Senator: Coastal states getting raw deal with federal drilling dollars

Sen. Mary Landrieu isn’t picking a fight with Wyoming, and she says she has nothing against the Great Plains state.

But the Democratic senator from Louisiana insists Wyoming is exhibit A for her argument that coastal states are getting a raw deal when it comes to collecting federal dollars tied to energy development.

After all, she notes in a new web video that highlights the disparity, in 2011, Wyoming was able to keep nearly $1 billion of the $2.1 billion that energy companies paid the federal government for oil and gas production in the state. At the same time, Louisiana held on to just $26.7 million, out of $5.7 billion that was paid to the federal government for oil and gas harvested in Gulf of Mexico waters near its shores.

The video, released Wednesday, insists this is “an unfair situation,” and touts Landrieu’s preferred solution: legislation she sponsored with Sen. Lisa Murkowski, R-Alaska, that would put coastal and inland states on more even footing.

The measure would expand an existing offshore energy revenue sharing program that is set to begin in 2017 and is limited to four Gulf Coast states (including Texas) so that every state with ocean views can participate and collect up to 37.5 percent of the money. Known as the FAIR Act, the bill also would allow the program to start right away, gradually phase out a $500 million cap on the amount of offshore energy revenues that can be shared with coastal states.

According to one catchy line in Landrieu’s new video, the bill also would treat all forms of energy equally, allowing dollars to be divided up among states whether they come from “oil or gas, wind or wave, onshore or offshore.”

The Senate Energy and Natural Resources Committee is expected to hold a hearing on the Landrieu-Murkowski bill in early July. Sen. Ron Wyden, D-Ore., the panel chairman, has signaled his support — no doubt partly because the latest version of the legislation would allow states to capitalize on renewable energy developments near their shores.

But the proposal is controversial, particularly among offshore drilling foes, who believe the lure of revenue could encourage cash-strapped states to support oil and gas development in nearby waters.

In a March letter to Wyden and Murkowski, eight senators insisted they would “vigorously oppose any effort that expands or provides further incentive for offshore oil and gas drilling in areas where drilling is currently prohibited.”

The critics stress that offshore oil spills don’t linger in one space; instead, they threaten beaches, tourism and coastal economies far from the original site. “Revenue sharing is inherently inequitable because it compensates a single state while other nearby states bear the risk, without receiving any resources to mitigate that risk,” the group said.

Landrieu actually uses a similar argument to push for her bill. She says the 2010 Deepwater Horizon disaster underscored the potential danger for coastal communities that sustain oil and gas drilling in the Gulf of Mexico — and illustrates the need for them to cash in on more of the development:

1. “The Gulf contributes to the U.S.’ energy security and economic vitality. One-third of domestic seafood is produced in the Gulf. It drains 40 percent of the North American continent. And the oil and gas produced off its shores fuels cars, heats homes, keeps the lights on and creates hundreds of thousands of jobs. To keep doing all of these critical things, coastal communities deserve a fairer partnership with the federal government to make their communities more resilient,” the narrator in her web video says. “The revenues kept in Louisiana under the FAIR Act will allow it to rebuild its eroding coast, protect its coastal communities from storms, create jobs and preserve a unique and treasured culture.”

Broader offshore energy legislation pending in the House of Representatives contains a similar revenue sharing proposal. But that bill is controversial because it would also force the Obama administration to sell oil and gas leases off the coasts of California, South Carolina and Virginia.

The issue could end up being a thorny one for Senate Democratic leaders. Despite the strong opposition from some Democrats — including Majority Whip Dick Durbin, D-Ill., and Senate Environment and Public Works Committee Chairwoman Barbara Boxer, D-Calif. — revenue sharing could be important to the political futures of some in the party.

Landrieu and Sen. Mark Begich, D-Alaska, (who has his own revenue-sharing proposal) both face tough reelection contests next year. For those senators, passing an offshore revenue-sharing plan could be a hit with some key voters back home. The same may also be true for some inland senators representing oil patch states, such as Sen. Mark Pryor, D-Ark.