Lawmakers scramble for slice of energy revenues

By Kellie Lunney, Geof Koss, Nick Sobczyk | 07/23/2019 07:19 AM EDT

As members of Congress increasingly look at federal energy dollars to pay for conservation priorities, the competition for a slice of the shrinking revenue pot is growing more intense.

Lawmakers on both sides of the aisle are increasingly turning to energy revenues to fund a variety of projects.

Lawmakers on both sides of the aisle are increasingly turning to energy revenues to fund a variety of projects. Bureau of Safety and Environmental Enforcement/Flickr

Tackling the multibillion-dollar maintenance backlog at national parks. Boosting coastal resilience to rising sea levels. Creating new recreational opportunities for states and local governments.

Support for all of these issues has grown among members of both parties in recent years — as has interest in establishing dedicated funding streams to pay for them in a tight budget climate.

The common denominator in many of the various legislative proposals to fund the Land and Water Conservation Fund (LWCF) and the National Park Service’s maintenance backlog, as well as to hand states more federal revenues to restore their coasts, is a reliance on federal energy revenues.


Such revenues, which led to nearly $9 billion in federal payouts to states and American Indian tribes last year, are disbursed according to a hodgepodge of formulas enacted in various federal laws since the 1950s, including the 1964 law that established the LWCF.

By requiring a portion of offshore drilling revenues to be deposited into a special LWCF account, Congress aimed to ensure the popular program would be funded into perpetuity.

Lawmakers also enshrined in law a link between energy revenues and conservation that continues to underpin legislative efforts today.

While members are increasingly looking to federal energy dollars to pay for their conservation priorities, the competition for a slice of the shrinking revenue pot is growing more intense.

That’s complicating the prospects for the various overlapping legislative efforts, which are often driven by regional considerations.

"It’s long been a concern that it is viewed as this source that is not accounted for, and so therefore, it is available," Senate Energy and Natural Resources Chairwoman Lisa Murkowski (R-Alaska) said last week.

"And I think what needs to be recognized is that you can only spend most of this money once. And I think there are those who, in an effort to go after their project, will try to spend it multiple times over and it doesn’t work."

As chairwoman of the committee with jurisdiction over energy production on public lands, Murkowski understands the twists and turns of navigating the competing proposals to spend federal revenues all too well.

"We don’t have a lot of what you could consider pay-fors," she said of the need to provide spending offsets to cover the 10-year deficit impacts of legislation when it comes to the floor.

While championing the permanent LWCF authorization that was signed into law earlier this year, Murkowski has resisted efforts by Democrats and some of her GOP colleagues to make a portion of the offshore drilling funds mandatory.

That push — along with efforts to dedicate billions of dollars of energy revenues to the park service’s maintenance backlog — is stalled in part because of parochial concerns about overextending the limited amount of federal energy funds that come in annually.

That dynamic was on full display last month, as the Senate ENR Committee heard testimony about legislation to provide mandatory funds for the LWCF and the parks backlog (E&E Daily, June 26).

It will flare again in the coming days as Gulf Coast lawmakers press new legislation to increase their share of offshore drilling revenues under a 2006 law, while senators also ready a new bill to steer offshore wind revenues to coastal restoration.

Both efforts also underscore the regional nature of the revenue-sharing debate. Coastal states have clamored for years for parity with states that receive roughly half of onshore energy revenues for production that occurs on federal lands within their borders.

This is in contrast to the 37.5% that a handful of Gulf of Mexico states enjoy for offshore production in the outer continental shelf.

Sen. Bill Cassidy (R-La.) said a coastal resiliency pot funded by energy revenues would be a fair return for the offshore drilling dollars that he said mainly benefit inland conservation. He is working with Sen. Sheldon Whitehouse (D-R.I.) on legislation that would steer federal offshore wind revenues to buffer coastal defenses.

"We put all this money in land and water conservation, which is basically big-box states in the Upper Midwest, but we don’t do anything for the coastlines," he told E&E News last week. "About 80% of Americans live within 100 miles of coastline. And so why don’t we do something for that?"

‘Have your cake and eat it, too’

Strong, bipartisan support exists for bicameral bills that would create a five-year, $6.5 billion trust fund to whittle down the growing infrastructure backlog at national parks.

The House bill, H.R. 1225, which also includes other public lands, has nearly 300 co-sponsors, while the Senate version, S. 500, has 40 co-sponsors. The Trump administration has thrown its weight behind the measure, as well.

But there is also opposition, particularly from Gulf Coast lawmakers, related to the plan’s proposed funding mechanism: up to 50% of otherwise unallocated revenue from all energy production on federal lands and waters.

Rep. Garret Graves has called the "Restore Our Parks and Public Lands Act" "flawed" from a policy and budget perspective.

"They’re talking about billions and billions of dollars in mandatory spending, and our concern is that the very area where these funds are derived, you don’t have funds invested in the resiliency of the area," the Louisiana Republican told E&E News last week.

