Offshore drilling bill stalled over royalty sharing plan

Controversy over whether to give states a greater share of federal revenues for offshore drilling near their coasts is stalling oil and gas legislation in the Senate.

The measure by Sen. Jeff Bingaman, D-N.M., and Sen. Lisa Murkowski, R-Alaska, aims to stiffen oversight of offshore drilling and would codify a reorganization of the federal agency that polices oil and gas exploration on the outer continental shelf.

Although the Senate Energy and Natural Resources Committee was set to debate and vote on the legislation this Thursday, the bill was left off a just-issued agenda for the meeting.

Murkowski said the major holdup is the revenue sharing proposal. A top priority for Sen. Mary Landrieu, D-La., and other coastal senators, the proposal is closer than ever to securing enough votes to be added to the offshore drilling legislation and make it out of the committee — over the objections of some panel Democrats, including Bingaman, the chairman.

Murkowski said there has been major “headway made in just educating people about the value of it.”

Supporters, including Murkowski and Landrieu, argue that coastal states bear a big burden for offshore energy development near their shores and deserve a greater share of the royalty dollars that companies pay the federal government for the oil and gas they extract from the outer continental shelf. Last year’s oil spill also gave the advocates a new argument, by illustrating the potential damage that states face for offshore drilling in federal waters.

States already take home 100 percent of the royalties for oil and gas extracted from their waters, which typically extend three miles from high-tide lines. The jurisdictions of Florida and Texas stretch nine miles into the Gulf of Mexico. The issue is what happens with energy produced in federal territories outside states’ control.

Right now, for drilling in federal waters, revenue is divided, with a quarter of it funneled to the 46-year-old Federal Land and Water Conservation Fund that pays for government land purchases and local park and recreation projects. In the Gulf of Mexico, the government splits remaining revenue evenly with Alabama, Louisiana, Mississippi and Texas. But under current federal law, other states with offshore drilling in nearby federal waters get no royalty revenue.

“Even though the exploration and the production may be in federal waters, you can’t get to those waters without landing in Louisiana, without landing in Virginia, without landing in Alaska,” Murkowski told reporters after a speech at the Center for Strategic and International Studies in Washington. “And the impact of that is more than just minimal. It’s the infrastructure that’s required to bear that — everything from the roads to the schools to the production facilities.”

Murkowski added that “revenue sharing has really kind of risen to the surface as one of those key issues when we’re talking about development of our offshore resources.”

Critics, including Bingaman, the energy committee chairman, worry that the promise of lucrative drilling revenues would encourage more offshore oil and gas development.

Revenue sharing proposals have been percolating on Capitol Hill for years.

Last April, just weeks before the Gulf oil spill, a group of senators drafting a broad climate and energy bill on Capitol Hill were close to adding proposals that would give states new power over nearby drilling as well as the promise of more federal drilling revenues. And Landrieu has offered revenue sharing initiatives as amendments to almost every piece of offshore drilling legislation that has made its way through the Senate energy committee in recent years.

The dynamic is different this year in part because the makeup of that panel has changed, with the addition of new Democrats who might support revenue sharing. Among the candidates is Sen. Joe Manchin, D-W.V. If all 10 panel Republicans voted for a revenue sharing plan, the proposal would prevail if just three Democrats crossed party lines and also voted “aye.”