drilling regulations introduced over the past several months.

Oil and gas

The $500 million for the new agencies includes a shared $132 million increase for BOEMRE's Bureau of Ocean Energy Management, which will handle leasing, environmental and resource analysis, and for the Bureau of Safety and Environmental Enforcement, which will be responsible for permitting offshore oil and gas proposals and enforcing safety rules.

The additional funding will be used to hire new inspectors, engineers, scientists and other key staff for oversight and to establish real-time monitoring of offshore drilling activities, conduct detailed engineering reviews, implement more aggressive reviews of oil spill response plans and facilitate the timely review of oil and gas permits.

But the increase in capacity will also require new sources of revenue, some of which is expected to come from industry through potential royalty and fee hikes and establishing fees from nonproducing leases.

Those proposals come on top of an Obama pitch to end billions of dollars in annual oil and gas tax subsidies that are expected to save $46.2 billion over the next decade but have drawn criticism from oil and gas groups.

"It's no surprise the administration is proposing yet again to raise taxes on the U.S. oil and natural gas industry," American Petroleum Institute President Jack Gerard said in a statement. "The administration continues to ignore the fact this industry is among the nation's largest job creators and delivers enormous revenues to government at all levels."

The industry pays income taxes, royalties and other fees totaling nearly $100 million every day and pays income tax at an effective rate far higher than most other industries, Gerard said.

"Besides eliminating thousands of new potential jobs, the increases, over the long term, would actually lower revenue to the government by many billions of dollars as a result of foregone revenues from projects the tax hikes would prevent going forward," he said.

The Obama request also proposes a new royalty for gold, silver, copper and other hardrock minerals -- the only extractive industry that pays no royalty to mine on public lands.

"As Washington works to reduce the deficit, we're very glad to see the Obama administration calling for a royalty on the billions of dollars of gold and other hardrock minerals that up until now have been taken from public land virtually for free," said Jane Danowitz, U.S. public lands program director at Pew Environment Group. "This means that mining would finally compensate taxpayers under a federal leasing program similar to the one that has governed oil, gas and coal for decades."

Danowitz added that new royalties and leasing, along with a reclamation fee to help clean up abandoned mines, would help reform an 1872 law that still governs hardrock mining and provide much needed revenues.

Land acquisition

The Obama proposal includes $900 million for LWCF, which is used to acquire lands, consolidate parks, protect sensitive species and assist states in promoting recreation.

The proposal is a significant increase over current funding levels of about $480 million and would for the first time in years provide full funding for the program.

The increase, which would include $200 million for a state grant program, would support the administration's Great Outdoors Initiative, which seeks to reconnect Americans and especially young people with nature.

But the Obama request comes days after the House introduced a continuing resolution to fund the government for the rest of fiscal 2011 that seeks to gut the program. And past administration requests to boost LWCF have been met by skeptical Republicans in the Senate, including Alaska Sen. Lisa Murkowski, who question whether the United States is equipped to manage new lands.

The administration recommends that much of the additional funding go to the National Park Service. That agency would see a total budget of $2.92 billion, up from $2.78 billion currently.

Proposals for other land management agencies include:

  • $5.14 billion for the Agriculture Department's Forest Service, which includes plans to consolidate forest restoration programs to restore resiliency and health to forests while maintaining economic development opportunities for rural communities.
  • $1.13 billion for BLM, a decrease of roughly $24 million from 2010 appropriated levels and from Obama's 2011 request of $1.15 billion.
  • $1.7 billion for the Fish and Wildlife Service, a slight uptick from the $1.65 billion in 2010 and roughly even with the amount Obama requested for 2011.

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