[StBernard] White House backs royalty sharing proposal

[Westley Annis]

White House backs royalty sharing proposal

By Bill Walsh 
Washington bureau

WASHINGTON - Legislation that would expand drilling in the Gulf of Mexico
and allow Louisiana and other Gulf Coast states to share in federal revenues
stemming from new energy production won endorsement from the White House on
Wednesday, shortly after easily clearing a key procedural vote in the
Senate. 

The White House called the proposal "an important component" of the
administration's plan to increase domestic energy production and ease the
nation's reliance of foreign sources of fuel. 

Final Senate passage and a highly unpredictable political battle with the
House, however, still pose significant obstacles to any new oil and gas
wells being drilled or Louisiana getting any new money from them. 
The 86-12 Senate vote to move ahead with debate on the energy bill far
exceeded the 60 votes supporters needed to avoid a possible filibuster and
move a step closer toward Senate approval. A vote on the legislation itself
is expected in the Senate on Monday or Tuesday. 

"I don't think we will be able to hold onto all 86 votes, but we're
relatively confident we will have 60" to pass the legislation before
Congress leaves for month-long recess next week, Sen. Mary Landrieu, D-La.,
said. 

Sen. David Vitter, R-La., was a bit more circumspect, saying the vote
Wednesday was a "strong start" toward Louisiana getting a share of federal
offshore royalties. 

Landrieu, an original co-sponsor of the legislation, was credited with
rounding up enough Democratic votes to help the bill clear the procedural
hurdle. Thirty-two Democrats voted for it and all but one Republican. 

Yet, even as the Senate waded into debate, many were looking to the
House-Senate negotiations that will attempt resolve significant differences
between the two proposals. Both bills contain a revenue-sharing component
for Gulf Coast states, money that Louisiana hopes to use to repair and
rebuild its eroding coastline and to erect a line of defense against
hurricanes. 

The Senate version would open to drilling 8.3 million acres in the eastern
Gulf of Mexico and steer 37.5 percent royalty revenue to four states in the
region, including Louisiana which stands to collect about $200 million over
the next decade. The House bill is much broader. It would allow all coastal
states to collect 50 percent of oil and gas revenues by allowing them to opt
out of 25-year-old federal moratoria on offshore drilling off their coasts. 

The possibility of allowing east- and west-coast drilling, however, has
prompted filibuster threats in the Senate from California an Florida
lawmakers, raising the possibility that in an election-shortened
congressional calendar, the legislation could get bogged down in
negotiations. 

Rep. Richard Pombo, R-Calif., who as chairman of the House Resources
Committee shepherded the bill through the House, struck a conciliatory tone
Wednesday when asked about House-Senate negotiations. 

"I'm willing to negotiate," Pombo said. 

He declined to say whether, in the face of a filibuster threat, he would be
willing to drop the House provision on the drilling moratorium. But he said
that the large margin of victory for the Senate bill Wednesday bodes well
for a deal to increase offshore drilling this year. 

"It really puts us in good position to get a bill to the president's desk,"
Pombo said. 

Democratic opponents made clear, however, they weren't going to let that
happen without a fight. In addition to concerns over the moratoria, they
objected to sharing federal revenue with Gulf Coast states. 

Sen. Jack Reed, D-Rhode Island, decried it as a "permanent entitlement" and
Sen. Jeff Bingaman, D-N.M., a longtime opponent of offshore revenue-sharing,
said giving money to the Gulf states would only be the start. 

"Other states are likely to follow," Bingaman said. "This is a precedent I
believe we will come to regret." 

It almost became a precedent 50 years ago when President Harry Truman
offered Gulf Coast states 37.5 percent of offshore royalties, the same
figure the Senate is proposing. The deal fizzled when Louisiana and other
states insisted on more. Since then, Gulf Coast states have collected
royalties on production up to three miles from shore, but nothing in the
more abundant deeper waters in the Gulf of Mexico. 

Inland states, such as New Mexico, have long collected a 50 percent share of
oil and gas royalties from production on federal lands within their borders.


The White House opposes the broad revenue-sharing provisions of the House
bill passed in June. In its statement Wednesday, the administration said it
approves the way the Senate bill addresses revenue-sharing by limiting it to
new production and capping it at $500 million a year. 

The White House cautioned, however, that the Senate bill "creates an
expectation" for revenue sharing above the cap, something supporters have
acknowledged. Landrieu's office has estimated that after 2017, the bill
would generate $650 million annually just for Louisiana. 

Rep. Bobby Jindal, R-Kenner, said that despite the differences between the
House and Senate approaches, he is optimistic about getting a deal this
year. He said that rising energy costs - particularly gasoline and natural
gas - has created a powerful political incentive for Congress to act. 

Jindal said the White House statement indicated that the administration is
"still not in favor of meaningful revenue sharing." But, he added, that it
wouldn't prevent Congress from passing legislation by the end of the year. 

He predicted that the Senate will pass the bill by early next week and House
and Senate negotiators will reach a deal. 

"The rubber hits the road in conference." Jindal said. 

(Bill Walsh can be reached at bill.walsh at newhouse.com or (202) 383-7817.)