States get $188 million as GOMESA revenue-sharing enters 2nd phase

The US Department of the Interior will distribute almost $188 million of federal offshore oil and gas revenue shares to Alabama, Louisiana, Mississippi, and Texas as disbursements authorized under the 2006 Gulf of Mexico Energy Security Act (GOMESA) enter their second phase, Interior Sec. Ryan Zinke said.

The amount is more than five times the roughly $37 million that the states and their coastal political subdivisions (CPS) received during GOMESA’s first phase from fiscal 2009 through 2017. DOI officials attributed the increase to more revenue-generating leases being included during GOMESA’s second phase.

They noted that during fiscal 2017, DOI’s Office of Natural Resources Revenue disbursed $67 million to the Land and Water Conservation Fund and almost $268 million to the US Treasury from bonuses, rentals, and royalties paid for GOMESA leases. The law requires that those disbursements be made the same year in which they are received. Disbursements to the states and their CPSs are made the following year.

“We have been waiting for this day for a long time. The effort to get a fair share of offshore energy revenues dates back many decades, and every penny of these funds announced today will be invested in urgent coastal restoration and hurricane protection efforts to protect [Louisiana] communities and economy,” said US Rep. Garret Graves (R-La.).

“Having helped draft and negotiate this law as a staffer years ago, it is especially satisfying to start to see many years of work finally pay off,” he indicated after presiding over a House Natural Resources subcommittee hearing where Democrats and one witness called on the oil and gas industry to support Louisiana’s coastal preservation efforts more aggressively.

‘A fundamental disconnect’

“There’s a fundamental disconnect here,” said Rep. Alan Lowenthal (D-Calif.), the Energy and Minerals Subcommittee’s ranking minority member. “On the one hand, the argument goes that Louisiana needs more money from offshore oil and gas to combat the damage arising from those activities. On the other hand, many of the same people making that argument will fight any efforts to hold the oil and gas industry accountable for that damage.”

John M. Barry, a best-selling Louisiana author who sued 97 oil and gas companies in 2013 to get them to repair damage they allegedly caused to the state’s wetlands over the past century, told the Energy and Minerals Subcommittee that the industry received an enormous boon when Congress passed a significant federal tax cut for businesses in the US near the end of 2017.

“It also is receiving regulatory relief, saving it more money,” he declared. “It is time now for the federal government to require it to repair not everything, just the part of the problem it created, and share in the costs with taxpayers. The industry finally needs to participate, not only because it caused land loss but because coastal restoration could protect tens of billions of dollars of its own infrastructure and prevent hundreds of miles of pipelines from being exposed.”

But Mary L. Landrieu, a senior policy advisor at Van Ness Feldman LLP in Washington who was one of Louisiana’s US senators from 1997 to 2014, pointed out that the state’s coastal erosion also was accelerated by federal construction of dams along the Missouri and Mississippi Rivers following major floods in 1927 also keep sediments from reaching and rebuilding the coast. “I support the industry paying its fair share. But I also believe the federal government should step up and do its part,” she said.

Landrieu, who led the effort to get shares of federal offshore oil and gas revenue for the four states when GOMESA was enacted, said that the law was a good start but needs to be improved. The 37.5% share to be paid to the four states is less than the 50% rate paid to inland states with significant oil and gas activity on federal land within their borders, and a cap on federal offshore revenue shares should be lifted, she noted.

‘Could play second fiddle’

“Because onshore unconventional oil and gas exploration and production has become so much less expensive than the same activity offshore, our coastal states could wind up playing second fiddle to inland states which get 50% shares that they can use of anything they want,” Landrieu told the subcommittee. “Louisianans overwhelmingly voted to dedicate our state’s revenue share to coastal restoration.”

A third witness, Reggie Dupre, executive director of the Terrebonne Levee & Conservation District in Houma, La., said the state’s delta region was sacrificed to build Mississippi River levees in the early 20th century. “Navigations and commerce throughout the country were saved, the heartland was spared flooding of the mighty river, and the positive economic impact of this work to the country is immeasurable. But my region is gasping for support as a result,” he said.

“Today, the people of Louisiana’s gift to the country is affordable domestic energy through its service of the oil and gas industry,” Dupre said. “My region is a leader in this service, especially that of deepwater oil and gas production. Our ability to work on this coast is threatened by our problems, but our dedication and resilience answers the call each time.”

A fourth witness, Chet C. Chiasson, executive director of the Greater Lafourche Port Commission in Cut Off, La., said, “The ability for an increased amount of [federal] royalty revenue to be shared, particularly in Louisiana, would allow for increased environmental protection, restoration, and critical infrastructure impacted by coastal land loss to make our coastal communities and the nation’s energy supply more resilient.”

Contact Nick Snow at [email protected].