Bills
| 3.23.22

Should Gulf States & Alaska Receive 50% of Revenues from Offshore Energy Development? (S. 2418)

Do you support or oppose this bill?

What is S. 2418?

(Updated February 27, 2020)

This bill — the Conservation Of America's Shoreline Terrain and Aquatic Life (COASTAL) Act — would amend the Gulf of Mexico Energy Security Act (GOMESA) to remove its revenue sharing cap and increase states’ share of revenues from offshore energy development to 50% (it’s currently 37.5%). This would bring states’ revenue-sharing percentage for offshore energy development up to parity with the 50% revenue share that states receive from onshore energy production on federal land. 

Additionally, this bill would add another use for GOMESA funds, allowing states to use their GOMESA revenue-sharing money for planning, engineering, design, construction, operations, and maintenance of projects for ecosystem restoration, hurricane protection, or flood damage prevention.

This bill would also create a new revenue-sharing program for future offshore energy production in Alaska. It would allocate revenues from Alaska Outer Continental Shelf as follows:

  • 50% to the Treasury Dept.’s general fund;
  • 42.5% to the state; and
  • 7.5% to coastal political subdivisions.

Of the 7.5% allocated to coastal political subdivisions, 90% would be allocated among coastal political subdivisions no more than 200 miles away from the development areas, in amounts that are inversely proportional to their distances from the geographic center of the applicable leased tract. The remaining 10% would be divided equally among municipal subdivisions that the state determines to be significant staging areas for oil and gas servicing, supply vessels, operations, suppliers, or workers. 

States would be required to use money received under the Alaska Outer Continental Shelf revenue-sharing program for the following purposes: 

  • Coastal protection, conservation, and restoration, including projects to address onshore infrastructure and relocation of communities directly affected by coastal erosion, melting permafrost, or climate change-related losses.
  • Mitigation of damage to fish, wildlife, or natural resources.
  • Mitigation of the impact of Outer Continental Shelf activities by funding onshore infrastructure projects and related rights-of-way.
  • Adaptation planning, vulnerability assessments, and emergency preparedness assistance to build healthy and resilient communities.
  • Installation and operation of energy systems to reduce energy costs and greenhouse gas emissions.
  • Programs at state higher education institutions.
  • Other purposes, as determined by the state’s governor, with approval from the state legislature.
  • Planning assistance and the administrative costs of complying with this bill.

No more than 3% of the state’s revenue-sharing money could be used for the last priority.

Argument in favor

Gulf states and Alaska should receive a share of the revenues from energy development along and offshore from their coastlines to help fund their priorities. A 50-50 share revenue-sharing arrangement between states and the federal government would put offshore energy development revenue-sharing on par with that 50% share states receive from onshore energy development, which is only fair.

Argument opposed

Energy development revenues belong to all Americans, not just the few states where offshore energy development currently occurs. As such, revenues from these activities should be sent to the Treasury Dept. to be used on priorities and programs that benefit all Americans, not just those living in Gulf states or Alaska.

Impact

Gulf states; Alaska; offshore energy development; offshore energy development revenue-sharing between states and the federal government; Treasury Dept.; and the Gulf of Mexico Energy Security Act (GOMESA).

Cost of S. 2418

A CBO cost estimate is unavailable.

Additional Info

In-Depth: Sponsoring Sen. Bill Cassidy (R-LA) introduced this bill to strengthen the current offshore energy revenue sharing program under the Gulf of Mexico Energy Security Act (GOMESA) and create a new revenue-sharing program for future offshore energy production in Alaska: 

“Louisiana’s coastline infrastructure is critical for America’s energy and economic security. This legislation creates equal treatment for Louisiana’s offshore revenue sharing and secures the funds needed to strengthen our state’s coastal restoration efforts.” 

Currently, Louisiana constitutionally dedicates revenues from offshore energy production to pay for conservation, restoration, and environmental projects to preserve and restore its eroding coastline. However, under current law, Gulf states receive only a 37.5% share of revenues from energy produced in federal waters (versus 50% from onshore energy production on federal land).

Original cosponsor Sen. Roger Wicker (R-MS) adds that this bill would bring parity to revenue-sharing arrangements for offshore development: 

“Mississippi is a proud contributor to our nation’s energy independence, and our state should receive its fair share of the revenues produced from our resources. This legislation would bring parity to revenue sharing agreements for offshore mineral development, ensuring that Mississippi and other states can invest in projects to protect our coasts for future generations.” 

