Coastal senators float revenue-sharing proposals for energy bill consideration

By Nick Juliano | 05/13/2015 07:35 AM EDT

The long-running effort by coastal lawmakers to increase the share of offshore drilling revenue going to their states’ coffers is slated for fresh consideration as the Senate works to assemble a comprehensive, bipartisan energy bill this year.

The long-running effort by coastal lawmakers to increase the share of offshore drilling revenue going to their states’ coffers is slated for fresh consideration as the Senate works to assemble a comprehensive, bipartisan energy bill this year.

But it remains to be seen whether revenue-sharing proposals stand any better chance of success than in recent history.

Sens. Lisa Murkowski (R-Alaska), Bill Cassidy (R-La.), Mark Warner (D-Va.) and other coastal-state senators this week introduced separate revenue-sharing bills linked to offshore drilling in the Arctic, Gulf of Mexico and along the East Coast.


Coastal lawmakers from both parties have long pushed to give states a greater share of revenues from energy development along the outer continental shelf amid opposition from some inland lawmakers and environmentalists wary of providing more incentive for offshore drilling. Murkowski said the bills would be considered next week when the Energy and Natural Resources Committee, which she chairs, holds a hearing on various energy supply proposals. But she has acknowledged the challenge such proposals face.

"I recognize the opposition — it’s nothing new out there — but again, it’s something that I feel very strongly about," Murkowski said during a press briefing last week. "We see the concept of federal revenue sharing on land, and the benefits there, I think, should be no different when it comes to our offshore resources."

Murkowski introduced her bill (S. 1278) yesterday, a day after the Interior Department took another step to clear the way for Shell to begin drilling this summer in the Chukchi Sea off Alaska’s northwest coast.

The bill includes a two-part revenue-sharing regime. From 2016 through 2026, 77.5 percent of offshore drilling revenues would flow to the federal Treasury, 7.5 percent would go to the state of Alaska, 7.5 percent would be divided among coastal "political subdivisions" based on their proximity to drilling operations and the remainder would be divided among workforce development grants, the Bureau of Land Management’s North Slope Science Initiative and Interior’s activities to support development in the Chukchi and Beaufort seas.

After 10 years, the federal government would receive half the offshore drilling revenues, Alaska would receive 30 percent, coastal communities would split 7.5 percent and the remaining 12.5 percent would fund low-income heating assistance, weatherization and Arctic infrastructure programs, according to a fact sheet.

Interior would be required to conduct at least three lease sales in the Chukchi and Beaufort seas and Cook Inlet during the 2017-2022 planning period under Murkowski’s bill.

"Alaska’s natural resources are vital to our prosperity," Murkowski said. "With exploration proceeding in the Chukchi, and the Alaska offshore emerging as a key part of our national energy security, it is critical that we ensure revenue sharing for the state and coastal communities and invest in the workforce development, science and infrastructure necessary to bring these vast resources to market."

Warner’s bill (S. 1279) would direct Interior to hold three lease sales in the South Atlantic leasing area identified in the administration’s proposed 2017-2022 outer continental shelf drilling plan, an area that stretches from Virginia to Georgia. It would divide revenues equally between coastal states and the federal government, with each state taking at least 10 percent in a share proportionate to the amount of coastline on which drilling occurs.

The bill would direct states to spend 10 percent of their proceeds on conservation, beach nourishment and coastal dredging, transit or clean energy production and to use 2.5 percent of state funds for public-private partnerships that include industry, historically black colleges and universities, and other institutions to support offshore energy education programs. Warner and other East Coast senators last month wrote to Murkowski requesting the inclusion of revenue-sharing provisions in any offshore energy legislation considered this year.

Cassidy’s bill (S. 1276) would expand access to the eastern Gulf of Mexico and direct at least three sales in 2018, 2019 and 2020 in the area, at least 50 miles from Florida’s coastline. Leasing is currently prohibited within 125 miles of the Sunshine State until 2022.

Gulf states already enjoy a share of offshore drilling revenues under the 2006 Gulf of Mexico Energy Security Act, but Cassidy’s bill would increase its cap from $500 million to nearly $700 million per year from 2017 to 2025 and to $1 billion from 2026 to 2055.

The bill is co-sponsored by Republican Sens. David Vitter of Louisiana, John Cornyn of Texas, and Thad Cochran and Roger Wicker of Mississippi and is backed by major oil and gas trade groups, including the American Petroleum Institute.

But similar revenue-sharing proposals have previously encountered resistance from the Obama administration, which in its 2016 budget proposed diverting roughly $3 billion in Gulf state offshore revenues to national priorities, as well as from inland lawmakers wary of reducing the amount of drilling proceeds that fund the federal government.

Such proposals also have run into trouble with budget scoring rules that view them as increasing the deficit. None of the proposals floated today has been scored by the Congressional Budget Office, but aides said offsets could be found elsewhere in a comprehensive energy bill as the legislation takes shape, if revenue sharing is part of the package. But some question whether including such proposals would sap more widespread support for a comprehensive energy bill.

"My prediction is the introduction of these bills is their high water mark for this year," said Athan Manuel, director of the lands protection program at the Sierra Club.

Reporter Phil Taylor contributed.