[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



 
            STATE PERSPECTIVES ON OFFSHORE REVENUE SHARING

=======================================================================


                           OVERSIGHT HEARING

                               before the

                     COMMITTEE ON NATURAL RESOURCES

                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                        Wednesday, July 27, 2011

                               __________

                           Serial No. 112-54

                               __________

       Printed for the use of the Committee on Natural Resources



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                     COMMITTEE ON NATURAL RESOURCES

                       DOC HASTINGS, WA, Chairman
             EDWARD J. MARKEY, MA, Ranking Democrat Member

Don Young, AK                        Dale E. Kildee, MI
John J. Duncan, Jr., TN              Peter A. DeFazio, OR
Louie Gohmert, TX                    Eni F.H. Faleomavaega, AS
Rob Bishop, UT                       Frank Pallone, Jr., NJ
Doug Lamborn, CO                     Grace F. Napolitano, CA
Robert J. Wittman, VA                Rush D. Holt, NJ
Paul C. Broun, GA                    Raul M. Grijalva, AZ
John Fleming, LA                     Madeleine Z. Bordallo, GU
Mike Coffman, CO                     Jim Costa, CA
Tom McClintock, CA                   Dan Boren, OK
Glenn Thompson, PA                   Gregorio Kilili Camacho Sablan, 
Jeff Denham, CA                          CNMI
Dan Benishek, MI                     Martin Heinrich, NM
David Rivera, FL                     Ben Ray Lujan, NM
Jeff Duncan, SC                      John P. Sarbanes, MD
Scott R. Tipton, CO                  Betty Sutton, OH
Paul A. Gosar, AZ                    Niki Tsongas, MA
Raul R. Labrador, ID                 Pedro R. Pierluisi, PR
Kristi L. Noem, SD                   John Garamendi, CA
Steve Southerland II, FL             Colleen W. Hanabusa, HI
Bill Flores, TX                      Vacancy
Andy Harris, MD
Jeffrey M. Landry, LA
Charles J. ``Chuck'' Fleischmann, 
    TN
Jon Runyan, NJ
Bill Johnson, OH

                       Todd Young, Chief of Staff
                      Lisa Pittman, Chief Counsel
                Jeffrey Duncan, Democrat Staff Director
                 David Watkins, Democrat Chief Counsel
                                 ------                                

                                CONTENTS

                              ----------                              
                                                                   Page

Hearing held on Wednesday, July 27, 2011.........................     1

Statement of Members:
    Hastings, Hon. Doc, a Representative in Congress from the 
      State of Washington........................................     1
        Prepared statement of....................................     3
    Markey, Hon. Edward J., a Representative in Congress from the 
      State of Massachusetts.....................................     3
        Prepared statement of....................................     5

Statement of Witnesses:
    Alexander, Ryan, President, Taxpayers for Common Sense.......    14
        Prepared statement of....................................    16
    Domenech, Hon. Douglas W., Secretary of Natural Resources, 
      Commonwealth of Virginia...................................     6
        Prepared statement of....................................     8
    Graves, Hon. Garret, Chairman, Coastal Protection and 
      Restoration Authority, Office of the Governor, State of 
      Louisiana..................................................    10
        Prepared statement of....................................    12

Additional materials supplied:
    ``Estimates of Phase II GOMESA Revenue Sharing Based on 
      Central and Western Gulf of Mexico Estimated Production, 
      Revenues'' submitted for the record by Representative 
      Grijalva...................................................    36
    Marron, Donald B., Acting Director, Congressional Budget 
      Office, Letter to The Honorable Pete V. Domenici, Chairman, 
      Senate Committee on Energy and Natural Resources, submitted 
      for the record.............................................    40
    Parnell, Hon. Sean, Governor, State of Alaska, Letter to The 
      Honorable Doc Hastings and The Honorable Edward Markey 
      submitted for the record...................................    47


  OVERSIGHT HEARING ENTITLED ``STATE PERSPECTIVES ON OFFSHORE REVENUE 
                               SHARING.''

                              ----------                              


                        Wednesday, July 27, 2011

                     U.S. House of Representatives

                     Committee on Natural Resources

                            Washington, D.C.

                              ----------                              

    The Committee met, pursuant to call, at 10:04 a.m. in Room 
1324, Longworth House Office Building, Hon. Doc Hastings 
[Chairman of the Committee] presiding.
    Present: Representatives Hastings, Gohmert, Lamborn, 
Wittman, Fleming, Duncan of South Carolina, Tipton of Colorado, 
Labrador, Landry, Johnson, Markey, Napolitano, Holt, Grijalva 
and Lujan.
    The Chairman. The Committee will come to order. The 
Chairman notes the presence of a quorum, which under Rule 3(e) 
is two Members.
    The Committee on Natural Resource is meeting today to hear 
state perspectives on offshore revenue sharing. Under Committee 
Rule 4(c), opening statements are limited to the Chairman and 
the Ranking Member. However, I ask unanimous consent that any 
Member who wishes to have an opening statement be part of the 
record. Without objection, so ordered.
    Before I recognize myself to make my opening statement, as 
people are probably aware, there are a few other issues 
floating around the Capitol today and our respective caucuses 
and conferences are meeting right now to discuss those issues, 
but I do appreciate very much the witnesses for being here.
    I will recognize myself now for five minutes.

 STATEMENT OF HON. DOC HASTINGS, A REPRESENTATIVE IN CONGRESS 
                  FROM THE STATE OF WASHINGTON

    The Chairman. Revenue sharing from offshore energy 
production has long had support in Congress, but its 
implementation is incomplete and limited to only a few Gulf 
states. I do recognize that offshore revenue sharing is not 
universally supported and has its opponents.
    Today I hope the Committee can have a constructive 
conversation and that Members concentrate on how best to move 
forward on a proposal that is both fair and responsible. We 
should focus on how best to share offshore revenue, because the 
Committee will be taking up this matter legislatively after the 
August work period.
    As we begin this conversation, I believe it is crucial to 
recognize that revenue sharing will increase American energy 
production by creating new incentives for opening new offshore 
areas for drilling. More American energy production equates to 
more jobs, a stronger economy and more revenue.
    The argument will undoubtedly be made today that the 
Federal Government cannot afford revenue sharing; that somehow 
the Federal Government cannot find a responsible way to fairly 
share offshore revenues with the states that are impacted. 
Ironically, those making this argument are the same folks who 
voted in the last Congress to give $58 billion in stimulus 
spending directly to state and local governments.
    This argument that we cannot afford to share offshore 
revenue ignores the fact that this policy will open the door to 
new energy production in new areas. Currently the Federal 
Government is not collecting any revenue from energy production 
off the Atlantic Coast because this area is not open for 
exploration and production. A revenue sharing proposal would 
help spur energy development in the Atlantic and other offshore 
areas, generating revenue for the Federal Government.
    It is interesting to note that the firmest opponents to 
offshore revenue sharing in many respects are the same people 
who fundamentally oppose offshore drilling. This is quite a 
different argument to make; that revenue sharing unfairly gives 
away Federal revenue, when if they had their way they wouldn't 
be collecting revenue from offshore in the first place.
    When it is all boiled down, a revenue sharing proposal is 
and must be about fairness. It must be fair to the coastal 
states by applying to all producing states equally and 
recognizing that they have a tremendous stake in the costs and 
inherent risk to offshore energy production and so they should 
share in the rewards.
    A revenue sharing proposal must also be fair to the 
American people. Our offshore oil and natural gas resources are 
Federal resources that belong to all Americans. This is a fact 
that we cannot forget.
    As I stated at the outset, I am actively reviewing revenue 
sharing proposals, and I intend for the Committee to address 
this legislatively after the August district work period. For 
the record, such a bill will be offset and comply with the 
House Cut-Go rules and protocols.
    Also on the agenda after August is action on organic 
legislation to reorganize the Department of the Interior's 
management of offshore energy. On Monday, I unveiled a 
discussion draft of such legislation, and I welcome those 
comments and suggestions of people that have any comments and 
suggestions on them.
    Each of these proposals further the goal of increasing 
responsible offshore energy production to create jobs, to 
protect our national security and generate more revenue for the 
Federal Government and the coastal states that partner with the 
Federal Government.
    This Committee has already acted aggressively to advance 
increased American energy production during the first half of 
this year, and our pace will only accelerate when Congress 
reconvenes in September. I would just remind Members to get 
rested, and we will look for a very robust time after the 
break.
    I thank the witnesses for being here, and I will introduce 
them in a moment. With that, I yield to the distinguished 
Ranking Member, Mr. Markey.
    [The prepared statement of Mr. Hastings follows:]

          Statement of The Honorable Doc Hastings, Chairman, 
                     Committee on Natural Resources

    Revenue sharing from offshore energy production has long had 
support in Congress, but its implementation is incomplete and limited 
to only a few Gulf Coast states. I do recognize that offshore revenue 
sharing is not universally supported and has its opponents. Today, I 
hope the Committee can have a constructive conversation and that 
Members concentrate on how best to move forward on a proposal that is 
fair and responsible. We should focus on how best to share offshore 
revenue because the Committee will be taking up this matter 
legislatively after the August work period.
    As we begin this conversation, I believe it's crucial to recognize 
that revenue sharing will increase American energy production by 
creating new incentives for opening new offshore areas to drilling. 
More American energy production equates to more jobs, a stronger 
economy, and more revenue.
    The argument will undoubtedly be made today that the federal 
government cannot afford revenue sharing. That somehow the federal 
government cannot find a responsible way to fairly share offshore 
revenue with states. Ironically, those making this argument are the 
same folks who voted last Congress to give $58 billion in stimulus 
spending directly to state and local governments.
    This argument that we can't afford to share offshore revenue 
ignores the fact that this policy will open the door to new energy 
production in new areas. Currently the federal government is not 
collecting any revenue from energy production off the Atlantic Coast 
because this area is not open for exploration and production. A revenue 
sharing proposal would help spur energy development in the Atlantic and 
other offshore areas, generating new revenue for the federal 
government.
    It's interesting to note that the firmest opponents of offshore 
revenue sharing are the same people who fundamentally oppose offshore 
drilling. This is quite a contorted argument to make--that revenue 
sharing unfairly gives away federal revenue, when if they had their 
way, we wouldn't be collecting revenue from offshore drilling in the 
first place.
    When it is all boiled down, a revenue sharing proposal is, and must 
be, about fairness.
    It must be fair to coastal states by applying to all producing 
states equally and recognizing that they have a tremendous stake in the 
costs and inherent risk of offshore energy production, and so they 
should share in the rewards.
    And a revenue sharing proposal also must be fair to the American 
people. Our offshore oil and natural gas resources are federal 
resources that belong to all Americans. This is a fact we must not 
forget.
    As I stated at the outset, I'm actively reviewing revenue sharing 
proposals, and I intend for the Committee to address this legislatively 
after August. For the record, such a bill will be offset and comply 
with House Cut-Go rules and protocols.
    Also on the agenda for after August is action on organic 
legislation to reorganize the Department of Interior's management of 
offshore energy. On Monday, I unveiled a discussion draft of such 
legislation. I welcome those with comments and suggestions to share 
them.
    Each of these proposals further the goal of increasing responsible 
offshore energy production to create jobs, protect our national 
security, and generate more revenue for the federal government, and the 
coastal states that partner with us.
    This Committee has already acted aggressively to advance increased 
American energy production during the first half of this year, and our 
pace will only accelerate when the Congress reconvenes in September. 
Get rested by Labor Day, because it is going to be a very active 
autumn.
    I thank the witnesses for being here today and look forward to 
their testimony.
                                 ______
                                 

    STATEMENT OF HON. EDWARD J. MARKEY, A REPRESENTATIVE IN 
            CONGRESS FROM THE STATE OF MASSACHUSETTS

    Mr. Markey. Thank you, Mr. Chairman, very much. So we are 
here at a very interesting time. The reason that this is so 
sparsely attended today is that almost all the Republicans are 
huddled in one room trying to find with Speaker Boehner a way 
to find a trillion dollars worth of revenue. Actually not 
revenue. Revenue means taxes. It could mean royalties too, I 
suppose.
    But to just find a trillion dollars to tide us over for the 
next six months or so before we go back into crisis again and 
keep a cloud over the American economy so the trillions of 
dollars on the sidelines the private sector is not investing 
because of economic uncertainty stays on the sidelines so that 
this recession just continues without being fully remedied with 
competence in the marketplace being restored.
    So what are we doing here today? Well, what we are doing 
here today is finding a way to take more revenues out of the 
Federal Government, the revenues that are paid by oil companies 
to the Federal Government for the right to drill for oil off of 
the coastline of the United States, actually not reducing, but 
increasing the deficit at the Federal level that is causing the 
crisis that we have right now.
    Now, back in 2006 there was a bill which passed. It was 
rammed through. It was like the last thing Republicans did when 
they controlled the House and the Senate and the Presidency was 
to ram through a bill which gave a disproportionate share, 
upwards of $150 billion worth of royalty money, to four states 
down in the Gulf of Mexico.
    Now, that $150 billion is exactly how short John Boehner is 
right now in reaching a trillion dollars, but that $150 billion 
is gone and is not there for the Republicans to find because 
they gave it back to the states as a gift from the Federal 
Government.
    Now, this bill that we are going to consider today will 
take even more billions of dollars and take it from the Federal 
Treasury and hand it over to the states, kind of welfare for 
the states, which would be fine if the Federal Government was 
rolling in dough, which we are not. In fact, we are in a crisis 
right now, but here we are debating how we can take more money 
and give it away from the Federal Government and give it to the 
states.
    So Mr. Holt and I are going to introduce legislation which 
will rescind that 2006 law. We need that money back for the 
Federal Government. Otherwise we are going to have to cut 
Medicare, cut Medicaid, cut NIH funding, cut programs for the 
disabled in our country, cut defense spending. We need that 
money, OK?
    It is obvious that that was a huge mistake, given the 
crisis that we are in right now, but this bill is a big 
mistake. How can we even begin to discuss this subject right 
now, given the totality of the fiscal calamity which is now 
descending upon the capital markets of our country and the 
world because of the fiscal crisis of the Federal Government?
    So my advice would be that this is just a big mistake and 
seen in the totality of the total fiscal situation of our 
country unfortunately it is just something we can't afford. You 
know, we would like to help the states out right now, but we 
are discussing cutting Medicaid funding for the states right 
now.
    We are discussing cutting programs across the board for the 
states that the Federal Government won't be able to provide any 
longer. We can't possibly be talking about actually a transfer 
of tax money, royalty money, to the states at this crucial 
time.
    So Mr. Holt and I are going to respond to that with 
legislation not only on this bill, but on the legislation that 
passed in 2006 because hindsight is 20/20. We can see the 2006 
bill is a big mistake, but you don't have to be Dick Tracy to 
figure out that the bill that we are considering here today 
going forward prospectively is like putting straws into the 
revenues of the Federal Government and allowing the states to 
suck it out even as they already benefit from all the money 
that is within the first three miles off of their coastline. 
They get 100 percent of the revenues anyway.
    But the money that is deep offshore, that is Federal money. 
That is money for the whole country, not just for the states 
that immediately abut that water mass. And so I look forward to 
the hearing and the testimony of our witnesses.
    [The prepared statement of Mr. Markey follows:]

     Statement of The Honorable Edward J. Markey, Ranking Member, 
                     Committee on Natural Resources