Graves, who sits on the House Natural Resources Committee, introduced several amendments during the bill’s June markup to protect his state, which produces the lion’s share of the country’s offshore energy revenues.

Most of the measures, all unsuccessful, were aimed at preventing Louisiana from losing out on money to restore its coastline through the 2006 Gulf of Mexico Energy Security Act, or GOMESA (E&E News PM, June 26).

Graves and Louisiana Democratic Rep. Cedric Richmond introduced a stand-alone bill last week that would increase from 37.5% to 50% the portion of oil and gas revenue that Alabama, Louisiana, Mississippi and Texas receive from production in the federal waters off their coasts (E&E Daily, July 19).

Gulf Coast members view the deferred maintenance bill as a threat to their revenue-sharing arrangement with the federal government under GOMESA, even though supporters of the parks legislation say the money for the restoration fund would come from unallocated proceeds.

"We are going to continue fighting" the backlog bill, as well as opposition to offshore drilling along the eastern Gulf of Mexico and East and West coasts, said Graves, who predicted an uphill battle on those measures in the Senate, as well.

He said bills banning offshore drilling, introduced along with other legislation that would rely on energy revenue for decreasing the parks maintenance backlog or boosting LWCF, don’t make sense in the overall scheme of things.

"You’re trying to have your cake and eat it, too," he said of offshore drilling opponents. "You’re trying to say that we’re going to stop this revenue stream, and we’re going to fund all of these mandatory spending things with it."

GOMESA also funds a portion of the LWCF, which depends entirely on offshore revenue.

In the Senate, Cassidy has expressed similar reservations about the deferred maintenance legislation and its potential impact on Gulf Coast states.

Sen. Angus King (I-Maine), a co-sponsor of the "Restore Our Parks and Public Lands Act," said he understands that Louisiana is a priority for Cassidy but that fixing the multibillion-dollar parks maintenance backlog "is a high priority for the entire country."

King also said Cassidy’s "concerns don’t really relate directly" to the bill because the legislation does not take money away from the existing energy revenue allocation that GOMESA mandates.

"Our bill is specifically the excess" revenue, King said. "It’s not allocated. It says, money otherwise going to the Treasury."

But Graves said that argument is "really misleading." "There’s this misconception that this money, just because it’s not committed in mandatory spending, that it’s available," he said.

"That’s not the case. This is what funds our current veterans programs, early education programs and environmental programs and road programs and everything else. This goes into the general fund of the Treasury, and it’s what funds our general government operations."

‘Healthy conversation’

While Louisiana is usually associated with oil and gas production, Graves and Cassidy are both working with Whitehouse to inject renewables into the revenue-sharing debate.

Whitehouse said he’s still waiting to see how things shake out into different bills, adding that there are "a number of pieces that are moving" to deal with offshore revenue sharing.

"I would like it to involve all the offshore revenues, and there are actually a few overlapping conversations that are taking place in this space, so we’re waiting to see what settles out," Whitehouse said when asked if he would be open to working on legislation that deals with oil and gas revenues on top of the wind energy legislation he’s working on with Cassidy.

In some respects, he suggested his views largely align with Cassidy and other coastal lawmakers — that their communities, particularly those feeling the effects of sea-level rise, aren’t getting a fair shake.

He also decried the "long-standing bias" at the Army Corps of Engineers toward inland flood control projects at the expense of coastal resilience efforts.

"I think it’s a very healthy conversation," Whitehouse told E&E News last week. "I think people are gradually more and more recognizing that coastal states really have gotten screwed and that the risk is now so great there that we need at least parity."

Whitehouse took a trip to Louisiana with Cassidy earlier this year, and afterward, the pair shared the Senate floor for back-to-back speeches about the Bayou State’s vanishing coasts.

Graves, a former leader of Louisiana’s Coastal Protection and Restoration Authority who joined the pair for the trip, suggested that the visit has helped bolster conversations about offshore revenues.

Graves, who serves as the ranking member of the Select Committee on the Climate Crisis, said all the recent attention on coastal resilience — particularly after the string of devastating hurricanes in 2017 — has also aided his long-standing quest to get his state a bigger chunk of offshore revenues.

"The amount of funding that is being dedicated to coastal sustainability right now is insufficient," he told E&E News last week. "And I think also the lack of policy parity between the Mineral Leasing Act and the Outer Continental Shelf Lands Act needs to be addressed."

Graves added he would like to see the ideas floating around packaged into a larger reform bill, but that kind of effort would face an uncertain path on the Natural Resources Committee.

"We should be marrying all this together, and I think that we should do a comprehensive bill that looks at how to treat all those royalties," Graves said.

House Natural Resources Chairman Raúl Grijalva (D-Ariz.), however, said he’s "not horribly enthusiastic" about what Graves has brought to the table so far. He suggested that he shares concerns with environmental groups, which are wary of expanding oil and gas revenue sharing for fear of expanding production.

"It’s a self-fulfilling prophecy," Grijalva told E&E News last week. "We have to do more to get more, and that is not really a way to some level of sustainable energy development. It’s a doubling down on what you have."