Senate Energy & Natural Resources Committee Chairwoman Lisa Murkowski (R-AK), whose home state of Alaska would receive a revenue-sharing program for offshore resource development under this bill, says: 

“Revenue sharing has been a longstanding priority for many Alaskans and remains a matter of both fairness and parity for us. We have significant offshore resources, the willingness and ability to responsibly produce them, and it is time to institute a framework that acknowledges our important role. I believe this bill is a strong starting point for a new dialogue and appreciate my colleagues’ support for including Alaska within it.” 

National Ocean Industries Association (NOIA), the trade association for the U.S. offshore energy industry, supports this bill. Its vice president for government and political affairs, Tim Charters, says: 

“It is vital that American offshore energy production promote equity for the states immediately adjacent to these offshore areas. By amending GOMESA and establishing a revenue sharing program for Alaska, the COASTAL Act will ensure that these states receive continued benefits from their participation in offshore energy production, while still protecting an irreplaceable revenue stream for the U.S. Treasury, the Land and Water Conservation Fund (LWCF), Historic Preservation, and other important Federal funding priorities. Congress must connect the dots between responsible offshore energy development and the critical funding it can provide the American public. This bill is a step in that direction. NOIA also urges Congress to examine the potential for distributing offshore energy revenues with Atlantic states in order to share the full bounty of America’s outer continental shelf with coastal states.”

Some Democrats opposed to offshore drilling have historically opposed efforts to expand GOMESA revenue-sharing. Additionally, lawmakers from inland states — which aren’t eligible to receive GOEMSA revenue-sharing money — have sometimes opposed offshore revenue-sharing arrangements, as they argue that these funds belong to all Americans, not just those states where energy development occurs.

This legislation has five bipartisan cosponsors, including four Republicans and one Democrat. National Ocean Industries Association (NOIA) and the Coastal Alabama Partnership (CAP) support this bill. 


Of Note: In 2018, the Dept. of Interior distributed over $8.9 billion in revenues from natural resource extraction to four Gulf states: Alabama, Mississippi, Louisiana, and Texas. Onshore state and local governments received more than $1.5 billion (17.7%) of the revenues, and Gulf States received approximately $188 million (2.1%) of the revenues. 

In FY2019, Louisiana received over $101 million in revenue-sharing from energy produced in the Gulf of Mexico that fiscal year. This amount — which was a 31% increase over FY2018 and a 66% increase over FY2017 — was part of a total of $11.9 billion in total revenue-sharing funds distributed to states producing energy on federal lands, on American Indian-owned lands, and in offshore areas.

The Alaska Outer Continental Shelf contains an estimated 27.3 billion barrels of oil and 131.6 trillion cubic feet of natural gas. Under current law, Alaska wouldn’t receive revenue from the development of those resources, outside of the nearshore areas designated under Section 8(g) of the Outer Continental Shelf Lands Act.

During the Obama administration, the administration’s FY2016 budget proposal proposed redirecting GOMESA revenue-sharing funds to the Treasury Dept., instead of states, to use for national programs and priorities, including federal coastal restoration programs. Administration officials said that sharing oil and gas revenues with Gulf Coast states hurts national conservation efforts and other federal programs. 

Autumn Hanna of Taxpayers for Common Sense expressed her organization’s support for the Obama administration’s proposal, saying that “any efforts to make that money head back to the federal coffers instead of state projects." Sen. Edward Markey (D-MA) added that the practice of sharing energy revenue with Gulf Coast states amounts to a “giveaway” for those states. However, Hanna noted that it would be difficult to eliminate GOMESA revenue-sharing, nothing that Gulf Coast lawmakers have “always led efforts to even further increase the state share,” as this bill would do. 

When the Obama administration made its GOMESA revenue-sharing elimination proposal, Sens. Cassidy and Wicker (sponsor and original cosponsor, respectively, of this bill) expressed opposition to it. In a March 4, 2015 letter to President Obama, they, along with Sens. David Vitter (R-LA), Jeff Sessions (R-AL), John Cornyn (R-TX), Ted Cruz (R-TX), and Lisa Murkowski (R-AK), wrote: 

“We not only oppose and reject your budget proposal eroding the revenue sharing provisions in GOMESA, but will actively pursue efforts to minimize the disparity by bringing equal treatment in revenue sharing among energy producing states.” 

Wicker also called the Obama administration proposal an effort to “raid Mississippi's energy revenues to help fund President Obama's big-government agenda” and said the “ill-conceived proposal could cost the state millions of dollars to which Mississippi is entitled under the law.”


Media:

Summary by Lorelei Yang

(Photo Credit: iStockphoto.com / its all about the shot)