    Thank you.
    It is hard to imagine a hearing that would be more tone deaf than 
the one the majority has scheduled today. We have less than one week to 
reach an agreement to reduce our federal deficit and raise the debt 
ceiling. But here the Republican Majority is holding a hearing to 
actually discuss increasing our deficit by diverting billions of 
dollars worth of oil drilling royalties away from the federal 
government and to the states.
    The Republican majority refuses to accept any increases in revenues 
by getting rid of tax breaks for billionaires and oil companies as part 
of a balanced approach to reduce our budget deficit and avoid national 
default, but they apparently have no problem diverting billions in 
federal drilling revenue.
    The revenue generated from oil and gas drilling on federal lands 
offshore is one of the largest non-tax revenue streams for the federal 
government. These oil and gas resources belong to all of the American 
people--not just those of the adjacent states. They are public 
resources that belong as much to someone living in Massachusetts or 
Ohio as they do to someone in Louisiana or Texas. These are resources 
that should help every American, not a select few.
    The revenue generated from these public resources goes to the 
federal treasury to help pay for Medicare and Medicaid. It helps to pay 
for our national defense. It helps pay for Pell Grants to educate our 
children. This money should be used to benefit all Americans. Yet the 
Republican Majority would like to use it as a bargaining chip to bribe 
cash-strapped states into accepting new drilling.
    Coastal states already get 100 percent of the revenue from all 
drilling in state waters, generally the first three miles from shore. 
In addition, the OCS Lands Act gives states 27 percent of the revenue 
from drilling in the first 3 miles of federal waters, generally 3 to 6 
miles offshore.
    However, in the waning hours of the 2006 Congress, the Republican 
leadership rammed through legislation that sent revenues from offshore 
drilling in federal waters in the Gulf of Mexico to four states--
Louisiana, Mississippi, Alabama and Texas. That bill set up what 
amounts to a new entitlement program for these four states that will 
result in a massive transfer of wealth from the federal government.
    According to the Department of the Interior, the revenue sharing 
provisions in that bill will cost the federal government $150 billion 
over the next 60 years. That is $150 billion that we will not have to 
reduce our deficit.
    Normally, welfare means the largess of the State. But with this oil 
welfare, it's the largess going to the states.
    And it could actually get worse if a proposal in the Senate to 
eliminate the annual $500 million cap on what can be sent to the states 
were to become law. That proposal would divert an additional $224 
billion of oil well welfare to those four Gulf States over the next 45 
years.
    If we are serious about getting our fiscal house in order, we need 
to end the royalty giveaway to these four Gulf States. And we should 
certainly not be expanding this giveaway.
    That is why today I will be introducing legislation with 
Representative Holt that would put an end to this irresponsible fiscal 
policy. Our legislation would repeal the revenue sharing provisions 
enacted in 2006 and save U.S. taxpayers $150 billion over the next 60 
years. Our legislation would also ensure that all of those funds be 
used for deficit reduction.
    As the Republican majority is pushing us to the brink of financial 
disaster by demanding cuts to Medicare and Social Security in order to 
reduce the budget deficit, we simply cannot afford to send $150 billion 
that rightfully belongs to U.S. taxpayers to these four Gulf States. 
It's time to stop this oil well welfare for the Gulf States and put 
this money to better use reducing the deficit and paying our bills.
                                 ______
                                 
    The Chairman. I thank the gentleman, I think, for his 
opening statement.
    Mr. Markey. You are welcome.
    The Chairman. As I am sure he thanks me. I welcome our 
witnesses. We have with us The Honorable Doug Domenech, the 
Secretary of Natural Resources for the Commonwealth of 
Virginia; The Honorable Garret Graves, the Chairman of the 
Coastal Protection and Restoration Authority, Office of the 
Governor of the State of Louisiana; and Ms. Ryan Alexander, 
Taxpayers for Common Sense.
    The rules here, just to give you the timing lights here, 
when the green light goes on you have five minutes, when the 
yellow light goes on you have one minute, and when the red 
light goes on that means that the time has expired. Without 
objection, your full statement will be in the record. If you 
can confine your remarks as close to five minutes, I would very 
much appreciate that.
    Secretary Domenech, you are recognized for five minutes.

     STATEMENT OF HON. DOUG DOMENECH, SECRETARY OF NATURAL 
              RESOURCES, COMMONWEALTH OF VIRGINIA

    Mr. Domenech. Good morning, Mr. Chairman and Members of the 
Committee. I am Doug Domenech, Secretary of Natural Resources 
for the Commonwealth of Virginia.
    In my secretariat, I oversee six state environmental 
agencies and assist in implementing the Commonwealth's energy 
policy. Thank you for inviting Virginia to share our thoughts 
on the importance of revenue sharing as a critical part of the 
development of offshore oil and gas resources.
    Governor Bob McDonnell has been clear from the day he took 
office in January of 2010 that his goal is to make Virginia the 
energy capital of the East Coast. We have been hard at work 
expanding opportunities for both conventional and renewable 
energy development onshore and offshore as part of an all-of-
the-above strategy.
    As part of this strategy, the Governor has pushed hard for 
access to oil and gas revenues off the Virginia coast. We enjoy 
the bipartisan support of our General Assembly and our 
congressional delegation, including our U.S. Senators Warner 
and Webb, and a majority of Virginia's delegation in the House 
of Representatives, in this effort.
    We are grateful to House Natural Resources Chairman 
Hastings and this Committee for putting forward bills that 
passed the House of Representatives to reinstate Virginia Lease 
Sale 220 after it was approved but then canceled by the 
Administration after the Deepwater Horizon tragedy. Governor 
McDonnell supports your diligent efforts in making offshore 
exploration and development a priority for our nation, and 
Virginia now asks for support of legislation to allow revenue 
sharing of royalties from offshore Federal leases.
    Virginia believes it is important to share revenues from 
oil and gas exploration with all coastal states in a similar 
way as is constructed in the Gulf. My written testimony can be 
summarized in four points:
    First, revenue sharing proves that energy development is a 
partnership between the states and the Federal Government. 
Development of our domestic oil and natural gas resources is 
critical to our nation's secure energy future. States must be 
partners with the Federal Government in that development, and 
as partners the states should share in the revenues derived 
from OCS activity.
    Revenue sharing that benefits local and state governments 
helps to promote national economic interests and generates 
additional Federal revenue by increasing state and local 
participation in offshore projects. Local and state governments 
will be incentivized to assist in the offshore exploration 
process by creating necessary infrastructure or passing 
offshore exploration friendly legislation.
    Second, revenue sharing is not new. The precedent for 
royalty revenue sharing has already been set. Since the 1920s, 
the states have been collecting royalties from onshore Federal 
mineral leases. Since the 1950s, seven coastal states have been 
collecting royalties from offshore Federal leases within the 
three miles of their state waters.
    Since 2006, four coastal states have been collecting 
revenues from offshore leases in any Federal waters under 
GOMESA. Now is the time for Congress to act to provide all 
states, not just a select few, with royalty revenue sharing on 
offshore Federal leases.
    Third, revenue sharing is fair and equitable. States that 
choose to pursue offshore development should receive a deserved 
portion of its rewards. Revenue sharing provides the states 
with the economic ability to invest in local communities most 
affected by development risk.
    States are on the front lines of the effects of offshore 
leasing, not the Federal Government. Last year's tragic 
offshore oil spill showed that such development can carry real 
consequences not for the inland states that ultimately use much 
of the energy being produced, but for the coastal states at 
water's edge.
    And finally, revenue sharing provides the resources states 
need to develop and improve infrastructure. Returning a 
reasonable portion of the vast revenues from offshore 
generation and production to states will allow them to be far 
better prepared to mitigate the resulting risks and impacts. 
Revenue sharing provides the states with the ability to keep up 
with increasing industrial activity and ensure that we have 
world class safety and environmental safeguards. The states are 
first on the scene, and the states are the most directly 
affected.
    Our national energy needs are too great not to have revenue 
sharing. We are hopeful that this Committee and this Congress 
will allow revenue sharing to go forward, and the Commonwealth 
of Virginia stands ready to lend a hand in any way we can.
    Thank you, and I look forward to answering any questions 
you might have.
    [The prepared statement of Mr. Domenech follows:]

            Statement of The Honorable Douglas W. Domenech, 
        Secretary of Natural Resources, Commonwealth of Virginia

    Good morning Mr. Chairman and members of the Committee. I am Doug 
Domenech, Secretary of Natural Resources for the Commonwealth of 
Virginia. In my Secretariat, I oversee six state agencies; the 
Department of Environmental Quality, the Department of Conservation and 
Recreation, the Virginia Marine Resources Commission, the Department of 
Historic Resources, the Virginia Museum of Natural History, and the 
Department of Game and Inland Fisheries. In addition, my Secretariat 
works closely with the Department of Mines, Minerals and Energy located 
within the Secretariat of Commerce and Trade to implement the 
Commonwealth's energy policy, and my Deputy, Maureen Matsen, serves as 
the Governor's Senior Energy Advisor.
    Thank you for inviting Virginia to share our thoughts on the 
importance of revenue sharing as a critical part of the development of 
offshore oil and gas resources.
    Virginia Governor Bob McDonnell has been clear from the day that he 
took office in January 2010 that his goal is to make Virginia the 
energy capital of the East Coast. We have been hard at work expanding 
opportunities for both conventional and renewable energy development, 
on-shore and offshore, as part of an ``all-of-the-above'' strategy. It 
is our intention to lead the way to reduce our nation's dependence of 
foreign sources of oil through new and innovative efforts to reduce the 
Commonwealth's consumption of gasoline and expand alternative fuel 
markets, and by being the first state on the Atlantic to explore and 
develop offshore resources.
    As part of this strategy, the Governor has pushed hard for access 
to oil and gas resources off the Virginia coast. We enjoy the bi-
partisan support of our General Assembly and our Congressional 
delegation in the United States Senate--Senators Warner and Webb--and a 
majority of Virginia's delegation in the House of Representatives in 
our effort.
    Immediately after his election, the Governor expressed his desire 
to both Interior Secretary Salazar and President Obama that the 
Administration proceed with the previously scheduled Outer Continental 
Shelf (OCS) Lease Sale 220 off Virginia, and we were thrilled when, in 
March of last year, the President announced Lease Sale 220 would 
proceed.
    Unfortunately, on April 20, 2010 the Deepwater Horizon tragedy 
occurred and on May 7, 2010 the Interior Department indefinitely 
postponed environmental work for Lease Sale 220.
    Then on December 1, 2010, Secretary Salazar announced that scoping 
for the next 5-Year leasing program 2012-2017 would not include any 
Mid-Atlantic leases effectively shutting out Virginia until at least 
2017.
    We are grateful to House Natural Resources Chairman Hastings and 
this Committee for putting forward bills that passed the House of 
Representatives to both re-instate Lease Sale 220 and open up 
additional acreage in the Atlantic. Governor McDonnell supports your 
diligent efforts in making offshore exploration and development a 
priority for our nation and Virginia now asks for support of 
legislation to allow revenue sharing of royalties from offshore federal 
leases.
    Development of our domestic oil and natural gas resources is 
critical to our nation's secure energy future. And the states must be 
partners with the federal government in that development. And as 
partners the states should share in the revenues derived from OCS 
activity.
    America needs the new energy sources that lie off Virginia's coast. 
While we support new OCS activity off Virginia, it must be recognized 
that there will be significant costs borne by the state to bring that 
new energy onshore. Roads, bridges, terminals, ports and other related 
infrastructure will need to be expanded and maintained.
    While we look forward to the job creation, the ability to keep up 
with this increased activity and ensure we have a world class safety 
regime in place to protect our shoreline is essential to making sure 
everyone knows how serious we are about safety and the environment.
    Sharing revenues with states tells states the federal government is 
serious about partnering on both the costs and benefits of energy 
production.
    In 2006, Congress passed the Gulf of Mexico Energy Security Act of 
2006 (GOMESA). GOMESA created sharing of leasing revenues with oil 
producing states in the Gulf and the Land & Water Conservation Fund for 
coastal restoration projects. This legislation grants a share of 
revenues generated from leases in one leasing block between 2008 and 
2015--and then from all Gulf of Mexico leasing from 2016 forward. 
Between fiscal years 2008-2010, it led to nearly $30 million in revenue 
sharing to those states and coastal political subdivisions and will 
generate significantly larger sums going forward.
    Virginia believes it is important to share revenues from oil and 
gas exploration with all coastal states who allow leasing in a similar 
way as it is constructed in the Gulf. One recent study (Southeast 
Energy Alliance) concluded that revenue sharing could mean up to $250 
million annually for Virginia if exploration and development moves 
forward in Virginia's adjacent waters.
    Last week, Virginia's Governor joined with the Governors of 
Alabama, Mississippi, Alaska, South Carolina and Louisiana in 
expressing their strong support for legislation in the Senate that 
would allow their states to receive a fair share of the revenues from 
energy generation and production in the Outer Continental Shelf (OCS). 
I would ask that a copy of that letter be entered into the record of 
this hearing.
    As these Governors stated, there is more than sufficient cause to 
justify energy-related revenue sharing. Ocean energy development can 
place heightened demands on transportation services, the environment, 
ports, fuel supplies, pipeline and transmission corridors, public 
health and safety, and other infrastructural, social and natural 
resources.
    Last year's tragic offshore oil spill also showed that such 
development can carry real consequences--not for the inland states that 
ultimately use much of the energy being produced, but for the coastal 
states at water's edge. Returning a reasonable portion of the vast 
revenues from offshore generation and production to the states, will 
allow them to be far better prepared to mitigate the resulting risks 
and impacts. This is an equitable bargain, wherein the states that 
choose to pursue development receive a deserved portion of its rewards.
    States rights are equally important to that of the federal 
government. Sharing revenue with the states additionally affords 
opportunities for the states to dedicate funds for important projects 
that otherwise would not be possible. A current example of such 
programs can be seen in Louisiana where all money from offshore revenue 
sharing goes to coastal protection, wetland mitigation efforts, and 
hurricane protection. Without the offshore revenue sharing program, 
such funding would likely not be possible.
    As you are aware, under the Mineral Leasing Act, all states with 
energy production on federal lands are rightly entitled to roughly half 
of the associated revenues--and, like offshore oil and gas, these 
revenues are derived from resources which belong to the entire nation, 
not any one state. Thus, the same sort of revenue sharing should apply 
to states most affected by development of the OCS.
    The Mineral Leasing Act allows inland states with mineral leasing 
to received 50 percent (with Alaska as the exception with 90 percent) 
of all revenues generated from royalties and bids for onshore oil and 
natural gas production with the federal government. From 1982 through 
2002, royalties from onshore resource revenue sharing was over $11.1 
billion, with Virginia receiving just $900,000 during that twenty year 
period. Providing for revenue sharing for coastal states in offshore 
development could provide a huge economic impact for states such as 
Virginia that have not had the benefits of inland oil production.
    Today in areas where offshore drilling occurs, coastal states 
collect 100 percent of the royalties from production in state waters. 
Under the Outer Continental Shelf Lands Act, seven coastal states, 
Alabama, Alaska, California, Florida, Louisiana, Mississippi, and 
Texas, are entitled to 27 percent of the revenue within three miles of 
their state waters. From 1982 through 2002, this 27 percent in revenue 
sharing has produced $3.08 billion for these seven states. This revenue 
sharing program was established to compensate these states for any 
damage to or drainage from natural gas and oil resources in State 
waters that are adjacent to Federal leases. The precedent for offshore 
revenue sharing of federal lease sales has already been set.
    As a result of the Gulf of Mexico Energy Security Act of 2006, from 
2007 through 2016, the Gulf States of Alabama, Louisiana, Mississippi, 
and Texas will share 37.5 percent of revenues from new leases in the 
0.5 million acres in the Eastern Gulf and the 5.8 million acres in the 
Central Gulf. After 2016, they will share 37.5 percent of revenues from 
all Gulf leases issued after December 2006. The Gulf States have seen 
significant income from offshore resource revenue sharing programs. 
Virginia and the other coastal states should be afforded similar 
opportunities for revenue sharing.
    As seen during the tragedy of Deepwater Horizon, states are on the 
front lines of the effects of offshore federal leases, not the federal 
government. Just as anticipated by the Outer Continental Shelf Lands 
Act in 1953, states bear the most burden of any damage or drainage from 
natural gas and oil disasters in federal waters. The states are the 
first on the scene and the states are the most directly affected. With 
the events of last summer, we have seen that the Congress of 1953 was 
correct in providing for revenue sharing to the seven Coastal States. 
Now is the time to provide for revenue sharing not just for these seven 
states and within the three mile marker, but for Virginia and any state 
with offshore federal leases.
    Revenue sharing from offshore resources in federal waters is 
essential. Revenue sharing provides the states with the economic 
ability to invest in local communities most affected by development and 
risk. Benefiting local and state governments helps to promote national 
economic interests and generate additional federal revenue by 
increasing state and local participation in offshore projects. Revenue 
sharing also helps to foster a better working relationship between 
federal, state, and local agencies. Local and state governments will be 
incentivized to assist in the offshore exploration process by creating 
necessary infrastructure or passing offshore exploration friendly 
legislation.
    In a recent letter, Senator Jim Webb said, ``Development of OCS 
energy resources, if accomplished with a fair and equitable formula for 
sharing of revenues between the federal and state government, will 
attract well-paying jobs and holds significant promise for boosting 
needed domestic energy production.'' Governor McDonnell could not agree 
more.
    Again, the precedent for royalty revenue sharing has already been 
set. Since the 1920's the states have been collecting royalties from 
onshore federal mineral leases. Since the 1950's seven coastal states 
have been collecting royalties from offshore federal leases within 
three miles of their state waters. Since 2006, four coastal states have 
been collecting royalties from offshore federal leases in any federal 
waters under GOMESA. Now is the time for Congress to act to provide for 
all states, not just a select few, with offshore federal leases to 
receive royalty revenue sharing. Revenue sharing with Virginia and 
other states can help the budgets of our states and foster stronger 
national economic interests.
    Our national energy needs are too great to not have revenue 
sharing. We are hopeful that this Committee and this Congress will 
allow revenue sharing to go forward and the Commonwealth of Virginia 
stands ready to lend a hand in any way we can.
    I look forward to answering any questions the Committee may have.
                                 ______
                                 
