Wednesday, July 02, 2008

Unfair revenue sharing is so 2006 (Updated)

I couldn't help but think about that 37.5% revenue share* that everybody got so excited about when I heard Lindsey Graham on Meet the Press recently:
But when it comes to domestic supply, we're talking about 50 miles off the coast of South Carolina with the consent of the legislature where the state gets half the revenue.

It's possible that Graham didn't review his notes very well before the show, as earlier in the segment he had repeated the canard about the Chinese and the Cubans drinking our milkshake, so he may have been mistaken about the 50 miles, but he seemed adamant that coastal states would get half of the revenue from new offshore drilling.

That made me wonder why we just don't shut down all of our drilling until after the election and see about getting a 50% share in 2009, instead of a 37.5% share (with a $650M cap) in 2017. Not seriously, but it certainly struck me as unfair. Still, I wasn't going to mention it, until I saw today's paper:
The $1.8 billion that Louisiana will have to pay over the next three years as its share of the $14.8 billion in approved levee construction will cripple other coastal projects, the governor's adviser on coastal issues said.
"The bottom line is there is no way possible for the state of Louisiana to come up with the amount of money that Washington is asking of us" without harming recovery and eating into regular government services, Graves said.
Graves expects to see a bill from the corps for between $550 million and $600 million by year's end, with $1.1 billion needed through 2009.

The Legislature set aside $300 million from the state's 2007 budget surplus for the Coastal Protection and Restoration Authority to split up among coastal restoration and levee projects this year. The authority has delayed action on those expenditures, awaiting action by Congress on the state share. Graves said the state might have to revisit its proposed use of the state's share of about $550 million in Coastal Impact Assistance Program money, the majority of which was supposed to be set aside for wetlands restoration projects or for infrastructure along the coast. Under federal law, only 23 percent of that money can be used for levees.

The state also has the option of issuing bonds that would be redeemed with revenue from the state's future share of offshore oil revenue, Graves said. Congress approved a new offshore revenue sharing scheme last year under which the state will receive about $20 million a year until 2017. After that, the state will receive as much as $600 million a year that can be used only for coastal restoration and levee projects. Those bonds, however, might not secure the needed money, or come at a high debt cost, because of the uncertainty of future revenue streams.

I don't know where to begin to respond to that news, but I wouldn't start with that "president needs to keep his promise" noise that sounds like begging to unsympathetic ears. Since the bill for levee construction would take money from coastal restoration, I would begin by pointing that it was projects that benefited the entire nation that caused most of the loss of coastal wetlands. I would be sure to point out that it was offshore oil & gas activities that made wetlands loss such a catastrophe so soon:
Still, the Louisiana coast might have survived another 1,000 years or more, Louisiana State University scientists said. But the discovery of oil and gas compressed its destruction into a half-century.

By the 1980s, the petroleum industry and the corps had dredged more than 20,000 miles of canals and new navigation channels from the coast inland across the wetlands. The new web of waterways, like a circulatory system pumping poison, injected saltwater from the Gulf of Mexico into salt-sensitive freshwater wetlands. Fueled by the advance of big business on the coast, the Gulf's slow march northward accelerated into a sprint.

Of course, you'd need to acknowledge just how much we've profited from the petroleum business:
While inland states enjoy 50 percent of the tax revenue from drilling on their federal lands, Louisiana gets back a mere $35 million of the $5 billion it contributes to the federal treasury each year from offshore drilling, or less than one percent

For opinions on just how fair that is, you could go to the Conservative Cajun:
In the state of Texas, any Gulf waters 9 miles from the coast of the state is considered state waters. As a result, the state of Texas grants those oil & gas leases and receives a certain percent of the royalties from the federal government for any leases granted farther out in what is federal waters. However, Louisiana is allowed only 3 miles off of its coast to be considered state waters...If that doesn’t seem fair, then you and I are in agreement.

or da po'blog:
Okay. Half of onshore revenues goes to the state where the oil came from. Then another 40% goes to the states in water projects. So, taken all together, onshore drilling states get 90% of the revenues generated by drilling on their land in some way. Alaska gets 90% outright.

And we get a “portion of royalties from certain offshore federal leases.” The rest goes to the U.S. Treasury.

That ain't right.

Since the federal government seems so hell bent on collecting money from Louisiana, you could also read what Ashley Morris and Oyster had to say about the federal government's reluctance to collect money (offfshore oil revenue, at that) from Chevron.

There's all sorts of retro stuff I could link to, but that's about all that I have time for tonight. While I was googling, I did find that Jason Leopold did some great work that I hadn't seen before.

Update: A must-read post at m.d. filter explains in much better detail what I said in the post (37.5% isn't a fair share) and alluded to in the footnote (the 37.5% revenue that La. supposedly received in the 2006 bill, isn't really 37.5%). When revenue sharing was being discussed, I cringed whenever I heard Bobby Jindal say that, with a fair share of offshore oil & gas revenue, we could pay for coastal restoration ourselves. Predictably enough, a rhetorical point made in favor of a fair deal, became a necessary condition for any new deal. That's in no way intended to put all of the blame on Jindal; Jindal, Mary Landrieu and David Vitter were all anxious to get the get the credit when the state was abused by both parties in Washington.

Still, since Louisiana has received pennies on the dollar (compared to what inland states, or Texas between 3-7mi. offshore, receive) in revenue for decades of drilling that have decimated our coastal wetlands, any fair-minded person should agree that the rhetorical point is still valid.

*37.5%, up to $650M, starting in 2017, all dedicated to coastal restoration, if I remember it correctly.

Thanks for reminding me about that. It inspired a lengthy post on mdfilter.

And, after reading the bill, I think the cap is actually $500 million for money that can be shared between the four Gulf Coast states and the Land and Water Conservation Fund, which would get 25 percent of that $500 million, leaving $375 million for the Gulf Coast states to divide (I am not 100 percent sure that is right, though) - which is a lot of money, but I don't think it is our "fair share."
GOP's false talking point: Jones Act blocks Gulf help | McClatchy

Jindal keeps screaming about foreign skimmers but BP is not even using the local boats at all..

(Rocky Ditcharo, a shrimp dock owner in Buras, La., said many fishermen hired by BP have told him that they often park their boats on the shore while they wait for word on where to go.

''They just wait because there's no direction,'' Ditcharo said. He said he believes BP has hired many boat captains ''to show numbers.'')
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