[StBernard] Flow of Gulf royalties to states to be delayed

[Westley Annis]

Flow of Gulf royalties to states to be delayed
Environmental OK needed before leasing
Times-Picayune
Friday, September 21, 2007
By Bruce Alpert
Washington bureau

WASHINGTON -- The federal government is delaying bids on 500,000 acres in
the Gulf of Mexico to be opened for new oil and natural gas production until
March, meaning that the revenue earmarked for Louisiana and other producing
states under a historic 2006 law will be delayed.

The 2006 law anticipated that the first new leases on 8.3 million acres in
the Gulf of Mexico would occur within a year of the bill's December 2006
enactment. But Minerals Management Service spokesman Gary Strasburg said
Thursday that an environmental assessment required before the sale can take
place will push back the lease date three months, until March of next year.

The first distribution of revenue-sharing dollars, which Louisiana officials
had hoped might begin in 2008 and which are committed to coastal restoration
work, is now projected by MMS to occur sometime before Sept. 30, 2009.

According to estimates made when the revenue-sharing legislation passed,
Louisiana expected to get $106 million from lease sales in 2007, and $125
million cumulatively over the following nine years. Starting in 2017, when
the revenue-sharing legislation would apply to all new lease sales, not just
for new acreage being opened for development, the legislation is projected
to produce $456 million a year.

More bidding possible

Adam Sharp, spokesman for Sen. Mary Landrieu, D-La., who after years of
trying finally got a revenue-sharing provision passed as the last action of
the 109th Congress, said that the senator would obviously prefer no delay.

But there may be an upside.

By putting the new leases up for bid in March, the same time period in which
Gulf oil and natural gas lease transactions normally occur, more bidders
might participate, Sharp said. Producers generally plan their spending with
the anticipation of lease sales in March, meaning that lease sales at other
times of the year might not be as successful, he said.

Sen. David Vitter, R-La., was critical of the delay, but added that it will
be cushioned some by the $525 million due the state between 2007 and 2010 in
coastal impact assistance under separate legislation passed in 2005.

"Louisiana has been waiting for these (royalty-sharing) revenues for 60
years, and it is disappointing that MMS will delay the sale and our funding
for three months beyond the bill's requirement," Vitter said.

Rep. Bobby Jindal, R-Kenner, said that the delay is disappointing because of
the urgent need to address the state's "vanishing coastline," but that MMS
officials assured him that they are still committed to meeting the 2006
law's requirement that royalty-sharing payments to producing states begin no
later than October 2009.

Strasburg, the MMS spokesman, said it is too early to estimate how much the
March lease sale will produce for Louisiana and other producing states.

Four states to benefit

Under the 2006 legislation, the 8.3 million acres in the eastern Gulf of
Mexico that had been off-limits to energy exploration were opened to
production. Louisiana, Texas, Mississippi and Alabama will share in the bid
payments made to acquire the new leases, 37.5 percent of the royalties
producers pay on the oil and gas they extract from waters off their coasts.

The March lease is expected to cover an area of about 500,000 acres,
approximately 125 miles south of Pensacola, Fla.

Sidney Coffee, head of Louisiana's Coastal Protection and Restoration
Authority, said that the state has already appropriated or identified enough
money for the next few years of its planned coastal restoration so that a
minor delay in federal revenue-sharing won't have major consequences.

Landrieu, backed by other members of the Louisiana delegation, had been
trying to get Louisiana a share of oil and gas royalty payments since she
arrived in the Senate in January, 2001. Just as the 2006 congressional
session was coming to an end, a revenue-sharing provision was accepted by
congressional leaders and the White House as part of omnibus bill that
included tax reductions, health care provisions and energy policy.

At a signing ceremony for the bill, Landrieu told President Bush that by
embracing the legislation he was creating a positive legacy for his
administration for decades to come.

Louisiana has committed to spending the revenue-sharing money for wetlands
and coastal restoration efforts.

. . . . . . .

Bruce Alpert can be reached at bruce.alpert at newhouse.com or (202) 383-7861.