    The Chairman. Thank you very much, Mr. Secretary, and thank 
you for adhering to the time.
    Chairman Graves, you are recognized for five minutes.

 STATEMENT OF HON. GARRET GRAVES, CHAIRMAN, COASTAL PROTECTION 
  AND RESTORATION AUTHORITY, OFFICE OF THE GOVERNOR, STATE OF 
                           LOUISIANA

    Mr. Graves. Thank you, Mr. Chairman, Ranking Member Markey 
and Congressmen Holt and Wittman. I appreciate you being here 
and appreciate the opportunity to speak today.
    My name is Garret Graves, and I serve as Chair of the 
Coastal Protection and Restoration Authority of Louisiana, the 
agency established after Hurricane Katrina to address coastal 
sustainability issues in the State of Louisiana.
    To give a quick background on offshore revenue and 
production revenues associated with offshore, this shows the 
various revenue streams that have been generated from offshore 
production over the last few years. You can see the bonus bids, 
which is the initial income stream during the auction process, 
the rental income, which is paid over a monthly process, and 
then the royalties are based upon the volume production.
    It is showing an extraordinary revenue stream. This is one 
of the largest revenue streams for the Federal Government on an 
annual basis. I would just make note. In 2008, $18 billion was 
generated from offshore production primarily in the Gulf of 
Mexico.
    There are five primary reasons why I have heard folks 
oppose the concept of doing revenue sharing, and they are 
listed out here. I am going to address the first two. The first 
two are bad policy precedent and it is a Federal resource and 
therefore should not be shared.
    These are all the policies, all the existing laws that 
share revenues with states today, so in effect you can see 
under the Mineral Leasing Act, under the various other 
programs, virtually all public lands where energy production 
takes place, the revenues are shared with the states and it is 
not just at 27 percent, 37.5 percent. Up to 90 percent of the 
revenues are returned to the states or, as you can see in the 
column to the right, in some cases the counties.
    So in our research I am going to say it again. Every single 
program that exists today where revenues are produced from 
energy production on Federal lands, those revenues are shared 
back with the states.
    But make note at the bottom, the Outer Continental Shelf. 
Yes, the State of Louisiana and other coastal states do share 
in 27 percent of revenues from production in the three to six 
mile zone. However, that is explicitly provided for drainage of 
the common reservoir pool between state and Federal waters. 
That was for drainage. That is not revenue sharing and it is 
not impact assistance.
    The 37.5 percent from GOMESA, as Ranking Member Markey 
noted. I want to clarify something very quickly here. The State 
of Louisiana received a check for $222,000 this year. That $150 
billion number that was used a few minutes ago, I have no idea 
where that is, but I think we need to do a quick investigation, 
and we would like the rest of the money we are owed. $220,000 
is what we were paid based upon about $8 billion in production. 
About $6 billion of that was attributed to our state. $222,000 
is how much we were paid.
    This shows the comparison of onshore versus offshore 
production. So under the Mineral Leasing Act, the State of 
Wyoming produced about $2.7 billion in revenue in 2008. They 
received a check for $1.2 billion. New Mexico on the bottom row 
there produced $1.4 billion and received a check for $600 
million. Incredible disparity.
    In 2008, we produced again $14.5, or if you include the 
bonus bids and everything it was about $18 billion. We received 
a check for $6 million. That was the first year under GOMESA. 
$6 million that the State of Louisiana received.
    This would create an incentive to drill is certainly 
another concern that I have heard raised. Current Federal law 
in virtually every case shares 25 to 90 percent of the 
revenues. So where is the big problem with the incentive that 
is created in virtually every other public domain that exists 
today?
    In addition, I think it is important to look at states like 
Florida and California. The whole incentive argument obviously 
hasn't resonated in those states as they have very much fought 
production in those areas. I think that there are other ways to 
mitigate the perception of incentives such as taking snapshot 
and other mechanisms that have been used in the past.
    It will harm the environment is another allegation that has 
been levied against offshore production. I think it is 
important to take a look at where we get our oil today, OK? We 
bring in oil from Mexico, from Nigeria, from Venezuela, from 
Algeria, from Angola, from Colombia. And you can see here 
Libya, Syria, China, Taiwan, North Korea. I would argue that 
the United States has far more stringent environmental 
standards.
    If we are going to protect the environment, and we are 
concerned about the environment, I think we need to be 
concerned about the environment for the entire globe and not 
just the United States. These countries don't hold a candle to 
our environmental standards, yet this is where we are bringing 
our energy in from today. So if we are environmentalists, let 
us be environmentalists for the globe because it certainly does 
have global consequences.
    And then budget consequences. I know some of you may be 
looking, as was noted earlier, saying what in the world are the 
states doing asking for revenue sharing today? Do you guys not 
get cable TV and not realize that we have a budget crisis and 
that there is a debt ceiling issue?
    Yes, we do get cable TV. That is the only way we can watch 
Swamp People. But I think it is important. You can't afford to 
not share the revenues. Congress spent $150 billion responding 
to Hurricane Katrina. $150 billion. Just three years later, 
about $11 billion responding to Hurricanes Katrina and Ike. 
Billions of dollars have been authorized, about $15 billion 
authorized by Congress for ecosystem restoration projects, and 
much of that is tied back to some of the historic management 
principles of industrial activities on the Gulf coast.
    And then last, Louisiana's coast between the States of 
Texas and Mississippi measure smoothly about 400 miles. As a 
result of the degradation of our ecosystem, if you measure all 
the nooks and crannies of that fragmented coast it is about 
7,700 miles long. So instead of fighting the BP oil spill along 
400 miles, we had to fight it along 7,700 miles of shoreline.
    So you are going to pay. I am going to say it again, and it 
has been said for decades. The Congress is going to pay for 
what is going on in coastal Louisiana. You can be proactive and 
you can pay a lesser amount, or you can be reactive and you can 
pay exponentially more because that is what is going to happen.
    I will stop there, Mr. Chairman. Thank you.
    [The prepared statement of Mr. Graves follows:]

                  Statement of Garret Graves, Chair, 
       Coastal Protection and Restoration Authority of Louisiana

    Chairman Hastings, Ranking Member Markey and Committee members, 
thank you for the opportunity to share aspects of Louisiana's long 
offshore energy history with you. My name is Garret Graves and I serve 
as chairman of the Coastal Protection and Restoration Authority of 
Louisiana (CPRA). The CPRA was established after Hurricanes Katrina and 
Rita to serve as the single state agency responsible for hurricane 
protection, flood control, ecosystem restoration and coastal 
resiliency. Responsibilities associated with this position include the 
lead Natural Resource Damage Assessment trustee for the State of 
Louisiana. In that role and following the 2011 oil spill, I was 
appointed by the President to serve on the Gulf Coast Ecosystem 
Restoration Task Force.
    The State of Louisiana welcomes the opportunity to provide our 
perspective related to the development of comprehensive energy policy 
and how revenue sharing should be part of the larger energy policy of 
our nation.
    For decades, energy activities in coastal Louisiana and adjacent 
offshore waters have produced billions of barrels of oil and trillions 
of cubic feet of natural gas. This energy production serves as one of 
the largest sources of domestic energy in the United States and 
Louisiana has played a key role in powering this nation's economy. 
Every barrel of oil and every cubic foot of gas produced in the Gulf of 
Mexico supplants the need for additional imported energy from foreign 
sources. At the same time, our coastal area has been cited as the most 
productive ecosystem on the continent by U.S. Fish and Wildlife 
Service. Commercial fishermen harvest over two billion pounds of fish 
and shellfish annually from the Gulf's waters. Louisiana's unique 
coastal estuary serves as a nursing ground for 90 percent of these 
fisheries and supports the lifecycle for 98 percent of the 
commercially-harvested species in the Gulf of Mexico.
    Over 20 million Americans are employed in the Gulf of Mexico 
region. Many of these jobs are tied to the Gulf's resources. For 
example, tourism and recreation provide over 620,000 employment 
opportunities, the seafood industry supports hundreds of thousands of 
jobs and gulf workers provide up to 27 percent of domestic oil 
production in the Gulf of Mexico. The waters in the coastal area of 
Louisiana produce or transport up to one-third of the oil and gas 
consumed in the United States. The production activities we host 
benefit the U.S. Treasury from $5 to14 billion annually. This revenue 
stream is one of the largest segments of annual deposits into the 
Treasury.
    Six of the nation's top 10 ports are on the Gulf Coast. With the 
deepening of the Panama Canal allowing the transit of larger vessels 
from Pacific nations, we expect to see an increase in traffic. 
Louisiana is home to five of the top fifteen ports in the country and 
our ports and river system currently provide maritime commerce and 
export capabilities to 31 states. The Mississippi River is truly 
America's Commerce Superhighway--supporting hundreds of billions of 
dollars in cargo annually with one of the most efficient transportation 
modes in the nation.
    According to the Bureau of Economic Analysis, the five Gulf States' 
gross domestic product collectively approaches nearly $2.5 trillion. If 
the Gulf States' constituted a country, this region would be the 
world's seventh largest economy.
    This impressive economic and ecological activity has been 
challenged in recent years. Specifically, in Louisiana, we have been 
hit with Hurricanes Katrina, Rita, Gustav, and Ike in the last six 
years. In addition, the most recent record high water event on the 
Mississippi River system has caused a number of tense moments. It is 
important to note that 40 percent of the continental United States 
drains through our state. From Montana, to Minnesota to portions of New 
York--to two Canadian Provinces--the Mississippi River watershed is one 
of the world's largest.
    Despite these extraordinary challenges, Louisiana was on an upward 
trajectory in recent years and our citizens were committed to a full 
recovery. Homes were being rebuilt, the economy was recovering and the 
state was making record investments to restore the ecosystem and 
improve the resiliency of our coastal communities. In fact, a United 
States Geological Survey report released just a few weeks ago indicated 
that our state may have actually grown by up to 200 square miles 
between 2008 and part of 2010. This apparent coastal wetlands 
restoration, recovery and accretion follows decades of coastal wetlands 
loss. The same USGS report confirmed that while 1900 square miles of 
wetlands have eroded or were lost over the last 80 years, our recent 
investments and coastal management improvements have contributed to a 
successful coastal strategy.
    The 1900 square miles of land loss is largely attributable to 
federal efforts to ``manage'' the lower Mississippi River system. The 
channelization of the river system has converted a once growing deltaic 
plain to the greatest source of wetlands loss in the United States. 
Decades of historic mismanagement of this coastal region have also 
contributed to this loss. Much of this management was related to 
commercial development--including building access to energy resources 
in our coastal area and the construction of pipelines to bring these 
resources to market in the interest of providing energy to the nation. 
The wetland policies of the past, which did not benefit from the 
science we have today, were unsustainable and have been reversed. The 
State of Louisiana is working aggressively to battle the reality of a 
channelized river system and make sure that our policies are 
sustainable. As I pointed out, many of the issues we struggle to 
address were caused by Federal policies or to fulfill a national need 
have been stopped, but the scars remain and the damaging effects 
continue to be felt. Addressing these historic impacts while ensuring 
resilient domestic energy supplies can only be attained by revenue 
sharing. The federal government has profited from Louisiana's loss for 
far too long.
    Today, many view the coastal challenges in Louisiana as a parochial 
issue resulting from local decisions. Nothing could be farther from the 
truth. The coastal loss our state has experienced for the last several 
decades is directly tied to federal actions and the entire country has 
paid the price for these decisions.
    After Hurricanes Katrina and Rita every taxpayer in the nation 
contributed to the $150 billion spent to date within appropriations and 
other measures put forward to address the nation's worst natural and 
manmade disaster. Consumers around the country were also paying an 
extra 75 cents/gallon of gasoline as a result of the impact to energy 
infrastructure in our state from those hurricanes. In 2008, consumers 
were faced with the largest gasoline price spike since the Arab oil 
embargo--an increase of $1.40/gallon nationwide.
    The impact to the nation did not stop there. The hurricanes also 
shut down river traffic where nearly 20 percent of the nation's 
maritime commerce traverses through our state. The repercussions were 
far reaching. For example, up to two-thirds of the grains from Midwest 
farms were unable to get to market due to the storms' impacts upon our 
coast.
    The Deepwater Horizon was yet another example of additional 
complexities and increased costs associated with coastal loss in 
Louisiana. As a result of the fragmented, eroded coastal conditions 
creating nooks and crannies along our coast, our oil spill battles were 
waged over 7700 miles of linear shoreline. Without the erosion and land 
loss that has occurred in our state, we may have been able to 
concentrate our efforts to less than 500 miles if our coasts were less 
porous and similar to the coasts of Mississippi and Texas.
    Mr. Chairman, Ranking Member, the disparity among federal revenue 
sharing programs must end now. Revenues from energy production on 
federal lands has continued for decades while virtually no funding has 
been shared with states for offshore production. Even under the Gulf of 
Mexico Energy Security Act of 2006, our state received $222,000 in the 
name of revenue sharing when the Treasury saw more than $5 billion in 
production revenues from offshore Louisiana. If federal law treated 
onshore and offshore resources equally, our state would have benefited 
from a more equitable process that would have provided approximately 
$2.5 billion and an additional $2 billion would have been sent back to 
our state for water-related projects. The difference we coastal states 
suffer from is the fact that under the Mineral Leasing Act, states 
share in 50 percent of all revenue generated from onshore mineral 
production on federal lands. And an additional 40 percent is placed 
into the Reclamation Fund for water projects in those same western 
states. Only 10 percent of onshore revenues are deposited into the 
Treasury. In 2009, the states of Wyoming and New Mexico alone shared in 
over $1.2 billion on $2.5 billion in energy revenues and were able to 
utilize those revenues in the way each state had decided. That same 
year, Louisiana received virtually nothing on nearly double the energy 
production.
    Responding to recent hurricanes, taxpayers have paid a significant 
price by not allowing coastal states to utilize these revenues to 
address the federal impacts. They will continue to pay exponentially 
more until Congress acts to address this revenue sharing disparity. 
Revenue sharing essentially boils down to be an issue of equal 
treatment, but in doing the proper thing Congress will empower states 
to take proactive steps to in order to improve the resiliency of our 
coastal communities and resources.
    Decades of inaction for an energy policy that includes revenue 
sharing has resulted in the loss of lives and increased our trade 
deficit. Our dependence upon foreign energy has added jobs and funding 
to the economies of Venezuela, Nigeria, Algeria, Iran, and many other 
nations that challenge American values. Our lack of an energy policy 
has also resulted in a net adverse impact to our global environment by 
increasing production in countries with less stringent environmental 
regulations and has increased unemployment in the United States.
    I urge you to not let another opportunity pass you by. Enact 
responsible revenue sharing legislation that will allow for coastal 
states hosting energy production to mitigate historic and prospective 
impacts from energy production and to make investments in the 
resiliency of these coastal resources. With adequate support our 
coastal communities have the potential to produce American energy for 
decades and play their proper role as part of a comprehensive energy 
policy.
                                 ______
                                 
