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Louisiana Governor Wants Bigger Slice of Offshore Royalty Pie

Gov. Kathleen Blanco is calling on the federal government to give Louisiana a greater share of the revenues from the oil and natural gas produced off the coast of her state, hinting strongly that she will block future lease sales off Louisiana's shoreline if the government does not fork over a bigger share of the royalty pie.

"Louisiana suffers disproportionate impacts resulting from development of oil and gas resources in the Gulf area," and yet it has received "sporadic and inadequate" revenues from the federal government to protect against wetlands erosion that in large part has been caused by energy production, Blanco said in a letter to the Interior Department's Minerals Management Service (MMS) last Tuesday.

"In an effort to bring OCS [Outer Continental Shelf] development in line with the state's coastal zone management policy, the state has advocated for significant sharing of recurring OCS revenues so that these revenues could be dedicated towards restoration and protection of coastal resources," she noted. But the federal government, which has "abundant" OCS revenues, "has not devoted adequate resources to this end."

Instead, "Louisiana is being asked to continue its role as the workhorse for OCS development while no provisions are being made to ensure the sustainability of the onshore support for that development," Blanco said. "Louisiana is expected to continue to be a 'working coast,' yet provisions are not being made to protect the workers, communities and high concentration of energy infrastructure of our working coast."

She urged the MMS to "support federal legislative changes so that the impacted coastal oil and gas producing states receive a significant share of OCS revenue." Blanco noted that the Energy Policy Act of 2005 awarded Louisiana $540 million for coastal impact assistance over the next four years, but she said that represents "only a fraction of the billions of dollars needed to properly restore and protect Louisiana's coast and its communities."

Under current law, states that engage in onshore oil and gas production receive 50% of the royalties, which typically are used to finance their annual budgets. But states that support offshore production, such as Louisiana, receive less than 1% of the royalties, with the bulk of the revenues going to the federal government. Blanco is trying to change that equation.

In 2001, the MMS collected more than $7.5 billion in oil and gas revenues from federal offshore leases, of which $5 billion came from offshore Louisiana. For that year, Louisiana received less than one half of one percent of the revenues generated from the OCS leases.

"We continue to urge congressional authorization of recurring OCS revenue-sharing," Blanco said. "Future OCS lease sales that are not accompanied by meaningful provisions for the protection of Louisiana's human and natural resources will be [deemed] inconsistent with Louisiana's coastal zone management program," and blocked by the state, she warned.

Blanco's letter, which was an official comment on a central Gulf lease sale (Lease Sale 198) now being considered by MMS, underscored the "growing tension between uncompensated support for OCS activities and the state's coastal zone management program." As a result, it said the state is "unable at this time to determine the consistency of Lease Sale 198" with Louisiana's interests.

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