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    Strong Coast Strong Texas

    Royalty bills reach critical crossroad

    New Orleans City Business
    by Matthew Penix
    12/04/2006    
          
    After decades of lobbying, the Senate offshore oil revenue sharing bill is in position for congressional approval Tuesday, which would pump $210 million into Louisiana's coastal restoration efforts over the next 10 years.  The Senate and President George W. Bush are leaning on House leaders to approve the Senate bill during the lame duck session Tuesday. The measure would open an additional 8.3 million acres in the Gulf of Mexico to drilling and provide Louisiana with a greater share of federal royalties from Gulf exploration.  "The most possible bill to be approved is the Senate bill as is," said Sen. David Vitter, R-Metairie, who estimates its chance of passage at 60 percent. "If not the Senate bill, it would have to be something very, very close to that."  The two bills, spawned after Hurricane Katrina ravaged Louisiana wetlands and coastline and called into question the federal government's responsibility to fund coastal restoration, are decidedly different.  The Senate's Gulf of Mexico Energy Security Act of 2006, co-authored by Sen. Mary Landrieu, D-New Orleans, provides less revenue than the House version. It would supply Louisiana with $210 million over the next decade, increasing to $650 million a year beginning in 2017. Louisiana recently approved a constitutional amendment to earmark the money for coastal restoration, hurricane protection and environmental improvements.  Drilling potential  The House's Deep Ocean Energy Resource Act of 2006 would potentially open the entire U.S. coastline to drilling, allowing all states along the East and West coasts to opt out of a two-decade-old federal drilling freeze. States giving the green light to drilling could get a cut of up to 50 percent of royalties from new and existing leases.  The House version, however, has drawn opposition for increasing drilling in too many places. The bill's author, Rep. Bobby Jindal, R-Kenner, now said he supports any measure capable of passing.  "We've told them at the very least to go ahead and vote on the Senate bill," said Jindal. "We're on the 1-yard line at this point. We just have to go ahead and get this done."  Jindal said he has received assurances from the White House and Senate and House leadership that the drilling bill remains a part of their agenda.  He hopes the Senate will adopt language from his bill that allows states to collect $2.5 billion lost in 1998 and 1999 due to oil lease glitches made by the U.S. Mineral Management Service. Those mistakes allowed oil companies to avoid paying royalties.  Coupled with the Senate version, which would allocate $650 million a year starting 10 years from now, Jindal said the combination would offer the best solution with "money in the short term as well as money in the long term."  "What we told leadership is that would be our preference. But if they can't convince the Senate to do that, we would rather vote on the Senate bill than go home with nothing," Jindal said.  Ed Renwick, director of Loyola University's Institute of Politics, said Jindal and the House are "ready to bend a little bit," in order to win voter support for the 2007 governor's race expected to pit Jindal and others against Gov. Kathleen Babineaux Blanco.  Time crunch  Some outgoing members of the GOP majority want to limit the post-election session to one week so it's not certain there will be enough time to push the oil royalty bill through, Vitter said. A backlog of bills could block the approval.  "The biggest challenge is simply the very tight timeframe," Vitter said. "We need to get this done now. Even given that challenge, I am hopeful we can do it."  Another complication is the lame duck session is run by Congress members who are term limited or lost their elections and thus face little political consequences for abandoned bills, Jindal said.  That leaves land-locked energy-producing states such as Wyoming, New Mexico, Utah and Colorado collecting the lion's share of federal oil and gas royalties, although offshore Louisiana continues to produce the nation's largest reserves.  The Minerals Management Service reported Wednesday a record $2.2 billion in revenue awarded to energy-producing states. Gulf states receive no revenue from energy produced offshore 3 miles and beyond. This year, Louisiana received $33 million from its onshore production.  The Senate bill would change that by pumping 37.5 percent of offshore royalties to the Gulf states. Louisiana, with its high historical output, would collect roughly 40 percent to 50 percent of that, which by the end of 2006 is expected to generate $8.2 billion for the federal government, said Landrieu.  If the 8.3 million acres opens with Senate bill approval, it's anybody's guess exactly how much how much Louisiana will receive, she said.  "But I can tell you this. Right now there's enough supply to fuel 1,000 chemical plants for 40 years," Landrieu said.•   

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