    The Chairman. The time of the witness has expired. I thank 
the gentleman.
    The next witness is Ms. Alexander, the President of the 
Taxpayers for Common Sense. The gentlelady is recognized for 
five minutes.

            STATEMENT OF RYAN ALEXANDER, PRESIDENT, 
                   TAXPAYERS FOR COMMON SENSE

    Ms. Alexander. Thank you. Good morning, Chairman Hastings, 
Ranking Member Markey and Members of the Committee. Thanks for 
the opportunity to testify today.
    Our mission at Taxpayers for Common Sense is to achieve a 
government that spends taxpayer dollars responsibly and 
operates within its means. I should just note at the outset as 
an organization we don't oppose offshore drilling or energy 
development domestically. That is not our position. We look out 
for the taxpayer and taxpayer dollars.
    For the past 15 years, TCS has actively worked to ensure 
that taxpayers receive a fair return on resources extracted 
from Federal lands and waters. As the rightful owners, 
taxpayers are entitled to fair market compensation for the 
resources extracted from our lands and waters, as would any 
private resource owner.
    Taxpayers for Common Sense is opposed to any measure that 
would reduce the Federal share of royalty payments--
particularly at this moment as we face a burgeoning Federal 
debt crisis and enormous deficits, siphoning billions of 
dollars in valuable revenue from the general treasury is 
inappropriate.
    Furthermore, altering these shares would do nothing for the 
bottom line of the oil and gas, wind or other offshore 
developers. They would owe the same royalties, rents and fees 
at the end of the day either to the states or the Federal 
Government.
    Federal waters are administered, protected and managed by 
Federal, not state agencies, at a cost to Federal taxpayers, 
and the revenue derived from the sale of these resources should 
be returned to the Federal Treasury. Unlike onshore energy 
operations, offshore operations do not occur within state 
boundaries, and the impact for operations in Federal waters has 
national implications.
    The newly created Office of Natural Resource Revenue is 
responsible for royalties due on conventional and renewable 
ocean energy and mineral resources on 1.4 billion acres of U.S. 
Outer Continental Shelf, as well as onto our Federal and Indian 
lands. The agency is charged with ensuring fair collection, 
calculation and distribution of royalties on behalf of the 
American taxpayer.
    Revenues from the collection of royalties represent one of 
the largest non-tax income sources to the Federal Government. 
The ONRR collects nearly $10 billion in revenues annually in 
royalties, rent, bonuses and fees from resource extraction on 
Federal lands and waters. In Fiscal Year 2010, more than $3.8 
billion of these revenues came from resource development in 
Federal waters.
    Offshore energy development is not managed by ONRR alone. 
Safety, leasing and environmental regulations on offshore 
development are carried out by the Bureau of Ocean Energy 
Management, Regulation and Enforcement. Substantial Federal 
funds are directed to both ONRR and BOEMRE, a bad acronym, 
annually. In fact, this week the House is considering the 
Department of the Interior, Environment and related agencies' 
appropriations bills, which provide $138.6 million for ocean 
energy management under BOEMRE and $109 million for royalty 
management to the Office of the Secretary for ONRR.
    Finally, on top of the costs that fall to the taxpayer for 
BOEMRE and ONRR, the U.S. Coast Guard, not the states, inspects 
and regulates offshore drilling rigs, as well as performs 
vessel regulation, search and rescue, security and pollution 
response.
    To be clear, states do get money from state waters. All 
Americans get the revenue from Federal waters. Federal waters 
are more than six miles off the coast and nine miles in certain 
part in the Gulf of Mexico. State waters are within three miles 
of their respective shorelines.
    The coastal states where offshore drilling takes place 
already receive significant revenue from royalty payments. 
States receive 100 percent of the revenue generated within 
state waters. Additionally, under Section 8[g] of the Outer 
Continental Shelf Lands Act they receive 27 percent of the 
royalty payments for development in waters within three to six 
miles of their coast, about a quarter of a billion dollars in 
Fiscal Year 2010. For the remaining exclusive economic zone out 
to 200 miles, the royalty revenue is returned to the rightful 
resource owner, the Federal taxpayer.
    Federal taxpayers have already lost significant income from 
Federal resources in the Gulf of Mexico. In 2006, the Gulf of 
Mexico GOMESA, as we have been talking about, gave the Gulf 
states 37.5 percent of the royalty income for certain newly 
opened areas of the Federal waters of the Gulf, and beginning 
in 2016 they will receive 37.5 percent of royalties from new 
leases throughout the Gulf's Federal waters up to $500 million 
annually.
    Royalties collected from offshore drilling in Federal 
waters should be returned to the rightful resource center, the 
Federal taxpayer. The Federal Government manages and secures 
operations off our coast, and the taxpayers bear the cost of 
these service. The impacts of drilling in Federal waters have 
national implications. Costs and benefits should be carried out 
in the interest of all Americans, not a handful of coastal 
states.
    The country is now facing $14.3 trillion in debt and an 
annual deficit of more than $1.4 trillion. Many, many things 
need to be done to resolve our fiscal woes, not the least of 
which is ensuring that Federal taxpayers get the revenue they 
deserve from the resources that they own.
    [The prepared statement of Ms. Alexander follows:]

  Statement of Ms. Ryan Alexander, PresidentTaxpayers for Common Sense

    Good morning Chairman Hastings, Ranking Member Markey and 
distinguished members of the committee. Thank you for the opportunity 
to testify today. My name is Ryan Alexander and I am President of 
Taxpayers for Common Sense (TCS), a national, non-partisan budget 
watchdog organization. Taxpayers for Common Sense's mission is to 
achieve a government that spends taxpayer dollars responsibly and 
operates within its means.
    Over the last fifteen years, TCS has actively worked to ensure that 
taxpayers receive a fair return on resources extracted from federal 
lands and waters. Royalties and fees collected from resource 
development represent a valuable source of income for the federal 
government and should be managed and accounted for in a fair and 
accurate manner. As the rightful owners, taxpayers have the right to 
fair market compensation for the resources extracted from our lands and 
waters, as would any private landowner.
    Taxpayers for Common Sense is opposed to any legislative measure 
that would alter the existing federal-state revenue sharing provisions 
for royalty payments. For many reasons that I will explain, this is an 
irresponsible action. However, in the face of a burgeoning federal debt 
crisis, siphoning billions of dollars in valuable revenue from the 
general treasury is downright foolish. Furthermore, altering these 
shares would do nothing for the bottom line of the oil and gas, wind, 
or other offshore developers--they would owe the same royalties, rents 
and fees at the end of the day either to the states or to the federal 
government.
    As you know, oil and gas companies that drill on federal and Indian 
lands or offshore pay royalties for the oil, gas, and other minerals 
they remove. Generally, this payment is a percentage of the total value 
of the minerals extracted. More recently other energy resources, such 
as wind, are also being leased on federal lands and waters and 
royalties paid to federal taxpayers.
    Federal waters are administered, protected, and managed by 
federal--not state--agencies at a cost to federal taxpayers, and the 
revenue derived from sale of these resources should be returned to the 
federal treasury. Unlike onshore energy operations, offshore energy 
operations do not occur in a state and the impact for operations beyond 
state waters reaches well beyond any one state and has national 
implications.
History of Offshore Energy Production and Royalties
    In the early 20th century oil and gas operators successfully 
extracted oil and gas from underneath our nation's waters. The first 
successful underwater well was just offshore near Santa Barbara, 
California.\1\ Oil was extracted there through the creation of a long 
pier--using this method operations were never much further than a 1,000 
feet off the shore. But by the late 1940s oil and gas development had 
moved to offshore platforms.
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    \1\ http://www.oilspillcommission.gov/sites/default/files/
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    From its beginning, offshore revenues were an important source of 
federal dollars. Shortly after the success of the first barge and 
platform system, roughly 10.5 miles from the Louisiana coast and 
operated by Kerr-McGee, the offshore oil and gas industry experienced 
rapid growth.\2\
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    \2\ http://www.oilspillcommission.gov/sites/default/files/
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    By the 1950s production was rising so high that offshore operations 
became a significant revenue generator for the country. Disputes over 
water rights and leasing became a problem and the Outer Continental 
Shelf Lands Act (OCSLA) of 1953 was enacted to manage the operations 
beyond state waters.
    The federal government was also charged with collecting royalties 
for extracted resources from publically owned lands and waters. This 
responsibility fell to the Department of the Interior (DOI). After 
there were problems with fiscal accountability of resource operations, 
President Reagan created the Linowes Commission to review the process 
and investigate the underpayment of royalties.\3\ Shortly thereafter 
the Minerals Management Service was created within DOI to manage 
offshore operations and collect royalties. From 1982-2010 the Minerals 
Management Service oversaw offshore energy production and collected and 
distributed royalties for minerals extracted from federal and tribal 
lands and waters.
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    \3\ http://www.dtdeal.com/pdf/chronology-
valuation_royalty_relief1980-2008.pdf
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Federal Waters are Federally Managed and Taxpayer Funded
    Formerly the responsibility of the Minerals Management Service, the 
recovery of royalties for resource development in federal waters now 
falls to the newly created Office of Natural Resource Revenue (ONRR) 
housed within the Secretary's office in the Department of the Interior. 
ONRR is responsible for royalties due on conventional and renewable 
ocean energy and mineral resources on 1.7 billion acres of the U.S. 
Outer Continental Shelf (OCS) as well as onshore federal and Indian 
lands. This new agency is charged with ensuring fair collection, 
calculation, and distribution of royalties on behalf of the American 
taxpayer.Revenues from the collection of royalties represent one of the 
largest non-tax income sources for the federal government. The majority 
of this revenue comes from offshore natural gas production--
approximately 60% of royalty revenue comes from natural gas. The ONRR 
collects nearly $10 billion in revenues annually in royalties, rents, 
bonuses and fees from resource extraction on federal lands and waters. 
In fiscal year 2010, more than $3.8 billion in these revenues came from 
resource development in federal waters offshore. In addition to 
directing money to the federal treasury, under federal law ONRR also 
distributes this money to states, American Indian Tribes, Land and 
Water Conservation Fund, the Reclamation Fund and the Historic 
Preservation Fund.
    Offshore energy development is not managed by ONRR alone. Although 
originally tasked fully to MMS, in the recently created system, safety 
and environmental regulations on offshore development are carried out 
by the Bureau of Ocean Energy Management, Regulation and Enforcement 
(BOEMRE).
    Substantial federal funds are directed to both the ONRR and the 
BOEMRE annually. In fact, this week the House is considering the 
Department of the Interior, Environment, and Related Agencies 
Appropriations Act for fiscal year 2012, which provides funding for 
both the ONRR and BOEMRE. This year's Interior bill includes an 
appropriation of $138,605,000 for ocean energy management under BOEMRE. 
It also provides $109,364,000 for royalty management to the Office of 
the Secretary for the ONRR.
    Finally, on top of the costs that fall to the federal taxpayer for 
BOEMRE and the ONRR, the U.S. Coast Guard, not the states, inspects and 
regulates the off-shore drilling rigs as well as performs vessel 
regulation, search and rescue, security and pollution response.
Coastal States Royalties from Offshore Drilling
    To be clear, states get the money from waters dedicated to the 
states under federal law. All Americans get the revenue from federal 
waters. These waters are more than six miles from the coast, and nine 
miles in parts of the Gulf of Mexico. State waters are within three 
miles of their respective shoreline.
    The coastal states where offshore drilling takes place already 
receive significant revenue from royalty payments. States receive all 
the revenue generated within three miles of their shoreline. 
Additionally, under section 8(g) of the Outer Continental Shelf Lands 
Act, states receive 27% of royalty payments for development in waters 
within three to six miles of their coasts--about a quarter billion 
dollars in FY2010. For the remaining exclusive economic zone--out to 
200 miles--the royalty revenue is returned to the rightful resource 
owner, the federal taxpayer.
    Additionally, states benefit from offshore operations in direct and 
indirect jobs such as service operations supporting offshore 
development, and more directly affiliated jobs such as commercial 
industries in gas processing and oil refining. Without directing the 
royalty payments to the states from federal waters there is still 
benefit to coastal states that pursue offshore drilling.
Gulf of Mexico Energy Security Act Already Siphons Taxpayer Dollars
    Federal taxpayers have already lost significant income from federal 
resources in the Gulf of Mexico. The Gulf of Mexico Energy Security Act 
(GOMESA) in 2006 gave the Gulf states an even larger share of federal 
revenues. They receive 37.5% of the royalty income from certain newly 
opened areas in federal waters of the Gulf, and beginning in 2016 they 
will receive 37.5% of royalties from new leases throughout the Gulf's 
federal waters, up to $500 million annually.
    GOMESA's large payments to the Gulf states were justified as 
mitigation for damage to Gulf coastal wetlands and environment due to 
past impacts of oil and gas development. In fact, the law restricts the 
states to use the money only for a range of purposes affecting these 
coastal areas, in order to meet a specific federal purpose for coastal 
wetland restoration. Whether or not this is a reasonable expenditure of 
federal money, it is directed at addressing a kind of damage that 
modern coastal and wetlands regulation should prevent. Revenues from 
any increase in oil and gas development off other states will not need 
to be directed to such mitigating for past harms, and there is no 
justification for simply giving the states a blank check from the 
taxpayers' money.
Directing Royalties to States in Federal Waters Poses an Enormous 
        Political and Logistical Challenge
    Beyond the limited state waters designated in federal law 
(extending 3 to 6 miles from shore), there are simply no state 
boundaries in federal waters. Drawing boundaries for states and 
determining the recipient for the increased state revenues for waters 
so far offshore would be a legal and technical nightmare. The division 
of revenue among the states in the GOMESA legislation represented a 
political compromise that would be indefinitely more complicated along 
other U.S. coasts.
    For example, states with concave or convex of the coastlines may 
have difficulty determining boundaries or agreeing on where their 
state's interests lie. The proposal for leasing wind offshore Rhode 
Island and Massachusetts was delayed nearly a year by negotiations 
between the states.
Offshore Drilling in Federal Waters is Important Revenue
    At a time when the country faces a $14 trillion debt discussing the 
prospects of diverting federal royalties to the states would only put 
more financial stress on the already pressed federal coffers. It is 
clear the federal government needs this valuable source of revenue that 
is rightfully due to all Americans now more than ever.
    As required by the 2005 Energy Bill, in 2006 the DOI completed an 
inventory of existing oil and gas offshore reserves. They estimated 8.5 
billion barrels of oil and 29.3 trillion cubic feet (tcf) of natural 
gas. Nearly all of this lies in federal waters-siphoning this money to 
a few states could cost taxpayers billions annually in rightfully owed 
revenue.
Federal Waters Belong to All U.S. Taxpayers
    Royalties collected from offshore drilling in federal waters should 
be returned to the rightful resource owner the federal taxpayer. States 
receive revenue from royalties collected within state waters and the 
transitional area between state and federal waters (3-6 miles from 
shore). Furthermore, the federal government manages and secures 
operations off our coasts and the taxpayer bears the cost of these 
services. The impacts of drilling in federal waters have national 
implications. Costs and benefits should be carried out in the interest 
of all Americans, not a handful of coastal states.
    The country is now facing a $14 trillion debt and an annual deficit 
of more than $1 trillion dollars. Many things need to be done to 
resolve the nation's fiscal woes. Not the least of which is ensuring 
federal taxpayers get the revenue they deserve for the resources they 
own.
                                 ______
                                 
