OFFSHORE DRILLING:

3 Senate Democrats urge rejection of revenue-sharing proposal

Three key Senate Democrats are urging their colleagues to reject a proposal in the emerging climate bill that would give a cut of oil and gas production royalties to states that allow offshore drilling.

Sens. Byron Dorgan of North Dakota, Jeff Bingaman of New Mexico and Jay Rockefeller of West Virginia called "revenue sharing" an ill-advised "giveaway" of money that belongs to all U.S. citizens.

"The fiscal consequences of such a loss would be devastating, particularly given the enormous demands on the federal Treasury and our need to reduce the deficit," the trio wrote in a letter to fellow senators sent Friday and publicly released today.

Dorgan and Bingaman's opposition to revenue sharing is well-established. But by firing such a public salvo during sensitive negotiations on climate, the trio are complicating efforts to bring Republicans on board a climate bill.

Revenue sharing is expected to be a part of the new climate bill being drafted by Sens. John Kerry (D-Mass.), Lindsey Graham (R-S.C.) and Joe Lieberman (I-Conn.), according to comments by the sponsors and other senators working with them on the energy portion of the bill. They are planning to roll out the bill next Monday.

Graham is trying to win some Republican votes for the bill. He has made it clear that revenue sharing is the price of getting members of his party to the table.

But analyst Kevin Book said the Senate math favors drilling without revenue sharing, because there are many more landlocked than coastal states.

"Dividing spoils and determining what part of the cash flows from offshore drilling to various states is a problem the federal government hasn't been able to solve for six decades," said Book, managing director of Washington-based consulting firm ClearView Energy Partners. "Some cut of proceeds from new drilling will be needed to earn coastal states' cooperation, but rich rewards will rile those without coasts."

Supporters say revenue sharing is essential to getting the 60 votes needed for Senate passage.

"It's going to be one of the more difficult provisions to negotiate, but we've done so in the past, and I'm expecting we'll do in the future," said Sen. Mary Landrieu (D-La.), who supports expanded offshore drilling, but only with revenue sharing. "The fact is you're not going to get any bipartisan support without increased revenue sharing," she said, "and we may lose a few Democrats, but we'll pick up hopefully any number of Republicans."

Drilling supporters and the petroleum industry want revenue sharing because it gives states an incentive to allow drilling off their coasts. Environmental groups and drilling opponents tend to oppose it for the same reason.

But Dorgan and Bingaman are supporters of offshore drilling who very publicly oppose revenue sharing. Rockefeller, who chairs the Senate Commerce Committee, has not had a high profile on those issues. But as a coal-state Democrat, he is seen as a swing vote on any climate proposal.

Bingaman and Dorgan enjoy outsized influence on energy. Bingaman chairs the Senate Energy and Natural Resources Committee. Dorgan is the chairman, or "cardinal," of the Senate Energy and Water Appropriations Subcommittee.

Dorgan also opposes the idea of bringing a climate bill to the floor this year. He thinks Senate leaders should scale back their expectations and try to pass an "energy only" bill.

The trio did not threaten to vote against the climate bill if their wishes are not fulfilled, as their colleagues Robert Menendez and Frank Lautenberg did last week. The two New Jersey Democratic senators are staunch opponents of offshore drilling, worried that oil spills from states to their south could wash up on Garden State beaches.

The Kerry-Graham-Lieberman proposal is also expected to set up rules for states to approve drilling off their shores. According to a participant in the negotiations, there would be no drilling unless state governments acted to approve it, or "opt in," within 35 miles of their shores. Beyond 35 miles and up to 75 miles out, drilling would be allowed unless a state "opts out," taking action to block it.

Money from drilling the outer continental shelf is among the larger non-tax sources of revenue for the federal government. It is expected to bring in about $6 billion in 2010 and about $40 billion during the next five years.

In 2006, Congress gave states 37.5 percent of the royalties that allow drilling off their shores in the Gulf of Mexico.

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