OFFSHORE DRILLING:

Wyden, Murkowski face 'unfinished business' of revenue sharing, spill response legislation

One month before the Deepwater Horizon rig exploded in spring 2010, Sen. Ron Wyden of Oregon and nine other Democrats sent a letter to colleagues arguing that revenues from offshore drilling should be "shared equally" among all Americans to be used for deficit reduction and protection of the nation's waters and coastlines.

It wasn't a clear denunciation of offshore revenue sharing, which would hand a percentage of federal drilling revenue to those states off whose shores drilling took place, but it was pretty close.

"The Senate has rejected the concept of revenue sharing on numerous occasions in recent years," the Democrats wrote to Sens. John Kerry (D-Mass.), Joe Lieberman (I-Conn.) and Lindsey Graham (R-S.C.), who at the time were crafting a comprehensive energy and climate bill. "All states should have a say in how offshore revenues are allocated."

Although the Democrats on the letter all represented coastal states, none of them was from a Gulf of Mexico state -- the only area that currently would benefit from a revenue-sharing plan.

Wyden, who next month will become chairman of the Energy and Natural Resources Committee, said his thinking on the issue has evolved over the past few years and that he is now open to solutions that address the revenue needs of resource-dependent communities nationwide.

His stance on the issue -- while still tantalizingly vague -- may factor in the committee's ability to pass other significant legislation in the 113th Congress, not the least of which includes an oil spill response bill that was shelved in 2011 amid disagreements over revenues from offshore drilling

Wyden appears more likely to embrace revenue sharing than current Chairman Jeff Bingaman (D-N.M.), which could offer a major bipartisan breakthrough.

"If you look at what's happened in the committee, there's been a pretty stark division on this revenue-sharing issue," Wyden told Platts Energy Week last month. "I think there's a chance to develop a third path in between those who want no revenue sharing and those who do want revenue sharing and in effect stitch together a new national coalition that involves resource-dependent communities all over this country."

Under a 2006 deal, Gulf of Mexico states will receive a 37.5 percent cut from certain offshore leasing areas, but the bulk of those payments won't phase in until 2016. Sens. Mary Landrieu (D-La.) and Lisa Murkowski (R-Alaska) want to see the revenue-sharing process sped up and expanded to other prospective areas including Alaska and Virginia.

But disagreements over their proposal sank passage of S. 917, a bipartisan suite of offshore safety provisions that the committee had passed easily in the 111th Congress.

That bill would have authorized the Interior Department to restructure the troubled Minerals Management Service, lengthen reviews for exploration plans and increase civil penalties to deter risky drilling, among other provisions.

While Interior has taken many steps administratively -- including a sweeping reorganization, more detailed environmental reviews and tougher safety regulations -- it lacks other authorities that environmentalists and drilling experts say are needed to prevent another spill.

"We've had a lot of reminders in the past couple of weeks of why this is so important, and how far we have to go to adequately protect our workers, our water, our wildlife from the dangers of offshore drilling," said Bob Deans, associate director for the Natural Resources Defense Council.

Deans pointed to last month's fatal explosion and fire on the Black Elk Energy Offshore Operations LLC oil platform in the Gulf of Mexico and BP PLC's recent admission of 14 counts of criminal wrongdoing in the April 2010 oil spill.

Over the past six years, there have been 681 fires or explosions on platforms in the Gulf, and 36 workers died and 1,653 were injured, Deans said, citing Bureau of Safety and Environmental Enforcement data.

"This is staring us right in the face right now," he said.

Not a 'slam dunk'

Murkowski's office said she is hopeful Wyden will support revenue sharing for coastal states, including Alaska, but that she realizes it is far from a done deal.

"You've had a chairman who has been philosophically opposed, who won't even bring it up for a vote, and his reaction to the issue, both from his own party, Democrats and Republicans, has been he's not interested in the conversation," said Robert Dillon, spokesman for Murkowski. "Sen. Wyden has certainly been interested in having the conversation."

Bingaman's office said the chairman was willing to give the revenue-sharing amendment a vote at the July 2011 markup but that the committee lost its quorum after Landrieu left the dias. The committee has not revisited the issue since.

Bingaman and other Democrats have long argued that revenues from federal waters belong to all Americans and are critical to reducing the nation's deficit.

Dillon said Wyden appears willing to have "difficult discussions" not just on revenue from offshore oil and gas, but also incentives for offshore wind and tidal energy off the coasts of states including Oregon.

"We're not saying this is a slam dunk or that he is a full supporter," he said. "This is an ongoing discussion."

Landrieu said an agreement on revenue sharing would build bipartisan momentum for the committee to tackle an array of energy issues including offshore safety, oil spill liability, exports of natural gas, energy and building efficiency, smart grids, and investments in alternative energy.

"There are any number of things that could be done that could be put together as a step forward on our goal to be more energy self-sufficient -- more cleaner, more renewable," Landrieu said.

Wyden appears "generally supportive" of revenue sharing and understands that energy development on federal lands depends on the cooperation of local communities, Landrieu said.

"Having a partnership between the local communities and the federal government for the benefit of the environment and all taxpayers is something we both strongly agree with," she said. "So it's just a matter of working out some of the details and levels of reimbursement. I think that can be worked out."