    The Chairman. I thank the witnesses for their testimony.
    Let me start the questioning first. I will just make an 
observation that I think needs to be made, and that is simply 
if we are not drilling offshore there is no revenue coming in, 
but if we start drilling and we share it there still is revenue 
coming in to the Federal Government. So to suggest that this is 
a cost associated, I really have sometimes a tough time 
understanding that argument.
    Secretary Domenech, my first question is to you. You noted 
in your testimony that Virginia was the first on the Atlantic 
Coast to have a potential lease sale. That of course has since 
been postponed to a minimum of 2017. You also testified that 
Virginians by and large through the public comment period 
support this very, very much.
    You are not entitled under current law to the same revenue 
sharing under GOMESA as the other Gulf states, but yet you say 
this is an incentive. Could you explain probably in more detail 
how this incentive of revenue sharing would enhance and be 
accepted by Virginians off the coast?
    Mr. Domenech. Thank you, Mr. Chairman, for that question. 
You are correct. Virginians and, as I mentioned, our delegation 
here in Congress has been very supportive of pursuing offshore 
development, primarily through Lease Sale 220.
    Our General Assembly has identified several ways they would 
like to spend the money that would come in from such an effort, 
but primarily these funds will allow us to develop the sort of 
safety infrastructure we need for this development to go 
forward, and the way we see it right now the Federal Government 
shares revenue with inland states off of lands owned by the 
Federal Government, so that is happening already the same way 
the Outer Continental Shelf development revenue should be 
shared with coastal states. So it does give us an opportunity 
and incentive to pursue additional efforts to develop offshore 
Virginia.
    The Chairman. Good. I appreciate that, and I also note too 
that I know Mr. Wittman and I have had a number of 
conversations about this, but I also note that both the 
Senators from the Commonwealth are very supportive of this, 
which I think probably reflects a view of most Virginians.
    Mr. Domenech. That is correct.
    The Chairman. Chairman Graves, you spoke about the need of 
revenue sharing to mitigate certain obvious energy production 
on the states, and you noted, as Secretary Domenech did, that 
states also share revenue.
    As we move forward on this, do you have any feedback on how 
the formula of GOMESA should be addressed perhaps differently? 
The graph you put up there was rather stark. Would you have 
some comments on the formula as we move forward with revenue 
sharing?
    Mr. Graves. Absolutely. Mr. Chairman, I think it is 
important to recognize the fact that coastal Louisiana has a 
long history in energy production and literally fueling this 
nation's economy.
    Last time I added it up I think offshore our state alone, 
we had generated about $150 billion for the United States 
Treasury with no revenue sharing and so I think that it is 
important that as formulas be developed that, first of all, 
there be some recognition for the areas that were the guinea 
pig for offshore energy production and, to be candid, did 
experience some impacts as we have gone through and improved 
technology.
    So I think that is an important component. Another one is I 
think production volumes, current production volumes. I think 
that as GOMESA has included items like the length of the 
shoreline and the coastal population, I think they are 
relevant, but I think the key items are historical production 
and current production rates.
    The Chairman. Let me just try to expand that because in 
your testimony you mentioned that Wyoming and New Mexico used 
their revenues in a way. Do you think that there should be more 
flexibility for states receiving revenue sharing?
    Mr. Graves. I do think that it should be a state's decision 
to determine how the impact should be addressed, how those 
funds should be used. In the Mineral Leasing Act, as you know, 
there are absolutely no conditions on the use of those funds.
    I know in the past, particularly under the Coastal Impact 
Assistance Program (CIAP), we have run into extraordinary 
challenges with Interior approving some of the coastal uses 
that we believe are very clear.
    The Chairman. Good. Well, I look forward to pursuing this 
as we move forward after the August recess. My time has 
expired, and I recognize the gentleman from Massachusetts, the 
Ranking Member.
    Mr. Markey. Thank you very much. Mr. Graves, I do agree 
with you that the Gulf states have been used as guinea pigs, 
and we saw a tremendous--maybe the worst--environmental 
disaster of all time last summer.
    There has not been yet any legislation produced in this 
Congress that would implement the safety recommendations from 
the blue ribbon BP Spill Commission. Would you support putting 
those recommendations on the books so that we implement the 
safety lessons from that Spill Commission?
    It is a guinea pig, yes, but we learned the lessons and now 
we are going to put the safety measures in place.
    Mr. Graves. Congressman, I think that I did read the report 
months ago when it came out. I do recall there being some very 
appropriate recommendations in that report and attempts to 
improve safety; improve industry I think in addition to looking 
at some of the efforts that the industry has undertaken.
    Mr. Markey. But none of the recommendations of the BP Spill 
Commission have been put on the books yet, so would you support 
us adopting legislation to accomplish that goal so that the 
guinea pig doesn't have a successor incident?
    Mr. Graves. Congressman, I will say two things in response. 
First of all, I think that there were a number of very 
appropriate recommendations that were included in that report, 
and I would be happy to go through and----
    Mr. Markey. Would you support----
    Mr. Graves. Not all the safety recommendations. No, sir. I 
would be happy to go through.
    Mr. Markey. OK. Do you want those recommendations put on 
the books or not?
    Mr. Graves. Again, Congressman, in total, no. I think that 
there were some very valid recommendations.
    Mr. Markey. Do you think we should raise the liability cap 
from $75 million for the oil industry----
    Mr. Graves. I do.
    Mr. Markey.--so that they should be responsible for the 
unlimited damages which they cause? Do you agree with that?
    Mr. Graves. I do. I do. And to be clear, Congressman, I 
agree with you that I do not believe that current law was 
appropriate or was sufficient in responding to the BP oil 
spill.
    Mr. Markey. Yes. I think that might be a good subject for 
us to twin here as well as we are moving forward so that we 
understand that this isn't just going to be a one-way street, 
that it is just anything the oil and gas industry wants, but 
that we have the concomitant safety recommendations put on the 
books as well.
    Ms. Alexander, I know you haven't had a chance to review 
the legislation which Mr. Holt and I are going to introduce to 
take back that $150 billion which in retrospect we couldn't 
afford in the end of 2006. Would you be supportive of ending 
those kind of giveaways of Federal money to the states, given 
what we realize is a fiscal calamity that we are facing as a 
country?
    Ms. Alexander. You know, I should say I haven't reviewed 
the legislation. We would have to take a look at it, but since 
in general we do think that revenues from Federal waters should 
go back to the Federal taxpayers, we would obviously be 
inclined to look favorably on legislation that would reverse 
that.
    Mr. Markey. So you see this bill as well or the potential 
proposal which will emanate from the hearings which we are 
having today. How do you view that in terms of the potential 
harm to the Federal taxpayers and the bond rating of our 
country, which obviously is very fragile?
    Ms. Alexander. Well, I think that at this moment when there 
is clearly very little appetite if you look at the entire 
Congress for raising taxes and there is a need for revenue; 
there is still some appetite for some services from government, 
although obviously a lot of controversy about what those should 
be, I think it is just the wrong time to take revenues away 
from the Federal coffers.
    These are Federal waters. They are six miles or nine miles 
or more off the shores of states. It would be difficult to map 
them. You know the consequences, as Mr. Garret said. The 
consequences are going to be paid for by the Federal 
Government. They are. So I think taking the revenue away from 
the Federal taxpayers is the wrong thing to do.
    Mr. Markey. Now, in April, May and June of 2010, BP, 
because of their negligence off of the coast of Louisiana, 
created the worst environmental disaster in history. In April, 
May and June of 2011, they have just reported $5.6 billion 
worth of profits, but the Majority is insisting that 
notwithstanding those historic profits that they continue to 
keep tax breaks, which obviously are not needed to get them to 
go out there and to drill.
    Do you think it is a good idea for us as part of any grand 
bargain to reclaim those $4 billion a year in tax breaks which 
we give to big oil to drill where they are going to drill 
anyway because they are like fish swimming and birds flying? 
The oil company is drilling, and they are making huge profits.
    Ms. Alexander. You know, we have been on record for a long 
time for repealing the vast majority of oil and gas tax breaks, 
so I think this is an industry that has ample market incentives 
to encourage production to keep going. The market should be 
sufficient to encourage the kind of production that we need to 
maintain our energy needs.
    I think the more our position as an organization is that 
the energy sector needs to kind of come back from the Federal 
subsidies and get a more level playing field by reducing the 
oldest and biggest subsidies first. You know, some of the oil 
and gas subsidies have been on the books for 100 years. It is 
hard to say that they are getting off the ground.
    Mr. Markey. Thank you, Ms. Alexander.
    The Chairman. The time of the gentleman has expired. The 
gentleman from Virginia, Mr. Wittman?
    Mr. Wittman. Thank you, Mr. Chairman. I would like to thank 
the members of the panel for joining us today.
    Secretary Domenech, let me begin with you and ask this just 
in general. When Virginia gets the opportunity to produce 
energy offshore, can you give me some indication about how many 
jobs that would relate to for Virginia?
    Mr. Domenech. Thank you very much for the question. There 
have been several studies estimating the numbers of jobs and so 
it fluctuates somewhat, but it is roughly between 5,000 and 
15,000 jobs associated, depending on what you include, so an 
enormous job creation machine.
    Mr. Wittman. And under that scenario, do you believe that 
there should be a revenue sharing structure similar to that for 
the Gulf states?
    Mr. Domenech. We do.
    Mr. Wittman. Can you give us a little idea about under that 
structure then what Virginia would like to, first of all, do 
with those revenues? You spoke a little bit about the General 
Assembly having some plans for those revenues. I would like for 
you to go ahead and let us know a little more about that.
    And then do you believe that the state, when given that 
possibility of those revenues, should have the flexibility as 
to how to spend those revenues? So I guess it is a two-part 
question. One is where would the proposed revenues go, and how 
would you like the flexibility to be able to spend those 
revenues?
    Mr. Domenech. Well, I think answering the second one first, 
flexibility is always a good thing because you never really 
know where you might need the money, but in general our General 
Assembly has said that we would like to target transportation 
infrastructure in the state. We want to target green energy 
incentives in the state.
    Third, we want to make sure that those funds go to build 
the kind of safety infrastructure that is needed to protect our 
coast with the most up-to-date, state-of-the-art environmental 
safeguards that can respond to a potential spill.
    Mr. Wittman. Let me ask this too. Do you see the potential 
there also with this? Obviously there is a military element to 
this with the potential impact on military operations there. I 
think many of those things we have been led to believe can be 
worked out, but do you believe also that those revenues might 
have an applicability to military families?
    And then we had heard about concerns about coastal 
communities, both from yourself and Chairman Graves. Do you 
also believe that there is an element there that Virginia could 
consider as far as impact of those funds to assist coastal 
communities?
    Mr. Domenech. Well, yes. A vast majority of the funds would 
stay in the coast area. That is going to benefit all the 
economy and the coast.
    I was at a DOD conference in Nashville just yesterday 
speaking with a number of the folks who are involved in siting 
that lease sale, and they are very open to the idea of moving 
lease blocks around our offshore area to accommodate their 
training concerns.
    Mr. Wittman. Very good. I know in my conversations with 
them they have expressed that same flexibility to make sure 
that obviously we are keeping in mind their needs, but also 
them keeping in mind the needs for energy development here in 
the United States, so that is a great point.
    I want to go to Chairman Graves and ask a question. I serve 
on the Migratory Bird Commission, and we talk a lot about the 
revenues that come in and how it goes to protect wetlands and 
specifically migratory bird habitat. Can you give me a little 
insight as to how revenue sharing for Louisiana has been used 
to restore and protect migratory bird habitat?
    I know with the spill there was a lot of concern about the 
habitat there and the impact on especially early migrating 
ducks like teal, but anyway I just wanted to get your 
perspective on that.
    Mr. Graves. Yes, sir. Thank you. Congressman, coastal 
Louisiana is the largest wintering habitat for waterfowl and 
migratory species in the United States. Literally tens of 
millions of birds winter in South Louisiana and the coastal 
area.
    Under our Constitution--in fact, there is a constitutional 
amendment that passed with the highest margin of any 
constitutional amendment in our state's history--all funds from 
GOMESA, from Coastal Impact Assistance, are dedicated to 
improving the resiliency of the Gulf coast.
    So the majority of those funds have actually been spent on 
ecosystem restoration, trying to re-establish, trying to 
improve the resiliency of habitat for many of those migratory 
bird and waterfowl.
    Mr. Wittman. Thank you, Mr. Chairman. With that, I yield 
back.
    The Chairman. I thank the gentleman and recognize the 
gentleman from New Jersey, Mr. Holt.
    Mr. Holt. Thank you, Mr. Chairman. Thank you. Thank you to 
the witnesses.
    I have a couple of questions about Virginia, if I may, Mr. 
Domenech. Do you know how much revenue Virginia has received 
over the life of the Land and Water Conservation Fund?
    Mr. Domenech. I am afraid I do not.
    Mr. Holt. Do you have any idea?
    Mr. Domenech. I don't.
    Mr. Holt. Do you think it is in the hundreds of thousands 
or the tens of millions?
    Mr. Domenech. My guess would be tens of millions.
    Mr. Holt. Yes. OK.
    Mr. Domenech. Would I be right?
    Mr. Holt. I think that would be right. You know, we are now 
celebrating or recognizing an anniversary of a period of time 
difficulty, some minor disagreements in this country that 
happened in the early 1860s, in the mid-1860s, and at that time 
there was a change that took place in the United States. We 
stopped talking about the United States as a plural, the United 
States are, and we began talking about the United States is.
    About a hundred years later when this Congress, a Congress, 
passed the Land and Water Conservation Fund, it was recognized 
that depleted resources offshore should somehow be balanced 
with acquisition of resources on land. The revenues that came 
from the Gulf or California or other places benefitted Virginia 
and North Carolina with a very clear recognition that these 
were resources that belonged to the United States singular.
    Now, I know you say you would like to use the revenues from 
offshore drilling which might start coming in sometime after 
2017 or some decades after 2017 to improve your ability to 
respond and have good environmental protection and so forth.
    So does that mean that you would be willing or your 
Governor would be willing to sign a statement binding the state 
to not use the resources in the event of a spill maybe on the 
scale of what we saw in the Gulf, not using the resources of 
the United States Coast Guard or not using the resources of 
other agencies, EPA or NOAA, or that you would only sue in 
state court to recover from the guilty parties' damages, or 
that you wouldn't ask for a Federal disaster declaration in the 
event of one of those environmental catastrophes?
    Mr. Graves. I assume it is a rhetorical question.
    Mr. Holt. Well, it is an actual question. Would you say 
that you wouldn't be looking for the resources of the United 
