Friday, March 15, 2013
Noisy Squabble over Oil and Gas Royalties
This week, President Obama proposed a new $2 billion renewable energy development trust to be funded with off-shore oil and gas exploration royalties. The proposal won quick praise from several as a particularly creative way to promote the development of cleaner fuels to replace oil and gas. Senator Lisa Murkowski had proposed a similar scheme for financing alternative energy research from new drilling royalties in the Arctic National Wildlife Refuge. There were a few boos and hisses as the idea is not a new one and there are some others who have designs on the money for environmental remediation.
The federal government receives royalties from companies in exchange for the opportunity to explore for and extract oil and gas on government-owned land and waters. Right now most of the funds go directly to the U.S. Treasury, but some is ear-marked for the Historical Preservation Trust Fund and the Land and Water Conservation Fund (LWCF). The most recent public report from the history folks claims $52.6 million in revenue, more than half of it from contributions. The report cites $6.7 million in royalty income, but that is mostly from rental of its own properties. Thus is does not appear they will find their preservation efforts stymied by a diverse of oil and gas royalties to renewable fuels.
The land and water people are in a different position. Since it was created in the mid-1960s the Land and Water Conservation Fund has had to scramble for funds. For four years in the late 1990s Congress saw fit to give the fund exactly zero in financial support. In the early 00s the fund was more fortunate. Still in fiscal year 2009, Congressional funding totaled only $19 million. However, for the first time the LWCF received $8.2 million in supplemental revenue from oil and gas leases in the Gulf of Mexico. In fiscal year 2012, the LWCF distributed a budget of $143.6 million, of which $101.5 million came from a supplement from the oil and gas royalties.
Besides the LWCF people, there are others who are wary of the President’s proposal. Senator Mary Landrieu has been fighting to increase the allocation of royalty revenue for her home state of Louisiana and other Gulf Coast states. Louisiana is already slated to begin receiving more off-shore oil and gas royalty appropriations beginning in 2017. Landrieu wants to speed up the timeline and remove a $500 million cap on revenue shared by four of the Gulf Coast states. Her fellow in Washington DC, Senator Vitter, has already submitted a bill called the Energy Production and Project Delivery Act to increase domestic energy production.
According to the Government Accounting Office, the government collection $11.3 billion and $11.4 billion revenue, mostly from royalties, in 2010 and 2011, respectively. With so many outstretched hands, that amount of funding will not go far. It portends a noisy squabble.