Oil & gas industry could see revenue sharing win this year

The oil and gas industry could get an early victory from the new congress in the form of a plan to give more coastal states some of the revenue collected for energy development near their shores.

Jack Gerard, the president of the American Petroleum Institute, said such a revenue sharing proposal — long stalled on Capitol Hill — “could be an early breakthrough.”

The incoming chairman of the Senate Energy and Natural Resources Committee, Ron Wyden, D-Ore., has signaled he is open to working on the issue with the panel’s top-ranking Republican, Lisa Murkowski of Alaska. At an event last November, Wyden suggested lawmakers could compromise on proposals to allow coastal communities to benefit from the full range of offshore energy development, including wind and solar farms as well as oil and gas production.

The former committee chairman, retired Sen. Jeff Bingaman, D-N.M., has been skeptical of revenue sharing. When Sen. Mary Landrieu, D-La., and Murkowski sought to add a revenue-sharing proposal to a broader offshore drilling bill advancing in the energy committee last year, the legislation stalled and Bingaman never brought it up again.

Gerard noted that Wyden and Murkowski may “have a different view on that issue” than Bingaman, in part because they both represent coastal states.

“There might be some potential for moving (that) early,” Gerard told reporters, before speaking at an annual “state of the energy industry” forum in Washington.

That, in turn, could provide the jumping off point for further collaboration, Gerard suggested. “That begins to set a new framework for common ground on energy policy.”

The Energy and Natural Resources Committee often divides along regional lines — not political ones — when it comes to oil and gas policy.

Inland states generally claim 50 percent of the revenue from oil and gas production on federal lands within their borders with no limits on the amount they can take in. 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, four coastal states _ Alabama, Louisiana, Mississippi and Texas _ will be able to collect 37.5 percent of oil and gas royalty revenue on some leases beginning in 2017, capped at $500 million annually. But other coastal states have no claim on the dollars.

Landrieu’s bill would have spiked the $500 million limit on revenue sharing for those four Gulf states and let them begin collecting the dollars two years earlier. A separate House-passed proposal that did not advance in the Senate would have raised the limit to $750 million each year.

Revenue sharing supporters insist that coastal states deserve compensation for the burden of offshore energy development near their shores, including building onshore infrastructure to support the work and being hit by damage from any spills. And they stress the inequity to states when it comes to revenue from energy harvested on federal lands versus federal waters.

Offshore drilling foes worry that the prospect of those drilling dollars would be too difficult for cash-strapped states to resist. Coastal states struggling to balance their budgets could be lured into supporting drilling near their coasts, even those that have historically resisted new offshore development, conservationists say.