States of America, that they are Virginia's resources, Virginia 
should get the revenue, Virginia should have the responsibility 
for any cleanup?
    Mr. Graves. Well, I would respond to that as saying we 
don't think of them as Virginia resources. We recognize that 
out three miles beyond our state waters it is Federal 
resources.
    Just like on land the Federal Government drills oil and gas 
resources off of BLM land or other lands that belong to the 
Federal Government and they share the revenue and royalty 
resource with the state onshore, we feel the same should apply 
offshore.
    Mr. Holt. Well, Mr. Chairman, let me just finish by saying 
that as we debate on the Floor a piece of legislation that has 
been characterized as the worst environmental legislation in 
the history of the U.S. Congress, which is probably a little 
bit of hyperbole, but an appropriations bill that clearly is 
from my perspective bad for the environment in a number of 
ways, that we should be using revenues, at least the full share 
of the 12.5 percent I guess it is, from offshore drilling for 
the Land and Water Conservation Fund and for other 
environmental protection and not to return to the general fund 
of any governmental organization. Thank you.
    The Chairman. The time of the gentleman has expired. Of 
course, we are talking about revenue sharing, but since you 
brought up the Interior bill obviously beauty is in the eyes of 
the beholder.
    The gentleman and I have a different view on that. I think 
Chairman Simpson has brought forward a very responsible bill, 
given the fact that we have a $14.3 trillion deficit, as only 
one issue.
    With that I recognize the gentleman from Ohio, Mr. Johnson.
    Mr. Johnson. Thank you, Mr. Chairman. I could not agree 
with your comments more. Right on target. Thank you for holding 
this hearing.
    You know, the current status quo for revenue sharing is 
unbalanced and provides disincentive to the majority of coastal 
states to push forward and allow offshore exploration and 
development. Now, I represent Eastern and Southeastern Ohio, so 
my state isn't directly affected by this unbalanced plan. 
However, my constituents have made it clear that they want to 
see America produce more of its own energy, and that comes from 
tapping into our own natural resources.
    In this time of crisis over our out-of-control Federal 
deficit, there is a concern that now is not the time for the 
Federal Government to further engage in offshore revenue 
sharing. Now, I find it ironic that the other side of the aisle 
seems to have suddenly found religion on addressing our 
nation's debt, and I have two suggestions that I think might 
address some of their concerns.
    First of all, they should support the Republican deficit 
reduction plan tomorrow that will cut at least a trillion 
dollars of discretionary spending over the next 10 years, while 
also setting up a bipartisan commission to address mandatory 
spending. But, second, they should support more offshore energy 
production of all kinds.
    If the other side of the aisle is truly worried about a 
loss of taxpayer dollars through revenue sharing, there is a 
simple solution to this issue, and that is to produce more. 
There is no secret equation here. More energy production on 
Federal offshore lands means more Federal revenue. This 
Committee and the full House passed three offshore energy bills 
that would cut through the red tape currently holding them back 
and allow the American people to unleash--to begin to unleash--
our own natural resources.
    Just a couple of questions to start out with. Ms. 
Alexander, do you believe that we should repeal onshore revenue 
sharing? You have testified that you think we should not do 
offshore revenue sharing and you are opposed to that for oil 
and gas. What about onshore revenue sharing? Do you think we 
should repeal that too?
    Ms. Alexander. We would look at any proposal to do that. I 
think that onshore is different from offshore. I think that 
Federal lands within state boundaries are different than 
Federal waters in three miles out.
    Mr. Johnson. How so?
    Ms. Alexander. I think they are within state boundaries. 
Federal waters are six miles offshore.
    Mr. Johnson. But they are still Federal lands. They are 
resources that belong to the American people.
    Ms. Alexander. That is right. And as I say, we would look 
at them. We might welcome them.
    Mr. Johnson. Do you believe we should prohibit sharing of 
revenue from wind and tidal energy?
    Ms. Alexander. Yes.
    Mr. Johnson. They are offshore.
    Ms. Alexander. Yes.
    Mr. Johnson. OK. So what is the distinction? Because there 
is a dichotomy here that I don't understand. You are opposed to 
revenue sharing for oil and gas.
    Ms. Alexander. And we are opposed to revenue sharing for 
wind and tidal.
    Mr. Johnson. You are opposed to revenue sharing----
    Ms. Alexander. Yes.
    Mr. Johnson.--for wind and tidal?
    Ms. Alexander. Yes. Yes. We don't have a distinction there.
    Mr. Johnson. So you are basically opposed to any offshore 
revenue sharing.
    Ms. Alexander. For Federal waters, yes, right now.
    Mr. Johnson. OK. That is very interesting. I don't 
understand the distinction between Federal lands that are 
onshore and offshore, and certainly the American people I 
believe share that concern, again back to the Chairman's 
comments, about having a $14.3 trillion national debt. We are 
in the middle of debt crisis. We are trying to put Americans 
back to work. This seems to be an ill-advised strategy.
    Secretary Domenech, in your testimony you described how the 
local infrastructure will need to be expanded and maintained 
should offshore drilling take place off the coast of Virginia. 
Can you give an estimate of what this cost would potentially be 
for the state and for the local governments along the coast?
    Mr. Domenech. Thank you for the question. Unfortunately, we 
don't have an estimate that I can give you at this time. We are 
primarily looking at our sister states like Louisiana that have 
recovered from or are in the process of recovering from the 
Deepwater spill to learn the lessons there so we can apply new 
lessons to Virginia.
    And of course Secretary Salazar and Director Bromwich have 
announced a new lease sale in the Gulf at the end of the year, 
so we are confident that the kind of safety regimes that they 
have identified are good to go at this point, so we are 
trusting that.
    Mr. Johnson. OK. Mr. Chairman, I am going to yield back 
with a closing comment here. You know, this seems to be further 
indicative. Ms. Alexander's testimony and the answers to her 
questions here seem to confirm my concern that this is the 
Administration of ``No.'' No to putting America back to work. 
No to tapping into America's natural resources. No to 
establishing a national energy policy. And with that I yield 
back.
    The Chairman. I thank the gentleman, and his time has 
expired. I recognize the gentlelady from California.
    Mrs. Napolitano. Thank you, Mr. Chair. I have a couple 
questions for Mr. Domenech.
    Last week, and I have a copy of the Washington Post item, 
Moody's Investor Service said that if the United States loses 
its top credit rating as failing to raise the limit on Federal 
borrowing, Maryland and Virginia could also be downgraded 
because their economies are so dependent on Federal spending.
    Do you support repealing the giveaway to these four Gulf 
states to help reduce the deficit and avoid a default, which 
could be a disaster to the State of Virginia? And while you may 
not be getting a lot of money now, 2018 will be a windfall.
    The followup question to that would be to ask if you 
understand. I understand why Mr. Graves is supporting the $150 
billion giveaway to the Gulf states because his state benefits 
from that giveaway. Mr. Graves' state and three other Gulf 
states have really put one over the other 46 with that law and 
absolutely be up there defending it, but the money that could 
and should be used to help the residents of your State of 
Virginia is important also.
    That should be used to help reduce our deficit, and I can't 
understand why you should support diverting money away from the 
residents of your State of Virginia to help the people of 
Louisiana. Would you explain that?
    Mr. Domenech. Well, I don't know if it is me or my 
colleague here from Louisiana, but from our perspective we 
would not support repealing the revenue sharing provisions that 
are in GOMESA, as well as all of the other ones that were 
detailed earlier from payment in lieu of taxes to onshore 
royalty relief. Congressman Holt mentioned Land and Water 
Conservation Fund, which of course is a mutually beneficial 
program for the entire nation.
    So their energy provides lots of incentive, a lot of power 
for the country. We think that America needs energy. The best 
way to incentivize states to participate in energy production 
is to allow revenue sharing. It gives us the ability to put in 
place the type of safety and infrastructure we need to do it 
safely.
    Mrs. Napolitano. Yes, sir?
    Mr. Graves. Yes, ma'am. I just want to clarify that this 
$150 billion, that is a pipedream. We got a check for $222,000 
this year, so there were several zeroes missing from our check 
if we were supposed to get----
    Mrs. Napolitano. No. That is not until 2018 when the 
windfall kicks in.
    Mr. Graves. Congresswoman, with all due respect, there is 
not a chance that the Gulf states are going to share anything 
close to $150 billion.
    Mrs. Napolitano. Well, that is what the Department of the 
Interior is telling us.
    Mr. Graves. I assure you--I am one of the guys who wrote 
the bill--it is not happening. That is just inaccurate. If we 
want to deal with facts, we can deal with facts.
    I think it is important to look at things like the 
Deepwater Royalty Relief Act that was passed in 1996 looking at 
the projections from the Department of the Interior and the 
revenue that was coming in at that time versus what happened, 
the huge spike in revenue, the additional revenue to the United 
States Treasury and the benefit to the Treasury that I know 
TCS, for example, is concerned about. So there is a major 
dynamic scoring issue that I think is important to look at.
    Mrs. Napolitano. We need to take a further look at it then.
    Mr. Graves. Yes, ma'am.
    Mrs. Napolitano. Ms. Alexander?
    Ms. Alexander. I just want to clarify one thing for the 
Members of the Committee that are still here. Our organization 
doesn't oppose additional development in offshore waters or on 
land. We don't oppose additional development.
    Mrs. Napolitano. I understand.
    Ms. Alexander. We want Congress to treat our Federal waters 
and our Federal lands as if they had a fiduciary duty to the 
taxpayer and make sure that as owners of those resources we are 
getting the revenues we deserve.
    Mrs. Napolitano. OK. Thank you. To both Mr. Domenech and 
Mr. Graves, I would like to ask who is responsible for bearing 
the cost of administering the Outer Continental Shelf?
    Is it correct that the Federal Government and specifically 
the Coast Guard is responsible for all maritime safety and 
security search and rescue operations, ensuring offshore aid to 
navigation are maintained and maintaining intracoastal 
waterways? Is it also correct that the Federal National Marine 
Fisheries Service has responsibility for managing all fisheries 
found in Federal waters?
    So given this, in administering the Outer Continental Shelf 
why shouldn't revenue derived from these resources on the Outer 
Continental Shelf be returned to the Federal Treasury to help 
offset the cost of all the activities?
    Mr. Domenech. The Federal Government can spend its portion 
of the revenue in supporting those activities. The state has 
costs of our own to support those activities and so we just see 
it as an equitable arrangement.
    Mrs. Napolitano. Equitable in terms of percentages. Can you 
tell me how it is split?
    Mr. Domenech. Well, of course, we don't have a program now. 
In GOMESA I think it is 37.5 percent goes to the state and the 
rest of it goes to the Federal Government. That is my 
understanding.
    Mr. Graves. Congresswoman, I think it is important to draw 
the analogy here looking at, for example, BLM land where the 
Federal Government is responsible for maintaining and 
patrolling those lands. They receive 10 percent of the revenue 
from mineral production on BLM land. Ten percent. Ninety 
percent goes to the reclamation fund.
    Mrs. Napolitano. But is that enough?
    Mr. Graves. Is 10 percent enough?
    Mrs. Napolitano. Is that enough to do the maintaining?
    Mr. Graves. I am talking about on Federal lands.
    Mrs. Napolitano. Right.
    Mr. Graves. That they receive 10 percent right now. And so 
for offshore waters the Federal Government currently retains 
virtually 100 percent of the revenues.
    And I also want to clarify that our Department of Wildlife 
and Fisheries responds to search and rescue, does patrol 
offshore waters and are very involved in rescue operations. I 
think the issue here, and this goes back to a question that was 
asked earlier by Mr. Holt, Congressman Holt. It is important to 
recognize, and he asked whether we would take over the offshore 
production platform, oil spill response and things like that.
    The Federal Government is responsible for doing that today, 
and in the case of the Deepwater Horizon spill in my opinion I 
think that it was not done properly. The states have to pay the 
price. Ninety-two percent of that oil, heavily and moderately 
oil true lines, are in the State of Louisiana.
    That is what I have been doing for the last year. And so as 
a result of largely, in my opinion, oversight issues and I 
think gross negligence, we have to respond to that disaster. 
The Federal Government, to be candid, did not do a very good 
job.
    Mrs. Napolitano. Thank you, Mr. Chairman. I appreciate your 
indulgence.
    The Chairman. Yes. I did want to thank the gentlelady. I 
did want the gentleman to respond. The gentleman from Colorado, 
Mr. Tipton, is recognized.
    Mr. Tipton. Thank you, Mr. Chairman. I would like to thank 
our panel for being here. I have a couple of questions.
    Mr. Domenech and Mr. Graves, in the State of Louisiana and 
State of Virginia do you feel any Federal impacts, any costs in 
your communities, in your businesses, in your state, from 
regulations coming down out of the Federal Government?
    Mr. Domenech. Yes.
    Mr. Tipton. Mr. Graves?
    Mr. Graves. Congressman, when the Corps of Engineers leveed 
the Mississippi River we lost nearly 2,000 square miles of our 
coastal area as a result of those Federal actions and so I 
would say without question.
    Mr. Tipton. Great. So the Federal Government mandates. 
States--Virginia, Louisiana--pay. If it is offshore, the 
Federal Government doesn't want to be able to give anything 
back to the states is essentially what we are seeing with this 
offshore. Is that correct?
    Mr. Graves. Yes, sir.
    Mr. Tipton. I think, Mr. Chairman, we see something really 
pretty clear. Our Democrat colleagues are opposed really to 
revenue sharing not because those revenues could be used to pay 
down the debt in this country or to be able to meet our Federal 
obligations. Their opposition seems to be simply to any kind of 
development that is going on in our coastal states.
    But because we know revenue sharing does make sense for 
these states and will lead to new development and new jobs, I 
think our Democrat colleagues' position is bad for America, is 
bad for our states and bad for addressing some of the 
challenges that we really face.
    Gentleman, I would like to ask you. Could you use a billion 
dollars in your state?
    Mr. Domenech. Sure.
    Mr. Tipton. Were you a little distressed when we saw the 
President of the United States, given what our Democrat 
colleagues have been pointing out, what the Chairman has 
pointed out, that we have $14.4 trillion in debt in this 
country, taking a billion American dollars, which we don't 
have, and encouraging offshore drilling off the coast of 
Brazil?
    Mr. Graves. I think it could have been better invested in 
Virginia.
    Mr. Tipton. How is your job climate? Do you have 100 
percent employment?
    Mr. Domenech. We do not. We are about 6 percent, so we are 
not as bad as some other states.
    Mr. Tipton. Nationwide, right. The economy is really 
robust? Everything is swell?
    Mr. Domenech. It could be improved.
    Mr. Tipton. It could be improved. So maybe it is important 
to be able to get Americans back to work, to be able to create 
those jobs, to be able to develop resources here in America, to 
be able to lower costs for Americans who are struggling with 
gasoline prices and being able to pay their bills. Would that 
be sensible?
    Mr. Domenech. It would.
    Mr. Tipton. It would be sensible. I tend to agree with you. 
You know, I come from a western state, a landlocked state, and 
we have that common sense at least in the west, and we see it 
reflected in at least some of the Federal policy, to be able to 
get some of those revenues back.
    Just in terms of who can best address some of those 
problems, when you are looking at your children, education, do 
you think those decisions are better made here in Washington or 
better made at the local level?
    Mr. Domenech. Local level.
    Mr. Tipton. Probably at the local level. Do you think 
