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MMS Issues Final Gulf State Revenue-Sharing Rule

Interior Department's Minerals Management Service (MMS) has issued a final rule that would allow four Gulf states -- Texas, Louisiana, Mississippi and Alabama -- to share revenues from oil and natural gas production on leases in certain areas of the Gulf of Mexico (GOM).

The new rule, which takes effect Jan. 22, directs the federal government to allocate 50% of qualified revenues -- bonuses, rents and royalties -- between fiscal years (FY) 2007 and 2016 to the four Gulf states from oil and gas development on leases in the 181 area in the Eastern Planning Area and the 181 South area in the Central Planning Area (see NGI, Dec. 15, 2008). The revenue-sharing requirement, as reflected in the final rule, was mandated by the Gulf of Mexico Energy Security Act of 2006 (GOMESA).

Of the 50% revenue share, 30% will go directly to the Gulf producing states, 12.5% will be earmarked for land and water conservation funds and 7.5% will be allocated to coastal political divisions within each state, such as municipalities. No state is expected to receive less than 10% of the total revenues to be disbursed, according to a final rule published in the Federal Register.

The Gulf states will receive half of the revenues from the eastern GOM Lease Sale 224, which was held in March (see NGI, March 24, 2008). The sale netted the federal government more than $64.7 million in high bids on 118 whole or partial unleased blocks covering approximately 547,000 acres in the Eastern GOM Planning Area.

The rule requires the MMS to disburse the the states' share of the qualified revenues on or before March 31 of the year following the fiscal year in which the revenues were collected by the federal government. MMS said if it cannot meet the deadline, revenue recipients will be notified in advance.

The MMS said it has designated the chief of financial management for Minerals Revenue Management as the lead contact on GOMESA revenue-sharing issues.

The Interior agency said it plans to publish the rulemaking for the second phase, which would address revenue sharing for 2017 and beyond, within the next two years. "This will provide time for MMS to incorporate any lessons learned during the first phase of GOMESA revenue sharing and to include similar revenue-sharing provisions if authorized in future legislation," the agency said.

In the second phase, the Gulf coastal states and subdivisions would be able to share revenues from "all" Gulf leases issued after Dec. 20, 2006.

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