Wyden is familiar with the needs of resource-dependent communities, coming from a heavily forested state that is dominated by federal lands. As Congress faces a "fiscal cliff" of tax increases and spending cuts, counties in western Oregon face a fiscal cliff of their own as federal timber payments expire.

Like Murkowski's Alaska, Oregon has suffered from a significant decline in timber harvests as federal agencies moved to protect old-growth trees and the species that depend on them.

In addition to timber, Wyden and Murkowski share similar positions on hydro and geothermal energy and some public lands bills, Dillon said. It may help the two reach agreements on larger issues.

"We may start with these, and then they can start building some good will in the committee," Dillon said.

Bingaman said he is hopeful Wyden and Murkowski can find a path forward on offshore safety.

"There's a lot of unfinished business," he said last week, citing specifically the need to clarify Interior's authority over offshore drilling.

"I think they are good friends, and I think the committee has a history of trying to pass things on a bipartisan basis," he added. "So I hope that continues."

'More vigorous oversight'

Whether Wyden and Murkowski will agree on offshore drilling or other hot-button issues -- including gas exports, regulation of hydraulic fracturing, nuclear waste storage and clean energy incentives -- remains to be seen.

The two have taken at least three trips to each other's states in the past year, including an August visit to an offshore gas platform in Alaska's Cook Inlet and a salmon dinner at Murkowski's home (E&E Daily, Sept. 11).

Wyden last month said he has not forgotten the lessons of the Deepwater Horizon accident, which killed 11 and sent nearly 5 million barrels of oil into the Gulf -- the nation's worst spill.

"If you look back in particular at the regulator, which was the Minerals Management Service, there is a fair amount of evidence that, had they done their job, this might well have been prevented or certainly might have been less damaging than it was," Wyden told "Platts Energy Week" last month. "I think this highlights the need for the committee and the Congress to do more vigorous oversight, particularly on safety kinds of questions. And I'm certainly taking that lesson into my service on the committee."

Keith Chu, a spokesman for Wyden, said offshore safety will get a "close look," particularly in light of last month's explosion on the platform of Black Elk, a company with a history of safety violations.

That is good news, according to environmentalists and a top former Obama administration drilling official.

"There are two items that need immediate legislative action," said Michael Bromwich, former director of the Bureau of Safety and Environmental Enforcement who currently is managing principal of the Bromwich Group.

They are an "organic act" to make permanent the reorganization of MMS that Bromwich oversaw in the aftermath of the spill and authority for Interior to substantially raise the civil penalties for safety violations. The current civil penalties of $40,000 per violation, per day, pale in comparison to the operating costs of offshore rigs, which run upward of half-a-million dollars a day.

"They are obvious and should be uncontroversial," Bromwich said.

Deans said NRDC is lobbying for a handful of legislative reforms, from higher oil spill liabilities to investments in clean energy, specifically an extension of tax incentives for wind, so that companies no longer have the incentive to drill into deeper and riskier waters.

"Science needs to play a broader role in permitting," Deans said. Congress could set up a distinct science division for offshore drilling, formalize consultations with the National Oceanic and Atmospheric Administration -- as Interior and NOAA have done administratively -- and require site-specific environmental impact statements for drilling into ultra-deepwater or complex geological structures, he added.

Corry Westbrook, federal policy director at Oceana, agreed with Bromwich that there is still a big discrepancy between offshore drilling penalties and operational costs.

"It can actually encourage operators to engage in rule breaking or corner cutting or cost-cutting measures when the penalties are not something they are necessarily afraid of," she said.

Westbrook said Interior agencies also have a much smaller ratio of inspectors to rigs than the United Kingdom and Norway, in part due to a lack of reliable funding.

She said groups plan to ramp up lobbying efforts soon after a resolution is found on the fiscal cliff. "As soon as the dust settles in January ... it is going to be a big priority," she said.

Elgie Holstein, senior director for strategic planning at the Environmental Defense Fund, said revenue sharing should not impede action on drilling safety. Passage of the RESTORE Act, a bill to ensure most of BP's Clean Water Act penalties are devoted to Gulf restorations, shows Congress can strike bipartisan compromises on revenue sharing.

But Holstein said he fears the nation's attention has drifted away from the Gulf spill.

"At the same time, the challenges of offshore drilling only grow more complicated," he said. "Companies are going into ever deeper water and into the Arctic in the case of Shell. It will be important to have a very strong safety net of regulation in place."

The former members of President Obama's oil spill commission last April expressed similar fears, releasing a report lauding the administration's response to the BP spill but excoriating Congress for doing almost nothing (Greenwire, April 17).

The former commission members said Congress must give NOAA a formal consultative role in the leasing process, ensure the offshore drilling industry bears the costs associated with leasing and permitting reviews, and significantly increase the oil spill liability cap.

"Although the administration and industry have made significant progress, Congress has not," said former Sen. Bob Graham (D-Fla.), one of the commission's co-chairmen. "Two years have passed since the explosion on the Deepwater Horizon killed 11 workers, and Congress has yet to enact one piece of legislation to make drilling safer."

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