somebody in Washington knows that you have potholes in your 
street, or do you know that you have potholes in your street 
when you were talking about getting money for infrastructure? 
You probably know that better.
    Mr. Domenech. Yes.
    Mr. Tipton. But you need the resources to be able to do 
that. That, Mr. Chairman, is something that I think that this 
Congress--and I applaud this piece of legislation. Recognizing 
that there seems to be a real mentality inside this Beltway 
that Washington needs money more than our states, than our 
communities, than our individuals, to be able to fill 
Washington's coffers and be able to meet Washington's needs.
    It seems to me that the more sensible approach to this is 
to be able to empower those local communities, to be able to 
empower individuals with those resources. We really need to be 
having a more balanced approach in terms of dealing with our 
states and truly recognizing many of the challenges that you 
face.
    Mr. Graves, when you were talking about the deplorable job 
that the Federal Government did when it came to the cleanup, 
there were many of us that were wondering as we heard your 
state stand up and say let us get involved. Let us be able to 
participate. You were handcuffed by Federal regulations.
    We are spending in this country $1.75 trillion a year on 
regs. Those are the real costs. We continue to see, as you have 
reflected here today, unemployment. We have seen revenues not 
increasing, but decreasing. If we are able to get our people 
back to work, we are able to get our people employed in this 
country, we support not foreign industry, but American industry 
for a change, I think that will be a more sensible approach and 
something I can certainly be behind, Mr. Chairman. Thank you, 
and I yield back.
    The Chairman. I thank the gentleman. His time has expired. 
The gentleman from New Mexico, Mr. Lujan.
    Mr. Luja. Mr. Chairman, thank you very much. Mrs. 
Alexander, why is your organization opposed to legislative 
measures that would alter the existing Federal/state revenue 
share provisions for royalty payments?
    Ms. Alexander. Our position is essentially these are 
Federal resources, and the Federal taxpayers should get the 
revenue. It is not about whether or not states should get aid 
for other things. It is not about the overall balance between 
state and Federal Government. These are resources owned by the 
Federal taxpayers, and they should get the revenue.
    Mr. Luja. I appreciate the honesty in the answer that it is 
not about picking winners or losers. These are Federal 
resources that should go to Federal taxpayers, and that is the 
position of the Taxpayers for Common Sense. We have talked a 
little bit about common sense, but you represent the 
organization called Taxpayers for Common Sense.
    Ms. Alexander. That is our position, and we have a long 
history where I am sure we would agree with Mr. Graves on many 
things about criticizing the Army Corps of Engineers and 
criticizing the execution across Administrations at the 
Department of the Interior in terms of their management of both 
lands and waters.
    We want excellence from the Federal Government. You know, 
we are not saying that everybody is doing a great job already, 
but these are Federal resources. Federal taxpayers own them and 
Federal taxpayers should get the revenues.
    Mr. Luja. Ms. Alexander, why would someone advocate then 
for taking money from the Treasury to put into the state 
budgets? What in the opinion of Taxpayers for Common Sense is 
the right approach in this front when we are talking about 
these Federal resources?
    Ms. Alexander. I mean, I think that the representatives 
from the states are in the best position to argue why the 
states want it, but I think that at the root level I think the 
question for us, from the Taxpayers for Common Sense point of 
view, is we are not saying that there shouldn't be incentives 
for increased production.
    I just don't think shifting the revenue from one place to 
the other means that it is an incentive for the developer. They 
still have to pay royalties. They still have to pay rents. They 
still have to pay bonuses and fees. So I think we think it 
comes down to a very simple point. They are Federal resources, 
and Federal taxpayers should get the revenue.
    Mr. Luja. So, Ms. Alexander, at a time when we are taking 
on these Federal deficits and getting our fiscal house in order 
with low Federal revenues, what would be the value to American 
taxpayers of a proposal to take money away from the American 
Federal taxpayers paid by these offshore royalties?
    Ms. Alexander. Taking away non-tax Federal revenue at this 
moment when we have a $14.3 trillion debt, which is something 
that my organization has been concerned about for many, many 
years. We have been on the record for a long time about being 
concerned about our growing debt and about our deficits and 
about our inability to bring our budget closer into balance.
    You know, this is Congress' job. You guys have a fiduciary 
responsibility to the taxpayers to make sure you are not 
wasting our money and making sure that the Administration is 
doing a good job of administering the programs, but also that 
you are managing the assets that are owned by the taxpayers in 
a way that is for long-term value and that returns revenue to 
us.
    Mr. Luja. And last, Mrs. Alexander, you state in your 
testimony that altering these royalty distributions would do 
nothing for the bottom line of the oil and gas, wind or other 
offshore developers, so doesn't it make sense if these 
penalties are going to be paid either way that the American 
taxpayer deserves a return on their use of public waters for 
offshore drilling?
    Ms. Alexander. Again, it comes back to the same point. 
These are Federal resources. The revenues should go back to the 
Federal taxpayer. It shouldn't make a difference for the bottom 
line for any offshore developer. If they are developing energy 
in Federal waters, they are paying those royalties no matter 
what.
    Mr. Luja. Appreciate that. Thanks very much, Ms. Alexander. 
Mr. Chairman, I yield back.
    The Chairman. Would the gentleman yield before he yields 
back?
    Mr. Luja. Cautiously, Mr. Chairman, I would yield.
    The Chairman. Well, the gentleman's line of questioning was 
very, very specific in the specificity of that to the 
gentlelady, and her position was it is Federal lands so the 
Federal Government should get the receipts from that.
    I would just ask the gentleman from New Mexico. Does 
anybody in your state, where there is a lot of Federal land, 
get PIL payments and does he agree that PIL payments maybe 
should be treated the same way as offshore revenues?
    Mr. Luja. We appreciate, Mr. Chairman, very much that rural 
schools, as well as some of our Federal lands with our local 
counties, receive PIL payments. That is something I very much 
support and am concerned with some of the opposition from our 
colleagues in those areas.
    But when we are talking about the treatment of what is 
happening with these resources and bringing them right back 
into the states, there is a difference when these programs were 
shut up as opposed to some of these other Federal programs.
    The Chairman. Well, in both cases, if the gentleman would 
yield to me, in both cases we are talking about Federal lands. 
I am just simply pointing out the line of the gentleman's 
questioning was Federal lands, and the response was Federal 
lands or Federal ownership should receive the receipts.
    Now, you are making an exception. By the way, I agree with 
you. I think PIL payments are a payment in lieu of taxes. I 
would rather have, frankly, individuals own that land, but I 
just think there is a distinction here, and that is the reason 
I ask that because it is not as black and white as one would 
assume. I just wanted to ask the gentleman, and I thank him for 
yielding.
    Mr. Luja. I appreciate that, Mr. Chairman. Again, I 
cautioned the yield, and I yield back the balance of my time. 
Thank you, Mr. Chairman.
    The Chairman. OK. The gentleman's time has expired. The 
gentleman from Colorado, Mr. Lamborn?
    Mr. Lamborn. Thank you, Mr. Chairman.
    Ms. Alexander, I would like to discuss a couple of 
underlying issues that we are talking about here today, so can 
you give me a yes or no answer to several questions? One is do 
you support offshore drilling under any conditions in new areas 
off the Atlantic coast?
    Ms. Alexander. Yes. We have no position one way or the 
other. We are not against development. Yes.
    Mr. Lamborn. OK. And would the same hold true for the 
Pacific, new areas off the Pacific coast?
    Ms. Alexander. Again, no position so yes.
    Mr. Lamborn. And finally, would that hold true for new 
areas off the coast of Alaska?
    Ms. Alexander. Yes.
    Mr. Lamborn. OK. Let me make a side comment here. I am glad 
to see a witness put forward by the Minority side that 
acknowledges that there is an important role for new energy 
production in this country.
    But to be more specific, do you believe that states that 
have shorelines adjacent or next to offshore drilling, should 
this materialize in the future in the Atlantic, the Pacific or 
Alaska, do they have a stake in the outcome that is any 
different than states farther away?
    For instance, the consequences of an oil spill that would 
affect tourism or fishing. Do these states have a stake in the 
outcome that is different than the other states, the other 49 
states?
    Ms. Alexander. Well, I think the three mile of state 
waters, clearly they have a different stake in that and a 
transitional stake. We have recognized that they have a 
different stake.
    But I think if you take Virginia, for example, it is 
possible that a spill in Virginia could affect North Carolina 
or New Jersey or Delaware. I think that the farther out you 
get, the impacts become a little more diffuse.
    Obviously the states where they are close to offshore 
drilling in Federal waters may have a disproportionate impact, 
but they are going to get disproportionate Federal aid if, God 
forbid, there were an accident, and they get the ancillary job 
benefits, which are considerable.
    Mr. Lamborn. So you can see that it is a reasonable 
position for people to take to say hey, that state has a 
potentially bigger impact because they are right next to it so 
they should share some of the revenues.
    Ms. Alexander. But they also get proportionate Federal 
assistance. And again we all hope there are no disasters, but 
they would get Federal assistance no matter what the share of 
the royalties would be. They would get a disproportion of 
Federal assistance. And we don't know where those impacts would 
all be. It is not as clear when the----
    Mr. Lamborn. I think this is a very reasonable position and 
should be the position we take as a country.
    Mr. Graves, you have heard the testimony from Ms. 
Alexander, and we just went into it a little bit in detail. Can 
you give us some thoughts on the State of Louisiana and the 
role that they play using state money for the cleanup efforts 
after the disaster a year ago?
    Mr. Graves. Thank you, Congressman. Without question, the 
State of Louisiana spent extraordinary dollars.
    In fact, we are still trying to quantify it, but tens of 
millions of dollars of our money responding to the oil spill as 
a result of the void in the response, seeing resources that 
weren't properly placed, seeing a lack of resources. We had 
literally thousands of state employees out there patrolling the 
waters, cleaning up the waters, providing security and many, 
many other efforts trying to protect our natural resources 
where those voids existed.
    In addition to that, as I noted earlier, historically 
production conducted in less environmentally sensitive ways did 
take a toll on our coastal area, and that is another area where 
we are spending recently over $1 billion trying to restore our 
coastal area with state funds.
    Mr. Lamborn. OK. Thank you. Mr. Domenech, have the people 
of Virginia or the government of Virginia thought about how you 
could use the additional--you have maybe touched on this 
already, but I missed some of the earlier questions and 
answers. Would you use additional revenues should this 
materialize as we are discussing here today?
    Mr. Domenech. Yes. Our General Assembly has passed 
legislation that says if we get royalty sharing, royalties from 
any future offshore development, that we would spend those on a 
couple of areas--green energy incentives and research, 
transportation needs, infrastructure, as well as putting in 
place the state-of-the-art safety regime that is needed, 
because where this energy is coming onshore we have different 
sorts of needs and requirements than other states that is not 
doing the offshore development. So that is the three areas 
where we would put our funding.
    Mr. Lamborn. OK. Thank you. It is hard to see anybody 
objecting to that. I want to thank you all for being here 
today. I yield back.
    The Chairman. I thank the gentleman. Time has expired. The 
gentleman from Arizona, Mr. Grijalva?
    Mr. Grijalva. Appreciate it. Ms. Alexander, now that 
Secretary Salazar, due to all the obvious problems that were 
there, has created the new Office of Natural Resource Revenue 
and the Bureau of Ocean Energy Management, Regulation and 
Enforcement to improve the management of royalties, the 
collection of royalties on onshore and offshore Federal 
property, what recommendations do you have to improve the 
management of that part of the Gulf coastal areas? Do you have 
any suggestions?
    Ms. Alexander. You know, certainly I can get back to you 
with more specific recommendations. It is not something that I 
was prepared to discuss today.
    We were long-time critics of the Minerals Management 
Service. I testified before this Committee----
    Mr. Grijalva. Yes.
    Ms. Alexander.--on the problems with that. We have been 
watching this reorganization very closely, and we are looking 
at it with a skeptical eye. So far it looks like there is 
improvement, but we are definitely not letting people off the 
hook yet.
    Mr. Grijalva. OK.
    Ms. Alexander. So we will be watching.
    Mr. Grijalva. You also mentioned in your testimony that one 
state cannot meet the impact of operations beyond state waters 
and that it has national implications.
    Could you elaborate further on why it is important for 
revenues to remain the way they are, and what would occur to 
our Federal waters if changes were made, the question being, 
the underlying question, would there be state accountability in 
this whole process?
    Ms. Alexander. I think for Federal waters, for waters six 
or nine miles offshore, the kind of consequences of any 
disasters--again, hopefully we don't have them, but the 
consequences of those disasters are more difficult to predict 
in terms of where things might create an impact. The states 
closest are obviously going to have significant impacts, and 
they will get significant Federal assistance in terms of 
disaster assistance.
    It is absolutely the case that there has to be Federal 
accountability on the performance of that disaster assistance, 
and that has been lacking in the past, but I don't think that 
doing revenue sharing increases the likelihood that that is not 
going to improve Federal disaster assistance. We need to make 
sure that that gets improved on its own. And I don't think it 
creates more accountability for the states either.
    Mr. Grijalva. Thank you. Mr. Chairman, if I may? Mr. 
Graves, earlier you said that you had no idea where the $150 
billion projected cost to the Federal Government, where it was 
coming from. It comes from, and I will be glad to share this 
with you, it comes from the Department of the Interior where 
over the next 60 years up to $150 billion is going to be sent 
to the states, and over the next 88 years $254 billion will be 
diverted to the states under the 2006 law.
    I wanted to make sure, Mr. Chairman, that there is no 
objection to entering this into the record and provide the 
witness with a copy of that.
    The Chairman. Without objection.
    Mr. Grijalva. Thank you.
    [The ``Estimates of Phase II GOMESA'' submitted by Mr. 
Grijalva follows:]
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    .epsMr. Grijalva. Mr. Graves, on Governor Jindal's website 
it states, ``Graves helped to draft offshore oil and gas 
revenue sharing bills, including the Gulf of Mexico Energy 
Security Act of 2006,'' continuing ``providing billions to 
Louisiana and other Gulf states.''
    I mention those two to clarify where the money came from 
and your participation in that revenue sharing and the original 
law.
    Mr. Graves. May I respond?
    Mr. Grijalva. Yes, of course.
    Mr. Graves. Thank you. Congressman, the legislation 
ultimately will provide billions of dollars. You just laid out 
a 60 and 88 year timeframe.
    First of all, under Senate rules when that bill was drafted 
there was a cap on the amount of any legislation that could 
pass the Senate that limited it to $5 billion over any decade. 
The way that was addressed is that provisions were put in 
limiting the amount of expenditures to $500 million in any 
given year.
    In addition, as a result of the moratorium, and keep in 
mind GOMESA shares only prospective revenues. Because of the 
moratorium, we have been unable to or we are actually delaying 
