[Congressional Record Volume 143, Number 147 (Tuesday, October 28, 1997)]
[Senate]
[Pages S11248-S11250]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




 REVENUE SHARING OF OUTER CONTINENTAL SHELF FEDERAL RECEIPTS FROM OIL 
                           AND GAS PRODUCTION

  Ms. LANDRIEU. Mr. President, I rise today to bring to the attention 
of the Senate and, hopefully, to the Nation, a concern that is very 
important to my constituents in the State of Louisiana and to other 
coastal States. I rise to address this issue in order to begin what I 
hope will be an educational process for all of us.

  As you know, the Federal Government, through the Minerals Management 
Service and the Bureau of Land Management at the Department of the 
Interior shares with the States 50 percent of the mineral revenues from 
Federal lands inside the boundary of States, to offset the impacts of 
onshore mineral development. Unlike the States that support onshore 
development of Federal mineral resources, Louisiana, particularly, and 
Texas, Alaska, California, Mississippi, Alabama, and Florida receive 
comparatively little of the revenues received by the Federal Government 
for offshore oil and gas development on the Outer Continental Shelf.
  I intend very shortly to introduce legislation to realign the OCS 
revenues to reflect a more fair and more just allocation. This 
legislation will also address historical and anticipated impacts on 
infrastructure and environmental needs that have been identified over 
the course of time. I raise this issue as the Senate today, Mr. 
President, will be voting on the Interior and related agencies 
appropriations conference report this afternoon. That bill

[[Page S11249]]

contains funding for land and water conservation and the National 
Historic Preservation Fund. All of those moneys, almost up to $1 
billion authorized, comes from OCS revenues. So the Federal Treasury 
has been a great beneficiary, and many States, of course, have shared 
in these revenues.
  This year also marks the 50th anniversary of oil and gas exploration 
and production in the United States off the gulf coast. We have come a 
long way from the early days when a few intrepid souls dared to combine 
their resources to take a risk on a black pitch-like substance that was 
seeping out of the hills of Pennsylvania. They discovered that this 
substance would burn. From that substance kerosene was derived and then 
came gasoline and numerous other petroleum products that support the 
American economy and the American lifestyle today.
  Oil and gas development has long been the lifeblood of my State--
through good times and bad, through the early years of this century and 
the bust years of the 1980's. In Louisiana, as in other oil-patch 
States, there was an abundance of oil and gas. Many people dug wells, 
plugged them, and made and lost fortunes.
  In the 1970's, there was an oil boom that no one thought would end, 
but it did. During that time, businesses sprang up in Oklahoma and 
Texas and throughout the oil patch with businesses building 
headquarters in cities like Tulsa, Houston, and Dallas. In the Gulf of 
Mexico, oil and gas platforms appeared. People discovered a wealth of 
reserves in coastal waters and, later, in Federal waters, particularly 
off the coast of Louisiana.
  Mr. President, I want to share with you today, and many Members of 
the Senate, that all of the production in the gulf identified is by 
these squares that are blocked off. You can see that almost 90 percent, 
from approximately this line to all the way over is off Louisiana's 
coast. About 90 percent of the production is supported off Louisiana's 
coast, and that is the point I want to make today. It is not all the 
coastal States supporting it equally. Louisiana is contributing a huge 
amount to this development, which is contributing a huge amount of 
money to the Federal Treasury.
  The history of OCS development and State versus Federal ownership was 
defined in the time of President Truman. There was a great deal of 
discussion on this issue between interested parties, with no real 
solution as to how these proceeds should be fairly divided. The 
controversy continued briefly through the forties and fifties. Finally, 
legislation came in 1953. This act established a 3-mile State water 
boundary for Louisiana, Mississippi, and Alabama and, for historical 
reasons, a 10-mile border for Texas and the gulf coast of Florida.
  The understanding was that States would own the resources up to 3 
miles out from their coastal boundaries, and the Federal Government 
would own the resources beyond the 3-mile mark, and that lasted for 
years. In addition, in 1985, a new zone was created through an 
amendment to the Outer Continental Shelf Lands Act, the 8g zone. So 
between 3 and 6 miles, the States on the coast can now benefit in some 
additional ways, but rather minor, from the oil and gas derived from 
that 3- to 6-mile zone.

