Bids to boost offshore royalty sharing could move next year

12 18, 2012 by Fuel Fix

A change in the leadership of the Senate Energy and Natural Resources Committee could give coastal states their best chance in years of winning a greater share of federal revenues for energy produced near their shores.

The top Republican on that panel, Sen. Lisa Murkowski of Alaska, told Platts Energy Week that she sees support for a fresh debate on offshore revenue sharing, more than a year after the last attempt collapsed amid opposition from then-chairman Jeff Bingaman, D-N.M.

Bingaman is retiring, and Sen. Ron Wyden, D-Ore., will hold the gavel heading that committee next year. Wyden has signaled he is willing to discuss revenue sharing — possibly as part of a broad energy bill — though not necessarily as part of a plan to broaden offshore oil and gas drilling.

“I think it’s important that we’re able to have the conversation on revenue sharing,” Murkowski said. “It’s too important an issue. I appreciate that Sen. Wyden has left the door open and intends to explore it.”

Inland states generally claim 50 percent of the revenue from oil and gas production on federal lands within their borders. And states already take home 100 percent of the royalties from oil and gas extracted from their waters, which typically extend three miles from high-tide lines (though Florida and Texas enjoy jurisdiction as far as nine miles out).

The issue is what happens with revenues from energy produced in federal waters outside states’ control. Under federal law, just four coastal states — Alabama, Louisiana, Mississippi and Texas — lay claim to some of that money. Those states will be able to collect 37.5 percent of oil and gas royalty revenue on some leases beginning in 2017.

Last year, Murkowski teamed up with Sen. Mary Landrieu, D-La., to advance a plan for expanding that program and allowing Alaska and all other coastal states to collect 37.5 percent of the federal revenues for energy produced in nearby federal waters. Half of the collected revenue would still go to the federal government.

Murkowski said revenue sharing could apply to money tied to all offshore energy development, including coastal wind and solar installations.

“Revenue sharing should not necessarily be limited to oil and gas,” Murkowski told Platts. “If you have a wind farm offshore, revenue sharing from those renewable energy projects and those leases also could be made a part of what we’re talking about.”

With lawmakers focused on cutting federal spending and bringing more revenue to federal coffers, it could be tough to advance anything that further winnows the offshore energy revenue stream. It’s possible Murkowski and other revenue-sharing supporters could advance a plan with a smaller percentage of dollars going to coastal states — less than the 37.5 percent baseline.

Offshore drilling foes also have traditionally opposed revenue-sharing proposals in the past out of fear that cash-strapped states would be lured into supporting drilling near their coasts. But supporters argue that coastal states deserve compensation for the burden of offshore energy development near their shores.