Louisiana oil royalty relief gains House nod

New Orleans CityBusiness, Jun 21, 2006 by CityBusiness Staff Report

The oil royalty relief bill sponsored by Rep. Bobby Jindal,R- Kenner, passed the House Resources Committee today with a bipartisan vote of 29-to-9, sending the bill to the full House of Representatives for an expected vote next week.

Louisiana moved a step closer today to receiving a fair share of oil and gas revenues that would produce annual funding that could be used for coastal restoration, hurricane protection, infrastructure, and levee improvements, Jindal said. My bill provides the best chance that Louisiana has ever had in receiving the offshore energy royalties.

During debate of the bill, amendments were offered by Reps. Edward Markey D-Mass., and Mark Udall. D-Colo., to strip revenue sharing and other provisions from the bill. The Markey amendment failed by a vote of 23-to-7 and the Udall amendment failed by a voice vote.

HR 4761, introduced by Jindal in February, would bring Louisiana up to 75 percent of energy royalties produced 3 to 12 miles offshore, which could mean more than $10 billion for the state in just the first 10 years of the program. Phased in over the next 15 years, the state would receive 50 percent of royalties from 12 miles out to 125 miles. The end result would provide Louisiana $2.6 billion in annual royalties when fully implemented.

Louisiana and other energy-producing states have tried for more than 50 years to get an equitable share of revenues produced from oil and gas production in the Gulf of Mexico. Even though the Gulf of Mexico produces 30 percent of U.S. domestic oil generating up to $7 billion in oil and gas revenues every year, the state received less than 1 percent of that money, or about $32 million in 2005.

Jindal's bill gives states the discretion to decide whether to open their coast to drilling and whether to allow drilling for natural gas, oil, or both. The bill places a permanent moratorium on drilling for oil and gas up to 50 miles offshore unless a state Legislature passes legislation to remove itself from the moratorium and allow exploration. From 50 to 100 miles, states must decide within one year whether to drill for natural gas, and have until June 30, 2009, to decide whether to drill for oil in the area. Waters outside 100 miles would be opened for oil and gas drilling.

The bill also includes price thresholds in Outer Continental Shelf leases that lost billions in state royalty revenue. The bill gives the U.S. Secretary of Interior the authority to renegotiate contracts or levy a fee on each unit of production of oil and gas. This could produce an additional $1 billion in royalties each year, helping offset the cost of the bill. Jindal's bill mandates that all future leases include price thresholds to avoid any oversight again in the future.

The bill has 110 co-sponsors from 33 states, including the complete House delegations from Louisiana, Mississippi and Alabama.