President Obama’s unexpected budget proposal to stop sending a portion of federal offshore mineral royalties to Gulf states could cripple Louisiana’s coastal-restoration efforts by eliminating what is expected to be $140 million to nearly $180 million in annual revenue.
The money, to come through the Gulf of Mexico Energy Security Act starting in 2017, would be the largest by far of only three recurring revenue streams the state has to pay for its Master Plan for the Coast, a 50-year, $50-billion effort. Current projections of land subsidence and sea level rise show most of southeast Louisiana will be part of the Gulf of Mexico by the end of the century if that plan isn’t a success.
“It would be a pretty tremendous blow to our overall efforts,” said Kyle Graham, executive director of the state’s Coastal Protection and Restoration Authority, in charge of the Master Plan initiative. “That was the revenue stream we were designing and planning our efforts around.”
The president would need Congress to pass legislation to change a 2007 bill that sent the royalties to the states.
“There are a lot of steps that this would have to go through before it became something to make us change our plans,” Graham said. “So we’ll just watch for right now.”
Passed in 2007, the energy bill was the culmination of a decade-long effort by Louisiana to have Congress mitigate the onshore damage related to the more than 4,000 oil and gas rigs off the state’s coast. When oil and gas are pumped from national lands inside a state, the royalties are shared equally by the state and federal governments. But most of the offshore energy extraction has taken place for decades beyond Louisiana’s three-mile territorial waters, making it a federal area.
Louisiana had always received the same share of offshore royalties as inland states, even though tens of thousands of miles of pipelines run from those rigs through its coast. Research shows canals and pipelines related to those activities are responsible for at least 36 percent of the 1,880 square miles of coastal wetlands the state has lost in the past 70 years.
The 2007 bill, passed in the wake of the devastation caused by Hurricanes Katrina and Rita, changed that system by dedicating 37.5 percent of all royalties from specific areas of the Gulf to the four coastal states with energy development – Louisiana, Mississippi Alabama and Texas.
Louisiana has taken in less $10 million total across the seven years since the bill passed, but that amount is expected to increase dramatically in 2017 because vast new areas of the Gulf will be included. The state is estimating annual income of as much as $178 million a year, depending on the rate of pumping and the price of leases and oil. Its estimated income could jump to as much as $600 million annually after 2055 when a cap on the states’ share is lifted.
The money is divided among the states and their coastal communities based on complicated formula involving the distance from the state to the drilling areas, coastal populations and other metrics.
The law requires the money to be used for:
- Coastal protection, including conservation, coastal restoration, hurricane protection, and infrastructure directly affected by coastal wetland losses.
- Mitigation of damage to fish, wildlife, or natural resources.
- Implementation of a federally approved comprehensive conservation management plan for the Gulf and coast.
- Mitigation of the impact of outer continental shelf activities through the funding of onshore infrastructure projects.
- Planning assistance and administrative costs, with a limit of 3 percent of income.
The budget change caught most coastal advocates by surprise because Obama has been a strong supporter of the Master Plan. He was the first president to include funding for that effort in a federal budget, twice asking Congress to allocate about $38 million. The GOP-led House killed both those efforts.
The reason for the change, his budget states, is to “redirect these payments … to programs that provide broad natural-resource, watershed and conservation benefits to the Nation, help the Federal Government fulfill its role of being a good neighbor to local communities, and support other national priorities. Such programs could include the Land and Water Conservation Fund, Payments In Lieu of Taxes, State and Tribal Wildlife Grants, Federal coastal restoration and resilience programs, or other national priorities.”