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Landrieu: Share Revenue With Coastal States

Last summer, Americans were reeling from the largest oil price spike the nation ever experienced. Oil prices had increased from $51 per barrel in January 2007 to nearly $150 in July 2008 — a nearly 200 percent increase in 18 months.

Skyrocketing energy prices led millions of hardworking families to demand that Congress change our policies to allow for more domestic oil and gas production. Americans from coast to coast were ready to cut ties with unfriendly foreign governments and produce our own energy right here at home.

Although still woefully behind the desires of our constituents, Congress is now recognizing the need for more domestic production. The Senate took a half step forward earlier this month when the Energy and Natural Resources Committee voted to open a significant portion of the eastern Gulf of Mexico to oil and gas drilling, including the natural-gas-rich Destin Dome. However, the committee did not approve a critical component to achieving energy security for America: revenue sharing.

Coastal states bear a disproportionate share of the responsibilities and risks associated with offshore drilling. Oil and gas wells in our Outer Continental Shelf are major industrial facilities that require substantial onshore infrastructure. These facilities are served by pipelines that traverse the seabed and coastline. Additional production necessitates new refineries, processing facilities and truck and rail traffic to onshore staging areas — all of which have a significant footprint.

To manage and mitigate the environmental impact of these activities, states that host onshore energy production on federal land within their borders have been receiving 50 percent of the revenues since the 1920s. By sharp contrast, coastal states have not benefitted from a similar partnership structure for OCS drilling.

In 2006, then-Energy Chairman Pete Domenici (R-N.M.) and I worked to remedy this inequality. Together we authored landmark legislation that opened more than 8 million acres in the Gulf of Mexico to drilling and provided a common-sense framework to share 37.5 percent of the revenues with the four energy-producing states: Louisiana, Mississippi, Texas and Alabama. An additional 12.5 percent was directed to the state side of the Land and Water Conservation Fund, which funds parks, bike trails, green space and outdoor recreation areas in all 50 states.

The United States will require increased and reliable supplies of oil and natural gas for the foreseeable future even as we aggressively transition to alternative energy sources. To build that “energy bridge,— the federal government should establish a partnership for production with coastal states such as Florida, North Carolina, Virginia and others. The current system of sending 100 percent of its offshore revenue to the federal treasury ignores the contributions of host states and is a significant disincentive for these states to undertake new offshore production.

The eastern Gulf of Mexico and the East Coast have been leased before. But despite substantial finds, leases were never brought to production because coastal states can stall or halt offshore production. More than 81 exploratory wells have been drilled in the eastern Gulf. Natural gas, condensate and crude oil discoveries were found in 13.

In 1995, the Destin Dome was discovered and is now known to contain 3 trillion cubic feet of dry natural gas. Yet Florida has blocked federally approved lease and exploration plans. Had revenue sharing been a part of the bargain, Floridians would have faced a choice involving rewards and not just risks. Given Florida’s current $6 billion budget deficit, such a choice would be starker today.

The solution is straightforward: Congress must rally the political will to extend the Domenici-Landrieu model of revenue sharing to Florida and other coastal states that step up and provide our nation with energy resources.

Along with generating additional energy supplies and revenue for coastal states, my plan directs a funding stream to the federal treasury for deficit reduction. Some claim that if new oil and gas revenues are shared with the states, Congress is “diverting— funds that would otherwise go to the federal treasury.

These critics miss the point: Without revenue sharing, there is unlikely to be any new offshore drilling. My plan offers the federal government 50 percent of something, which is better than 100 percent of nothing.

The tide is turning in Florida and other coastal states. The state House in Florida recently approved the reversal of the state’s 19-year-old ban on offshore drilling by a vote of 70-43. With gasoline prices on the rise again, Americans’ cry for affordable energy will grow even louder in the coming months.

To answer this call, Democrats and Republicans in Congress need to work together to develop an energy policy that allows for more, not less, offshore drilling and incentivizes coastal states to have a stake in our future energy security. This progressive approach will set America’s path to energy independence and create thousands of good-paying jobs to strengthen our economy.

Sen. Mary Landrieu (D-La.) is a member of the Senate Energy and Natural Resources Committee.