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Opposition to Trump's Proposed Budget Grows; OCS Revenue Cuts to Coastal States Spark Howls of Pain from Louisiana

One day after President Trump sent a $4.1 trillion budget proposal to Congress, opposition to all or parts of the budget plan was beginning to form among elected officials both in Washington and in several energy producing states.

The proposed budget, officially titled "A New Foundation for American Greatness," calls for a massive cut to the U.S. Environmental Protection Agency (EPA) and smaller cuts to the Department of Interior (DOI) and the Department of Energy (DOE). But the centerpiece of the budget involves a $52.8 billion increase in defense spending, which would be offset by cuts to social programs.

Politicians and industry organizations expressed alarm over a proposal to eliminate the Gulf of Mexico Energy Security Act (GOMESA), a revenue sharing agreement between the Gulf Coast states.

"Eliminating Gulf state revenue sharing for offshore energy production would punish coastal states that support and host the development of home-grown energy and jobs, and would be a serious step backward in the quest for energy reliability and independence," said Randall Luthi, president of the National Ocean Industries Association (NOIA). Still, he said NOIA appreciated what he called a "pro-American energy message."

Louisiana Gov. John Bel Edwards, a Democrat, blasted Trump over the idea of eliminating GOMESA. He urged his state's Congressional delegation to oppose the proposed budget, which he said "turns a blind eye to the needs of the state of Louisiana."

"This proposal would set us back decades," Edwards said Tuesday. "The resources, which must travel through the infrastructure networks in Louisiana, require an ongoing federal funding commitment. Ignoring the significance of Louisiana's coast, its assets and its impact to this country is short-sighted. The nation depends on the energy resources found off the coast of our state, but this budget doesn't reflect that."

Edwards said Louisiana was in line to receive $145-176 million annually under GOMESA. He added the state had already appropriated GOMESA funding in its fiscal year (FY) 2018 budget, with the funds going "toward critical projects that address coastal restoration and hurricane protection but are not eligible for funding under the settlement agreement from the Deepwater Horizon oil spill."

The Trump administration contends that repealing GOMESA will save $272 million in FY2018. The savings would balloon to about $1.69 billion over the next five years, and $3.57 billion over the next decade.

A proposal to reduce the Strategic Petroleum Reserve (SPR) by half also raised concern. The Trump administration estimates that cutting the reserve in half would save an estimated $4.4 billion over the next five fiscal years, and $16.6 billion over the next 10 years. The proposed budget calls for cutting $500 million in spending to support the reserve in FY2018.

"The proposed sale of one-half of the nation's emergency oil supply in the SPR could threaten domestic energy security by limiting our ability to counter any unforeseen supply interruptions," Luthi said. "Any plan for depleting the SPR should be accompanied by a plan to refill it."

Alaska Gov. Bill Walker said that while he applauded the Trump administration for its "interest in responsible resource development on the North Slope," he added both he and his staff were "closely examining President Trump's proposed budget for impacts, both positive and negative, on Alaska...

"We are concerned about what some of the deep cuts, if sustained, would mean for crucial services, like air travel for rural residents and infrastructure assistance to villages," Walker said.

Republican Sens. Lindsey Graham of South Carolina and John McCain of Arizona were also critical of Trump's proposed budget, but for reasons not related to oil and gas development. Graham objected to Trump continuing the Obama administration's process for the disposal of weapons-grade plutonium, while McCain called Trump's $603 billion defense budget request "inadequate."

In a note to clients on Tuesday, ClearView Energy Partners LLC said that like the "skinny" budget rolled out in March, Trump's proposed deep spending cuts to energy-related agencies have "near-zero odds" of passing Congressional muster.

"Indeed, the contentious nature of funding targets unrelated to energy (e.g., school lunches) could potentially scuttle broader Congressional agreement regarding spending," said ClearView managing director Christi Tezak. "As a result, FY2018 could begin on Oct. 1 the same way FY2017 began a year earlier: governed by continuing resolution that extends prior-year outlays."

The proposed budget calls for allocating $5.7 billion to the EPA, $11.7 billion to the DOI and $28 billion to the DOE in FY2018, equating to cuts of 31.4%, 10.9% and 5.6%, respectively.

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