  The most recent Federal law to apply to the Outer Continental Shelf 
was passed in the last Congress, through the leadership of my 
predecessor, former Senator Bennett Johnston. This measure, the Outer 
Continental Shelf Deepwater Royalty Relief Act, provided a royalty 
incentive for companies that wished to explore in deep waters off the 
continental shelf but were constrained by the cost of deepwater 
drilling.
  Today, as a result of this act, you can see from the previous chart 
that there have been record sales and bids off the gulf coast, 
particularly in Louisiana. In March of this year, lease sale No. 166 
was held in the central gulf, and 103 companies bid on over 5,000 
blocks comprising 27 million acres offshore Alabama, Louisiana, and 
Mississippi. The companies made record bids. Fifty-one percent of these 
blocks were in 800 meters of water. The deepest block was in 9,000 feet 
of water.
  The mind-boggling total value of these bids was in excess of $800 
million. Mr. President, five additional sales are planned beginning in 
March. All of this is due to the Deep Water Royalty Relief Act which 
has created thousands of good paying jobs in the energy industry, both 
onshore and offshore. The Federal Treasury has benefited substantially. 
The Federal Treasury received an amount of $2.8 billion from these 
leases in 1995. Louisiana contributed $2.1 billion. These figures do 
not include corporate taxes and taxes that were also collected for the 
Federal Treasury.
  I need to clarify the funding situation for those who are listening 
today. When there is onshore oil and gas production, States are 
entitled to 50 percent of the royalties. Alaska gets 90 percent 
onshore. For coastal States with offshore production in 8g, States 
receive only 27 percent, and beyond the 6-mile mark for Louisiana, 
Mississippi, and Alabama, States are not entitled to any percentage. 
That is the point of this discussion.
  In conclusion, let me say that we need to make this distribution more 
fair and more equitable. With the amounts of money that are being 
distributed based on 50 percent for onshore, based on 90 percent for 
Alaska, but now under the current law, outside of this 6 miles, the 
coastal States receive almost nothing. The amount of money being 
generated is greater and greater every year. Just last year, as I 
mentioned, it was up to $2.8 billion received by the Federal Treasury. 
And of that amount, Louisiana received less than $16 million from 
contributing over 90 percent of the production totaling almost $3 
billion. We received only $15.9 million.
  For 50 years, Louisiana has borne the brunt of the impacts associated 
with oil and gas production in the Gulf of Mexico. While we acknowledge 
that hosting offshore production has provided some economic rewards in 
the State, Louisiana cannot tax the production on the OCS, nor do we 
receive a share of the governmental payments on the OCS. There has been 
damage to onshore staging areas, damage from activities by the Corps of 
Engineers, and deterioration of infrastructure such as roads and 
highways that are used to get equipment and workers to the offshore 
fields. The State of Louisiana has not received appropriate 
compensation for the use of its land and the environmental impacts of 
this production.
  Moreover, Mr. President, we have a very fragile environment in south 
Louisiana. I have visited Port Fouchon, in La Fourche Parish many 
times. La Fourche Parish is a rural, relatively isolated parish at the 
bottom of the ``L'' in Louisiana, if you picture the State in the form 
of the letter ``L.'' The people there are of modest means, and do their 
best to make a good living. Port Fouchon is Louisiana's only port on 
the Gulf of Mexico. Its proximity to the deepwater oil and gas 
discoveries makes it the port of choice for an increasing number of 
businesses. Over 6,000 people depend on the port as an avenue to and 
from offshore facilities. In just 3 years, Port Fouchon has tripled the 
amount of cargo it handles--from 10 million to over 30 million tons in 
1996.

  Near Port Fouchon is the Louisiana Offshore Oil Port [LOOP]. LOOP is 
a state of the art offshore facility located 20 miles south of Port 
Fouchon. LOOP is connected through five pipelines to over 30 percent of 
the Nation's refining capacity. Recently, the deepwater platform Mars, 
by Shell Oil, was connected by pipeline to LOOP. Consequently, LOOP 
will be handling a significant portion of the Gulf of Mexico's domestic 
deepwater oil production. Couple this with the recently announced goal 
that the MMS would like to increase oil production in the gulf from 1.7 
to 2 million barrels of oil a day. This is an extremely ambitious 
schedule. Such an increase would amount to an additional $600 million 
in royalties by the year 2000. Yet, there has been little attention to 
infrastructure in La Fourche Parish, and little attention to the 
environment. According to Bob Thompson, president of LOOP, ``Nearly all 
of LOOP's logistical support for offshore operations comes directly 
through Port Fouchon, and hence across substandard roadways. We must 
improve our highway infrastructure to accommodate this new business.'' 
Currently, over 80 deepwater prospects are identified off coastal 
Louisiana. An astounding 75 percent of these are in the Port Fouchon 
service area. Terrebonne and St. Mary Parishes, St. Bernard, and 
Jefferson which

[[Page S11250]]

are adjacent to La Fourche, will also support industry activity. Many 
of the parishes need additional help as well as other coastal States. 
These new demands will put a great deal of stress on an already 
besieged environment. Mr. President, these areas and their fragile 
environments in Louisiana were sacrificed long ago for the benefit of 
industry investment and development. I intend to ensure that these 
areas will be ignored no longer.
  Since the early 1990's, the Minerals Management Service at the 
Department of the Interior and various heads of environment and natural 
resource departments from a number of States have been holding talks 
and negotiations over revenue sharing from the funds collected from 
activity in the gulf. This month, in fact, tomorrow, the OCS Policy 
Committee will be meeting in Galveston, TX, to vote on a revenue 
sharing initiative. I commend this method of consensus building that 
the Department, industry, and the States have undertaken to address 
revenue sharing and its implementation. But I want to go further than 
just recognizing their actions, Mr. President.
  In the next few weeks, I will be filing the bill to bring this issue 
to the attention of the U.S. Senate to ask for a greater distribution 
and a more fair distribution to those States impacted so that we can 
continue to support this industry, but in return this industry can and 
the Federal Treasury can invest back into Louisiana and other coastal 
States so we can continue this drilling in an environmentally sensitive 
way.
  Through advances in technology and favorable laws, we have come upon 
a great resource for this Nation, to reduce our dependence on foreign 
oil. At the same time, we must take advantage of this economic boon to 
reinvest in our environment, to repair damage to our wetlands, and to 
take stock of our natural resources and their value as we benefit in 
the coming years from activity in the gulf.
  Thank you, Mr. President. I thank you for the time.

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