By Lori LeBlanc for BIC Magazine
Members of Louisiana’s U.S. Senate and House delegation are championing federal legislation that would substantially increase Louisiana’s share of offshore energy revenues, providing a big boost to the state’s funding for coastal restoration and levee projects. The time is right.
As the U.S. becomes energy independent, Louisiana and other energy-producing Gulf States deserve to receive their fair share for the abundant oil and gas activity supported off of our coasts. Likewise, the federal government should be compelled to contribute its fair share toward sustaining the coastal communities that make this critical American energy-producing province possible.
Senators Bill Cassidy and John Kennedy are co-sponsors of the Conservation of America’s Terrain and Aquatic Life (COASTAL) Act, and Congressmen Garret Graves and Cedric Richmond introduced a similar House bill in July. Both proposals address deficiencies in the current Gulf of Mexico Energy Security Act (GOMESA) program and provide that Gulf states receive 50 percent of the federal revenue from offshore energy produced, equal to the revenue rate that states with onshore energy production have long enjoyed.
“Louisiana’s coastline infrastructure is critical for America’s energy and economic security,” Senator Cassidy said, pointing to the state’s leading role in America’s modern energy dominance. “This legislation creates equal treatment for Louisiana’s offshore revenue sharing and secures the funds needed to strengthen our state’s coastal restoration efforts.”
Revenues received by the State of Louisiana from offshore energy production are constitutionally dedicated to fund conservation, restoration, and environmental projects along the Louisiana coastline. A portion of revenues can also be dedicated to fund infrastructure projects that are critical to the sustainability of the coast and the nation’s energy security, like the LA Highway 1 project in southern Lafourche Parish. With $50 billion in significant coastal projects identified in the state’s current Coastal Master Plan, Louisiana’s need for its fair share of energy revenue is undeniable.
Under GOMESA, Gulf states like Louisiana currently receive only 37.5 percent of revenues from energy produced in federal waters off of their coasts, compared to the 50 percent shared with states with energy production on federal lands. In 2018, 16 percent of U.S. crude oil and three percent of natural gas was produced in federal waters in the Gulf. That same year, the Department of Interior distributed more than $8.9 billion in revenues from the extraction of natural resources; onshore state and local governments received more than $1.5 billion or 17.7 percent, while Gulf states shared only about $188 million or 2.1 percent.
LMOGA recognizes that an equitable revenue sharing rate for Gulf states is needed to sustain our coastal communities whose residents, small businesses, roads and ports provide immeasurable service to offshore oil and gas production, and our members are fully behind the efforts of our Congressional delegation to do just that.
This industry also recognizes that royalty reform is needed to make this additional funding for the coast a reality. A robust GOMESA program that provides increased revenue to Gulf states ultimately relies on a sustained increase in Gulf oil and gas production to achieve its goals. That’s why LMOGA is also advocating for royalty reform to spur renewed investment and keep the Gulf competitive in the global energy market.
In recent years, America’s Gulf has produced record amounts of oil and natural gas from industry investments made decades ago. That level of production and the federal revenue generated from our offshore waters is not sustainable for the long-term, however, without renewed industry investment.
A reduction in the royalty rate collected by the federal government on oil and gas produced offshore is the spark that is needed to attract more producers to the Gulf and fuel investment growth, which will ultimately generate the much-needed and deserved increase in funding for Louisiana’s coastal restoration and protection efforts.