[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
Available via the World Wide Web: http://www.gpoaccess.gov/congress/
index.html
or
Committee address: http://naturalresources.house.gov
U.S. GOVERNMENT PRINTING OFFICE
67-650 WASHINGTON : 2012
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC
area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, Washington, DC
20402-0001
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.
---------------------------------------------------------------------------
\1\ http://www.oilspillcommission.gov/sites/default/files/
documents/A%20Brief%20History%20of
%20Offshore%20Drilling%20Working%20Paper%208%2023%2010.pdf
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\2\ http://www.oilspillcommission.gov/sites/default/files/
documents/A%20Brief%20History%20of
%20Offshore%20Drilling%20Working%20Paper%208%2023%2010.pdf
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\3\ http://www.dtdeal.com/pdf/chronology-
valuation_royalty_relief1980-2008.pdf
---------------------------------------------------------------------------
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:]
[GRAPHIC] [TIFF OMITTED] 67650.006
.eps[GRAPHIC] [TIFF OMITTED] 67650.007
.eps[GRAPHIC] [TIFF OMITTED] 67650.008
.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:]
[GRAPHIC] [TIFF OMITTED] 67650.003
.eps[GRAPHIC] [TIFF OMITTED] 67650.004
.eps[GRAPHIC] [TIFF OMITTED] 67650.005
.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:]
[GRAPHIC] [TIFF OMITTED] 67650.001
.eps[GRAPHIC] [TIFF OMITTED] 67650.002
.eps