Obama administration 'cannot support' bill increasing offshore revenue sharing

A key Interior Department official Tuesday said the Obama administration "cannot support" legislation that would increase revenue sharing from offshore oil and gas development because it would increase the federal deficit and doesn't appear targeted to advance energy conservation.

Sen. Mary Landrieu, D-La., a sponsor of the revenue sharing legislation, called the administration's position "tragic" and "seemingly heartless," given Louisiana's continued loss of wetlands and coastline, the loss of lives, property and natural resources during Hurricane Karina and what she says is a substantial shortfall of revenue provided off-shore producing states compared to states that produce energy on land.

The testy confrontation came during a hearing by the Senate Energy and Natural Resources committee on legislation offered by Landrieu and Sen. Lisa Murkowski, R-Alaska, that would make states like Louisiana and Alaska eligible for 37.5 percent of royalty payments for oil and gas developed off their shores beginning 2014, three years sooner than scheduled under a 2006 Senate bill. It would also gradually lift a $500 million cap on yearly revenue sharing for the Gulf states.

The Interior Department official, Pamela Haze, a deputy assistant secretary for budget and finance, praised Landrieu's effort to restore Louisiana's wetlands, and "clarified" that she is not saying "we oppose the bill." Rather, Haze said, "we cannot support it."

That comment irritated Landrieu, who said "it's the same thing." Landrieu said she agreed with Murkowski that the administration's failure to embrace their bill reflects "a disinterest" in the problems caused by giving states with offshore energy development a smaller share of royalty payments than states with land-based production.

While Haze said that Louisiana could get extra revenue for coastal restoration from the Restore Act, which allocates 80 percent of Clean Water Act fines from the 2010 BP oil spill to the five gulf states, Landrieu said much more is clearly needed, and that her bill would do so in a fiscally sound way. Landrieu said she and Murkowski are committed to providing offsets to cover the cost of the legislation, which the Interior Department pegged at more than $5 billion over nine years.

In her prepared testimony, Haze said Louisiana benefits from oil and gas development, despite the complaints of insufficient revenue sharing, through jobs and additional tax revenue to state and local governments.

"The revenue sharing provisions of (Senate Bill) 1273 would ultimately reduce the net return to taxpayers in every state from the development of offshore energy resources owned by all Americans, have significant and long-term costs to the Federal Treasury, and increase the federal deficit," Haze said.

Haze also complained that the legislation, known as the Fair Act, would not come close to adequately funding the Land and Water Conservation Fund, which the administration views as an important resource for conservation.

Landrieu said it wasn't her intention or Murkowski's to reduce funding for the Land and Water Conservation Fund. After several senators on the committee also expressed concern whether the legislation provides adequate financing for the fund, Murkowski said resolving that issue might be a key to gaining the support needed to pass the legislation.

Though the administration's opposition is a setback, Landrieu and Murkowski, unlike the past Congress, have an ally in the chairman of the Senate Energy and Commerce Committee. Chairman Ron Wyden, D-Ore., has expressed some enthusiasm for the bill, especially since it provides for revenue sharing for alternative energy programs, which he strongly supports. Former Committee Chairman Jeff Bingaman, D-N.M., had opposed the bill, seeing it as an attack on more robust revenue sharing for land-based energy projects, such as those in his own state, and an inducement to more oil and gas development that he opposed.

Wyden said he wants to work with Landrieu and Murkowski, but also noted that because of the decades-old fight over revenue sharing and oil and gas development, it "will be a challenge" to come up with a final bill that can make it through Congress.

Among those testifying at the nearly 2 1/2-hour hearing was Athan Manuel, director of Lands Protection for the Sierra Club, who complained the bill would provide incentives for more "dirty" oil and gas development.

"The FAIR Act will provide an incentive for coastal states to agree to new or additional offshore oil and gas development, development that could put booming local economies at risk," Manuel said. "While only a few big oil companies will profit from drilling off of our coasts, all Americans stand to profit from keeping our oceans, beaches and coastal economies clean and healthy."

Landrieu said that the entire nation continues to rely on oil and gas, much of it produced off Louisiana and that the state is entitled to a fairer share of the off-shore royalties.

"How do you think the oil and gas gets into people's tanks when they fill up at the gas station?" Landrieu said. "Do you think there are a bunch of fairy godmothers out there that just wish a magic wand?"

Reggie Dupre, executive director of the Terrebonne Levee & Conservation District in Houma, testified that the legislation would provide the money Louisiana needs to restore its coast and the fish and wildlife that depend on it.

"The state of Louisiana is currently operating on a master plan for the coast which includes $50 billion in projects designed to stabilize our coast and protect wetlands," he said. "This massive undertaking will not be possible without utilizing the recurring source of offshore oil and gas revenue sharing."

In a 2008 campaign document, the Obama-Biden campaign said the Democratic administration would "direct revenues from offshore oil and gas drilling to increased coastal hurricane protection."