Long-simmering revenue fight flares up

By Geof Koss | 03/10/2016 07:53 AM EST

This story was updated at 1:43 p.m. EST

When Sen. Bill Cassidy (R-La.) found himself with President Obama in New Orleans last year to commemorate the 10th anniversary of Hurricane Katrina, he decided to use the opportunity to bend the president’s ear about an administration proposal that irked him.

Buried deep in the fiscal 2016 Interior Department budget request was a proposal to change the distribution system for federal offshore drilling revenues.


A 2006 law earmarks some of the money for Gulf Coast states depending on the amount of fuel that companies extract in federal waters off their coasts. The administration’s proposal would have made it available to projects around the country.

The funding and the long-standing debate surrounding it are of paramount importance to Louisiana, which has seen rapid coastal erosion for much of the past century because of levees built on the Mississippi River and the effects of oil and gas drilling.

Cassidy and other Gulf lawmakers are looking to not only protect the revenue source but also increase it amid concerns about fossil fuel production and skepticism from many Democrats. The fight may return to the Senate floor in the coming days.

Cassidy recounted his time with the president in an interview last week. "We were at the Katrina 10 ceremony in the Lower 9th [Ward]," he said. "We’re there to celebrate recovery from devastation — the devastation worsened by the lack of wetlands to protect" the coast.

After informing Obama of a Louisiana Constitution requirement that offshore drilling revenues be spent on restoring the battered coast, Cassidy said the president "was very sympathetic."

Cassidy said Obama looked at White House Office of Management and Budget Director Shaun Donovan and asked, "We cut this?"

Cassidy, who didn’t think the White House trusted Louisiana to spend the money well, remember the president saying something along the lines of: "We need to make sure this happens.’"

Despite the president’s gesture, Cassidy said he was "very disappointed" to see the redistribution proposal included once again in the fiscal 2017 budget request last month. And he expressed his displeasure to Interior Secretary Sally Jewell during a budget hearing last month.

"Now they are going to say we redistribute it, but the reality is that instead of Louisiana having money, which they can essentially bond to jump-start multiyear projects to restore, now we got to hope that we are able to get some money if it’s held together by some future administrations," he said.

The group Restore the Mississippi River Delta Coalition, which includes businesses and environmental organizations, echoed Cassidy’s position in a letter to the president this week.

Following Landrieu’s path

The Republican majority in Congress means the administration’s proposal "is not going anywhere," as Senate Energy and Natural Resources Chairwoman Lisa Murkowski (R-Alaska) told Jewell at the outset of last month’s hearing.

But with a glut of domestic oil stalling new production, including offshore, Cassidy said it is crucial to continue funding coastal restoration efforts.

"Obviously, there’s been a lot of concern about Flint, those children," he said, referring to the lead contamination in the Michigan city’s water supply. "But there’s children in the Lower 9th Ward now who are going to be subject to another devastating storm unless we rebuild that coastline — a coastline, by the way, which is in large part eroded because of federal decisions to levee the Mississippi River in such a way for the benefit of inland commerce. And ever since, from the year that was done, our coastlines have begun to melt away."

In doing so, Cassidy is carrying on the fight waged by his predecessor, Sen. Mary Landrieu (D-La.), whom he unseated in 2014. Working with then-Senate Energy Chairman Pete Domenici (R-N.M.) and the George W. Bush administration, Landrieu helped push the Gulf of Mexico Energy Security Act (GOMESA) into law in 2006.

But to stave off the need for costly offsets for the loss of federal revenue that accompanied the change, the law capped the annual amount of the state payments at $500 million. Efforts to raise that cap for the Gulf states, as well as to expand the 37.5 percent sharing formula nationwide, have faltered since 2006.

An amendment to the Senate energy bill, S. 2012, proposed by Cassidy and fellow Louisiana Sen. David Vitter, Murkowski, and Virginia Democratic Sens. Mark Warner and Tim Kaine, would raise that cap to $999 million from 2027 to 2031, which Cassidy’s office says would raise an additional $1.87 billion for Gulf states.

Significantly, it would also expand revenue sharing beyond the Gulf Coast to Alaska, Virginia, North Carolina, South Carolina and Georgia.

Nelson balks

The proposed change is of concern to Senate Democrats from Maryland and points north, and Florida’s Sen. Bill Nelson (D), who for years has fought to keep oil rigs as far away from his state’s coastlines as possible.

GOMESA also put a swath of the eastern Gulf of Mexico off-limits to drilling — a nod to the Florida delegation — and Cassidy’s amendment does not touch that moratorium. Still, asked about the prospects of Cassidy getting 60 votes for his amendment, Nelson this week said he doesn’t plan to find out.

"I’m not going to take a chance," he said in an interview. "I’ve fought this for 40 years, and my answer is no. I’m not going to let Cassidy proceed."

Both Cassidy’s amendment and a competing proposal by Sen. Ed Markey (D-Mass.) that would repeal GOMESA are among the list of three dozen amendments that may receive votes in the event the energy bill returns to the floor.

During a brief interview, Markey last week said his amendment repealing GOMESA was under discussion.

"We’re looking at what’s the best way of framing this issue of how many of the federal tax dollars should be sent out of the Treasury and what the implications are," he said. "So we’re looking at the best ways of shaping the argument."

In a statement yesterday, the Sierra Club slammed Republicans for blocking progress on the energy bill and aid to Flint, Mich., by pressing for revenue-sharing changes.

Enviros attack

"It’s pathetic that Senator Cassidy and Senate Republicans are blocking an effort to help the families of Flint just to push the agenda of Big Oil companies," said Athan Manuel, the Sierra Club’s director of lands protection.

But support for revenue sharing is not only among the GOP. In an interview last week, Kaine said his backing for drilling off his state’s coast has always hinged on the addition of revenue sharing.

The Interior Department is currently weighing whether to allow leasing off the Atlantic Coast. Kaine noted that the Cassidy amendment was silent on that issue.

"The worst situation for Virginia would be for the moratorium to go away and we to get nothing," he said. "So the White House is going to figure that out, and we’re going to figure it out with them — on the moratorium."

Kaine went on: "But we do not want a situation where this president or any president could go down the path of allowing lease sales or drilling and there be no revenue. So we need to clarify that."

Murkowski told reporters yesterday she thought lawmakers could negotiate with Nelson over his objections. But she urged him against stalling. "It’s the last thing out there" holding up an agreement to set up votes on the energy bill and Flint, she said.

Reporter George Cahlink contributed.