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Senate OCS Bill Calls for Royalty-Sharing with Coastal States

Sen. Lisa Murkowski of Alaska, the ranking Republican on the Senate Energy and Natural Resources Committee, and Sen. Mary Landrieu (D-LA) have introduced legislation that not only would permit drilling for oil and natural gas closer to the western coast of Florida, but also would give coastal states that agree to allow exploration and production off their shores a piece of the revenue pie.

The bill, the Domestic Energy Security Act of 2009, would narrow the no-drill buffer zone off the western coast of Florida to 45 miles, and it would allow drilling even closer (10-20 miles) off the Florida Panhandle in the gas-rich Destin Dome. The existing buffer zone for drilling, which was established in 2006, is 125 miles from the Florida coast in the eastern Gulf of Mexico (GOM) (see NGI, Dec. 25, 2006).

Drilling opponent Sen. Bill Nellson of Florida sharply criticized the bill, calling it an "oil industry bailout plan."

In June the Senate energy panel voted out a broad energy bill that also would permit oil and gas activity in the eastern GOM 45 miles off of Florida's west coast and closer off the Florida Panhandle. But that bill, unlike the Murkowski-Landrieu measure, did not include language that would allow coastal states, which open their shores to production, to share Outer Continental Shelf (OCS) revenues with the federal government. The omission had been roundly criticized by Murkowski and Landrieu (see NGI, June 22).

The bill would provide coastal states such as Alaska, Virginia, North and South Carolina and Georgia with 37.5% of all rents, royalties and bonuses from oil and gas development in federal waters off their coastlines. It follows a precedent set in 2006, when Congress provided a 37.5% share of revenues to five Gulf Coast states.

"This long overdue legislation would recognize contributions of host states, while incentivizing them to undertake new and responsible offshore development," Landrieu said. "Coastal communities should not shoulder the risks and responsibilities of OCS production without reaping some of the rewards. This bipartisan bill would finally change the inequitable regime that sends 100% of the revenue to [the] federal treasury," she noted.

"There are real local costs associated with energy production, from the need for bigger ports and airports to the need for schools and housing for energy workers and their families," Murkowski said.

"Development of the OCS is key to improving our energy security and economy. At a time when we are struggling to create jobs and produce affordable energy, ignoring the immense natural resources just off our shores is inexcusable," she said. The OCS holds mean undiscovered technically recoverable reserves of 86 billion bbl of oil and 420 Tcf of natural gas, according to federal estimates.

"Considering the economic and energy challenges we as a nation face, now is the time to get this right," Murkowski said.

The measure also would require oil produced in Alaska's Beaufort, Chukchi and Norton Basin planning areas to be transported to onshore facilities by pipeline in order to better protect whales and other marine mammals.

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