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Senate Approves Coastal Impact Funds for Louisiana, Other Coastal States

Following an extended debate and back-room deals, the Senate on Thursday approved a bipartisan amendment as part of the omnibus energy bill to provide $1 billion in coastal impact assistance funds over four years to six coastal states with oil and natural gas production on the Outer Continental Shelf (OCS).

The amendment, offered by Sen. Pete Domenici (R-NM), was approved by voice vote late in the day after the Senate agreed to waive provisions in the Budget Act, which Sen. Judd Gregg (R-NH), chairman of the Senate Budget Committee, claimed Domenici's proposal violated. The Senate voted 92 to 4 to waive the budget provisions after Gregg raised a procedural motion to block the amendment.

The Senate on Thursday also approved a procedural motion to limit debate on the broader energy bill (HR 6), which means a vote on the entire measure could come Friday.

The Domenici measure calls for $250 million annually in direct spending to be provided between 2007 and 2010 to four Gulf Coast states (Texas, Louisiana, Mississippi and Alabama), California and Alaska, with Louisiana receiving the lion's share to restore its coastlines. Louisiana is expected to receive about $540 million over the four-year period, or 54% of the total $1 billion.

The Senate action was a significant victory for Louisiana and the other coastal states, but a setback for the Bush administration which had opposed the bipartisan measure.

Louisiana's Sens. Mary Landrieu and David Vitter, who co-sponsored the amendment, argued that Louisiana was entitled to the coastal impact assistance funds, given that the state had contributed more than $155 billion in OCS-related revenues to the U.S. Treasury since the early 1950s and had received little in return. Other cosponsors included Sens. Jeff Bingaman (D-NM) and Trent Lott (R-MS).

This is a "small initial step to correct [the] injustice" and capture a small percentage of the royalties for the host state, said Vitter on the Senate floor. He noted that the loss of Louisiana's coastline and wetlands was "directly related" to the oil and gas activity off the state's shores. He and Landrieu further assured offshore drilling opponents that the proposal would do nothing to overturn the moratorium on drilling in much of the OCS or provide incentives to encourage more offshore drilling.

As for the coastal impact funds' impact on the federal budget, Vitter said that Domenici, chairman of the Senate Energy and Natural Resources Committee, worked "extremely hard" to make sure that it would not "bust the budget."

Gregg countered that there was "no nexus" between Louisiana's receding coastline and the oil and gas drilling activity off of its shores. "The amendment as proposed has no relation to energy production," and has no place in an energy bill.

"This bill uniquely benefits [6] states at the expense of the Treasury," and excludes other states that have "conservation issues," some directly tied to energy production, Gregg said.

He noted that Louisiana was already receiving a "fair amount of money" from the federal government, approximately $1.43 for every $1 forwarded by the state to the Treasury. "I don't think they should get another dedicated stream of money." Gregg said the proposal was "highway robbery," and an "attempt to raid the Treasury." It's a "grab at the federal Treasury."

Vitter argued "nothing could be further from the truth" than Gregg's contention that no linkage exists between oil and gas production and Louisiana's dwindling wetlands and coastline. He noted that 50 years of activity off of Louisiana's coasts have lead to coastal erosion. "It's been scientifically proven."

Landrieu estimated that Louisiana receives $50 million a year from the federal government, which she said was a "drop in the buck" compared to the more than $155 billion that the state has generated for the United States since the early 1950s.

No other state, with the exception of Wyoming, contributes more energy production-related revenues to the U.S. Treasury than Louisiana, according to Landrieu. "The people in Louisiana are entitled to the money that we [forward] to the general fund."

Louisiana, Mississippi and other Gulf Coast states get only 1% of the royalties from production in their states, while other states get up to 50% of the royalties, said Lott. "We're prepared to do the dirty work. We're prepared to take the risks... But we do think we should get a share of the royalties." He noted that the Budget Committee allocated $2 billion for the energy bill, and that Domenici's amendment was within that range.

Gregg questioned whether the coastal impact funds would be used for things other than wetlands. This money will be used "primary and almost exclusively for the restoration of [the] wetlands," Landrieu countered.

The nearly day-long debate on the Domenici amendment evolved into a wider discussion of expanded drilling on the OCS. Sen. George Allen (R-VA) indicated that he would prefer that individual coastal states have "more prerogatives" to choose whether or not to opt out of the existing congressional moratorium and drill off their shores.

"That's just something I'd like to see ultimately allowed," he said.

Sen. John Warner (R-VA), a strong proponent of expanding domestic energy production, offered an amendment on the floor late Wednesday to allow non-producing coastal states to petition the federal government to opt out of the existing moratorium. The amendment came under immediate attack, which lead Warner to withdraw it.

Sen. Lamar Alexander (R-TN) filed a similar amendment Thursday, but he did not offer it on the Senate floor. Sen. Bill Nelson of Florida sought assurances from Domenici, manager of the energy bill, that no more OCS-related amendments would be offered as part of the wider energy bill. Domenici agreed later that the Senate would propose "no further amendments related to the OCS or OCS moratorium [or] natural gas and oil exploration" in the energy bill.

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