The US Senate Energy and Natural Resources Committee held a hearing regarding US Senator Bill Cassidy’s legislation S. 1276, the Offshore Energy and Jobs Act of 2015, to expand offshore energy production by opening parts of the Outer Continental Shelf (OCS) that are currently restricted from oil and gas exploration and to lift the Gulf of Mexico Energy Security Act (GOMESA) cap to provide Louisiana and other Gulf of Mexico states with more revenue. The co-sponsors of Cassidy’s Gulf Coast-focused bill include Senators David Vitter, John Cornyn, Thad Cochran and Roger Wicker.
“According to the Department of Interior, royalties from crude oil production in the offshore Gulf of Mexico for fiscal year 2014 was $4.6 billion dollars. In the same year, $3.4 million was shared with coastal states,” says Cassidy. “Federal government gets $4.6 billion, we get $3.4 million. That’s about 0.07%.”
Cassidy’s remarks were aimed toward his perceived inequity of revenue sharing arrangements. For example, states typically receive about 50% of revenue that is shared from energy development on onshore federal lands, compared to 0.07% for coastal areas, he said.
“One fourth of our nation's energy supply depends on the support facilities in South Louisiana,” he says. “Our working coast creates significant value benefiting the entire country. This legislation helps create 230,000 working class jobs for Americans who currently are underemployed or unemployed, $70 billion in new revenue, and $10 billion or so for Land Water Conservation Fund, while providing access to America’s oil and gas for Americans. What’s not to like?”
Energy and Natural Resources Chairman, Lisa Murkowski, introduced similar legislation to expand Alaska’s OCS, and Senators Mark Warner and Tim Scott introduced bipartisan legislation to open the Atlantic.
Currently, about 87% of OCS area is restricted for offshore oil and gas exploration. The Obama administration’s current five-year offshore oil and gas leasing plan, which took effect on 27 August 2012, removed 1.42 billion acres of the 1.65 billion acres of available OCS lands for production.
The proposed Offshore Energy and Jobs Act of 2015, if approved, would provide access to frontier acreage in the Gulf of Mexico by redefining the Eastern Gulf of Mexico (EGOM) moratoria in 2017 (scheduled to expire in 2022) to open the largest undiscovered, technically recoverable, energy resources in areas 50 miles from the Florida coastline.
Also, the plan would direct the Department of Interior to hold three lease sales in the EGOM in 2018, 2019 and 2020. Rule S.1276 would also allow for ongoing lease sales going forward beyond 2022.
According to a 2014 API/NOIA commissioned study, by 2035, eastern Gulf offshore oil and natural gas development could produce nearly 1 MMboe/d, contribute more than $18 billion per year to the US economy and generate $70 billion in cumulative government revenue.
Cassidy says the new ruling would provide the docks, roads, railways, refineries and other infrastructure that make energy production possible. In addition, the critical areas that support energy are experiencing land-loss due to federal engineering decisions that, for nearly 100 years, have channelized the lower Mississippi River System for the benefit of the country.
Louisiana’s estimated 2300 sq mi of land loss is largely attributed to this channelization, along with the placement of federal levees along the river system that converted delta plains to wetlands loss, says Cassidy.
Cassidy’s bill would lift the revenue-sharing cap for Louisiana, Texas, Mississippi and Alabama from $500 million in 2017 to nearly $700 million annually from 2018-25, and to $1 billion annually from 2026-55, and give greater allocations to the Land and Water Conservation Fund state grant program, which shares 12.5% in offshore revenue.
Elsewhere, it would provide revenue-sharing regulations for Florida beginning in 2017, which would receive an estimated $1.6 billion over a 10-year period.
The proposed legislation is supported by the National Ocean Industries Association, the American Petroleum Institute and others.
Image: Senator Bill Cassidy