what is currently that 2017 date, and I think it is actually 
going to be closer to 2019 or 2020 before we see those 
revenues.
    The last point is that----
    Mr. Grijalva. But we are talking about production, aren't 
we, and not drilling at this point?
    Mr. Graves. We are talking about production. Right.
    Mr. Grijalva. Yes. OK.
    Mr. Graves. But production has to start with the 
exploration activities, which have been restricted.
    Mr. Grijalva. Right.
    Mr. Graves. So I don't think we are going to see the surge 
in 2017's projections.
    Mr. Grijalva. Reclaiming my time if I may, Mr. Graves, 
right now as we sit here talking about revenue sharing and to 
other states beyond the 2006 law, we are also in the process of 
imploding on the Majority's budget to try to deal with the debt 
ceiling, and it is imploding as we speak.
    And yet we are having this really kind of dual universe 
discussion where we are talking about sending billions of 
dollars back to the states at a time when this government needs 
its resources and its revenue to try to balance what is a very 
difficult and delicate situation in terms of our own debt 
ceiling discussions. Would you agree with me that this is a 
wonderful time to be having this discussion?
    Mr. Graves. Congressman, I would say that I think that with 
a small degree of research it would be proven based upon 
history that this is the fiscally conservative approach.
    The Chairman. The time of the gentleman has expired.
    Mr. Grijalva. Tell that to somebody on Medicare. Anyway, 
thank you.
    The Chairman. The gentleman from South Carolina, Mr. 
Duncan?
    Mr. Duncan from South Carolina. Thank you, Mr. Chairman. 
Let me just say that in 2008 I served on the South Carolina 
Offshore Drilling Study Committee, and South Carolina wants to 
see offshore drilling in our state and we want to see the 
revenue sharing that has gone on forever.
    In 1787, states freely joined this union known as the 
United States of America, and at that time they gave up rights 
to anything off their shore. But they also expect something in 
return when the Nation harvests those resources and so this 
really gets down to the root of the union and the states' 
rights to some degree.
    So the gentleman from Louisiana has an extraordinary and 
huge amount of experience in this area so, Mr. Chairman, I 
would like to yield the balance of my time to Mr. Landry from 
Louisiana.
    The Chairman. The gentleman is recognized.
    Mr. Landry. Thank you, Mr. Chairman. I thank the gentleman 
from South Carolina. I am going to have to make him an honorary 
citizen of Louisiana because I think this is important not only 
to Louisiana, but all of not only the Gulf coast, but any 
states that have a coastline on it and natural resources out 
there.
    Mr. Graves, I understand before I arrived the Ranking 
Member, Mr. Markey, mentioned that he would be soon introducing 
legislation with Mr. Holt to repeal the existing GOMESA revenue 
sharing with Gulf states.
    Mr. Chairman, I would submit for the record he used some 
figures as to how much it was going to be costing the Federal 
Government, and I would like to submit for the record factual 
information today about the cost of GOMESA to the American 
people.
    As scored by the CBO at the time of passage, it was 
estimated it would cost less than $1 billion over 10 years. It 
would not cost more than $5 billion in spending in any of the 
next four 10-year periods after 2015. That means under CBO 
scoring over 50 years that this program would not have cost the 
Federal Government more than $20 billion.
    There have been accusations, as I said, today by Members of 
the Minority that somehow this program cost the Federal 
Government $150 billion, and I submit for the record here today 
that the official CBO score for GOMESA does not reflect that.
    The Chairman. Without objection, it will be part of the 
record.
    Mr. Landry. Thank you.
    [The CBO letter submitted for the record by Mr. Landry 
follows:]
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    .epsMr. Landry. You know, I also find it just remarkable 
that the other side will sit here today and talk about a hole 
in the Federal budget that they created and then we spend four 
months giving them an opportunity, passing legislation through 
this Committee that is sitting idle on the Senate Floor which 
in the opinion of many others would create $1.7 billion a year 
more in Federal revenue for the Treasury, but yet they don't 
want to pass it.
    They object to that legislation, and then they would sit 
here today and tell Mr. Graves to tell that to someone on 
Medicare. I find that somewhat disheartening.
    Mr. Graves, thank you for making yourself available today. 
I will tell any Member of Congress who has a coastline that 
this gentleman right here probably knows more about coastlines 
than anyone else when it comes to protecting the environment.
    Ms. Alexander, have you ever lived on the coast?
    Ms. Alexander. No.
    Mr. Landry. OK.
    Ms. Alexander. Close, but not on.
    Mr. Landry. Close? How close?
    Ms. Alexander. Ten miles.
    Mr. Landry. Ten miles. That is pretty close. On a coastline 
that is prone to hurricanes?
    Ms. Alexander. Yes.
    Mr. Landry. OK. All right. Have you ever had to sit through 
one?
    Ms. Alexander. The only time I have been in hurricanes I 
was pretty far inland, so it is not----
    Mr. Landry. You were pretty far inland. Well, my house sits 
about 15 miles from the coastline, and I sat through Rita, 
Gustav, Ike, Lily, Andrew.
    It has been proven that when we repair Louisiana's 
coastline it helps to protect Louisiana's citizens and 
infrastructure. That infrastructure is not only important to 
Louisianians. It is important to you because if you flew here 
they had to fill that plane with hydrocarbons, with diesel jet 
fuel most likely refined out of Louisiana refineries that are 
protected by Louisiana's coast.
    This is an environmental bill. Revenue sharing protects the 
environment. It does not just protect Louisiana. It does not 
just protect Alabama or Mississippi or Florida or any of the 
other states.
    Mr. Gohmert. Texas.
    Mr. Landry. I can't forget Texas. I am sorry. It protects 
Americans because there is infrastructure that those states--
Texas is well documented, the refineries on the coast.
    Why is it so unfair when other states in this country have 
been receiving 50 percent of oil and gas royalties for their 
drilling that we shouldn't receive any as well? Do you know 
what? The Members on the other side have never proposed 
repealing that to fill their thirst for spending in this 
country, but yet today we are going to talk about repealing 
revenue sharing and how it is not fair.
    Mr. Chairman, I know I am out of my time.
    The Chairman. The gentleman now is recognized for five 
minutes if he would yield just for a moment.
    Mr. Landry. Yes, sir.
    The Chairman. We are not talking about repealing revenue 
sharing. We are talking about enhancing revenue sharing that is 
the subject of this Committee. Now, others may be talking about 
that, but the Chairman isn't.
    The gentleman is recognized.
    Mr. Landry. Right. Mr. Chair, I do recognize that, but the 
problem is that there are some at the witness table who would 
like to see it repealed, who have said that it is unfair. My 
point to them is how is it unfair? It needs to be enhanced.
    Look, I think that every state that has natural resources 
off of its coast has the right to participate in the activity 
not only from a purely economical standpoint, but because those 
natural resources really, as the gentleman from South Carolina 
noted, belonged to those states before they entered the Union.
    Ms. Alexander. I think we are just going to have to agree 
to disagree here. I think in the first three miles absolutely 
the states benefit from that activity in the transitional zone. 
They benefit from the activity.
    We are saying that in Federal waters six or nine miles off 
the coast of the states those are Federal waters, and we think 
the revenue should be Federal. I don't begrudge folks from 
coastal states making those arguments. We look out for the 
Federal taxpayer across the country, and we think that for 
Federal waters six or nine miles off the coast it is 
appropriate for those revenues to stay Federal.
    Mr. Landry. Mr. Graves, maybe you answered this question, 
but could you tell us if Louisiana put an aggressive coastal 
restoration plan in place what is the total amount dollar-wise 
of infrastructure that we are protecting? Do you happen to 
know?
    Mr. Graves. I don't remember the number right off, but I 
know it is several hundred billion dollars at a minimum.
    Mr. Landry. And wouldn't you agree that putting in place 
sound coastal restoration management practices protects us from 
storms?
    Mr. Graves. Without question. As a matter of fact, I think 
it is noteworthy, Congressman, that, as you know, under 
Louisiana's Constitution that 100 percent of these revenues are 
dedicated to mitigating the impact of OCS activities and in 
repairing the ecosystem, which is degraded as a result of 
Federal activities.
    Mr. Landry. Mr. Graves, is it not correct, and I know that 
Louisiana certainly sometimes in its past colorful history has 
been known to maybe waste money. Of course, they are kind of 
guilty of that up here.
    But isn't it true that the people of the great State of 
Louisiana passed a constitutional amendment to ensure that any 
revenue sharing would be spent solely on coastal restoration 
and hurricane protection projects?
    Mr. Graves. Yes, sir, and mitigating impact of OCS 
activities. That is correct.
    Mr. Landry. And wouldn't you say that those projects are 
classified as environmentally sound projects?
    Mr. Graves. We work very closely with the environmental 
community. They have endorsed our plans in absolutely helping 
to restore the environment.
    Mr. Landry. And so if Members on the other side, who I 
respect, have such a keen interest in protecting the 
environment and wanting to protect species out in Louisiana--we 
had a discussion here about turtles yesterday--wouldn't you say 
that every dollar spent on the coast protects that environment 
again?
    Mr. Graves. Not only does it protect the environment, but 
it improves the resiliency of those communities that FEMA has 
come in and paid exponentially more dollars for.
    I mean, Congressman, looking at Hurricane Katrina as an 
example, we had to sacrifice 1,200 lives and we had to 
sacrifice hundreds of thousands of businesses and homes in 
order to get the Federal Government to do what they should have 
been doing ahead of time and, by the way, could have spent 8 to 
10 percent of that $150 billion taking proactive actions and 
preventing those losses. The policy is backwards.
    Mr. Landry. And so you would say that any Member who voted 
against revenue sharing would basically be voting against the 
environment?
    Mr. Graves. It is without question. We are investing funds 
in improving and restoring the environment, improving the 
ecosystem services that our costal area provides.
    Mr. Landry. Thank you, Mr. Chairman. I yield back the 
balance of my time.
    The Chairman. I appreciate the gentleman for yielding back. 
The Chair recognizes the gentleman from Texas, Mr. Gohmert.
    Mr. Gohmert. Thank you, Mr. Chairman. I do appreciate the 
effort it takes to get here and be a witness. I know you don't 
get compensated for it, so it truly is an act on each of your 
parts of trying to do what you believe is the right thing for 
the country.
    Does anybody know what the position of those who oppose 
revenue sharing on oil and gas is on whether or not there 
should be shared revenue from solar or wind energy? Any of you 
all know?
    Ms. Alexander. I mean, speaking for Taxpayers for Common 
Sense, we treat all energy sources equally so offshore in 
Federal waters, if there is development of wind or tidal or 
anything in Federal waters, we believe that revenue should be 
Federal.
    Mr. Gohmert. So you are against all the Democrats that want 
to share revenue from solar and wind? You depart with those 
folks on that?
    Ms. Alexander. In Federal waters, Your Honor.
    Mr. Gohmert. OK. Thank you. Well, because that is what we 
have been hearing; if it is solar or wind, gee, that revenue 
should be shared, so I appreciate hearing that is your position 
at least, Ms. Alexander. That is nice to know. It is also 
interesting to note that people, at least some, that are 
leading the charge against revenue sharing are absolutely 
steadfastly against drilling off of their state's coast.
    It is just amazing to me to have that kind of dichotomy in 
thinking we are going to demand to drill off your coast because 
we want your energy and we want to fly in our jets and we want 
to leave the Suburbans running so they are cool when we come 
back from our speeches, but we don't want it coming from our 
state because it is so much work to keep it clean. It is work 
to keep energy production clean and it does make sense for 
those states who are willing to do it that revenue should be 
shared.
    I am still aghast that people would be so opposed to 
drilling off their own coast and yet they want to take all of 
the revenue from those states that are willing to do what it 
takes to have drilling and try to keep their states clean on 
top of that. We have seen what this complete anti-fossil fuel 
effort has produced. It always produced hurt to the economy.
    And what some folks on the left don't appreciate about 
those of us on the right, we want an environment that is every 
bit as clean as what anybody else on the left wants. We want 
that. We want clean drinking water. I don't want dirty water. I 
don't want water that smells like oil and gas.
    The trouble is when an economy is suffering you find more 
and more people who are more concerned about getting a job, 
about being able to afford gasoline that would get them to 
their job, and they quit caring about how clean the environment 
is, which is one of the reasons you see it so nasty in places 
around the world, whether it is India or China or whatever, 
where you just can hardly breathe over there.
    We have done a good job, but when the economy suffers the 
environment suffers more. It is only a vibrant economy that 
allows an effort to keep the environment clean and to get it 
cleaner. I have seen the struggling in Texas. I have seen the 
struggling in East Texas, and to have a lady in her eighties 
say I came into this world into a home with no power other than 
an electric stove and it looks like because of what you guys 
are allowing to happen, because we won't even use our own 
energy resources, I am going to leave this world the same way, 
that is just not right.
    We have been blessed with more energy resources than any 
nation anywhere when you use them all, and if we use them and 
we share the revenue and we can use those revenues both at the 
state level and the Federal Government level to keep the 
environment clean and to also pursue environmental alternatives 
we are going to have a vibrant economy and we are going to be 
the greatest economy in the world instead of heading down to 
the dust bin as we keep doing with these.
    I know nobody wants to go there but that is where we are 
headed when we keep trying to punish people who want to provide 
us energy. I yield back.
    The Chairman. The time of the gentleman has expired. I want 
to thank the Members and I want to thank the witnesses for 
their testimony. As I mentioned from the outset, it is the 
intention after we come back from the August district work 
period to work on this bill and hopefully mark it up.
    I just want to make a point that wasn't made probably as 
much as it should have been, and that is that the reason for 
this bill is to provide incentives so that America can become 
less dependent on foreign energy. The gentleman from Texas 
alluded to that.
    I recognize the principles stand that the gentlelady from 
the taxpayers organization takes. That is a very defendable 
position, but there is an issue at least beyond what she was 
arguing, and that is my friends on the Democrat side were 
suggesting that all this revenue is the Federal Government's 
revenue. Well, if you are not drilling you are not getting any 
revenue. One hundred percent of zero is still zero.
    What we are attempting to do is add incentives for states 
to be part of this. Certainly there is a cost. We heard that in 
the testimony today. At the end of the day, not only do the 
states benefit; we hope we become less energy dependent because 
of the activity of that, jobs are created, and, lo and behold, 
the Federal Government benefits also.
    That is the intent of where we are going with this 
legislation, and hopefully we can work on this and make that 
part of what our agenda has been here, a part of the American 
energy initiative that all of us have worked very hard on.
    So with that I want to thank very much the witnesses for 
their presence here and the Members for participating. If there 
is no further business to come before the Committee, the 
Committee stands adjourned.
    [Whereupon, at 11:44 a.m. the Committee was adjourned.]

    [Additional material submitted for the record follows:]
    [A letter from The Honorable Sean Parnell, Governor, State 
of Alaska, follows:]

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