[Congressional Record Volume 152, Number 135 (Friday, December 8, 2006)]
[Senate]
[Pages S11677-S11678]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




               GULF OF MEXICO ENERGY SECURITY ACT OF 2006

  Mr. FRIST. Mr. President, on another issue, one of the most 
significant components of the legislation we passed about 30 minutes 
ago is the Gulf of Mexico Energy Security Act of 2006. This measure 
will open more than 8 million acres in the Gulf of Mexico to domestic 
energy production. In doing so, it will help to make America more 
energy independent. It will lower oil and natural gas prices for 
American consumers, and it will help to preserve jobs right here in 
America--jobs that have been migrating overseas due to high natural gas 
prices. According to the National Association of Manufacturers, since 
the year 2006, more than 3 million highways and manufacturing jobs have 
been lost due to high energy prices.
  The area opened up under this bill is estimated to contain a 
remarkable 1.26 billion barrels of oil and over 5.8 trillion cubic feet 
of natural gas. That is roughly the same amount of oil as the proven 
reserves of Wyoming and Oklahoma combined and more than six times our 
current imports of liquefied natural gas each year.
  These estimates could be the tip of the iceberg. This fall, the 
Chevron discovery in a nearby area found an estimated 3 to 15 billion 
barrels of oil, the largest discovery in a generation. This find alone 
could boost U.S. domestic oil reserves by 50 percent.
  Efforts have been underway to try to open this area in the Gulf of 
Mexico for more than a decade. In November 1996, the Clinton 
administration Interior Secretary Bruce Babbitt proposed opening the 
so-called Lease Area 181 to oil and gas production. Yet, for various 
reasons, the area has not been leased and America has not been 
benefiting from the energy resources we know it contains--until now.
  In a post-9/11 world, energy security is a matter of national 
security. We must take steps, real steps, meaningful steps to reduce 
our dependence on foreign sources of energy, particularly from 
countries hostile to the United States. Now, more than ever, America 
needs America's energy. That is what this provision does: It brings 
more American energy to American consumers.
  This has been a bipartisan effort all along the way. The Senate 
passed the Gulf of Mexico Energy Security Act on August 1 by a vote of 
71 to 25. Chairman Domenici led the way on the issue in partnership 
with Senator Landrieu, Senator Vitter, and the entire gulf coast 
delegation. I do want to salute their efforts and also to thank the 
assistant majority leader, Senator McConnell, for spearheading this 
issue on behalf of leadership.
  I also thank the tremendous staff, bipartisan staff who helped 
shepherd this issue through both the House and the Senate. In 
particular, I thank on my own staff Libby Jarvis, who represented 
leadership at the table throughout these negotiations.
  I truly believe this is one of the most significant accomplishments 
of the 109th Congress which will have a lasting impact on American 
consumers and on our economy. I am very pleased we were able to get it 
over the finish line as part of this important package.
  Ms. LANDRIEU. Mr. President, as a member of the Senate Committee on 
Energy and Natural Resources, and as an original cosponsor and a 
principle architect of S. 3711, the Gulf of Mexico Energy Security Act, 
I wanted to rise today to offer my perspective on the bill. This bill 
is now part of a broader package that was considered today in the House 
H.R. 6111. The package passed by a vote of 367-45. I sincerely hope and 
believe that the Senate will pass this historic legislation later 
tonight or sometime this weekend and that if it is tonight or tomorrow, 
it will be a historic occasion.
  The legislation will open 8.3 million acres of the U.S. Outer 
Continental Shelf in the central Gulf of Mexico to leasing for oil and 
natural gas exploration and production. This area is located more than 
125 miles from the closest point in Florida on the Florida Panhandle 
and more than 300 miles from the southern gulf coast of Florida. The 
area is closest to Louisiana, Alabama, and Mississippi and most of the 
exploration and production activities are likely to be staged from 
ports along the gulf coast, and from the ports in my state located in 
southeast Louisiana.
  The U.S. Department of the Interior estimates that the area contains 
at least 1.3 billion barrels of oil and 5.8 trillion cubic feet of 
natural gas. To put this in perspective, that is enough natural gas to 
heat and cool nearly 6 million homes for 15 years.
  In addition to opening up 8.3 million acres in the Gulf of Mexico to 
new oil and natural gas leasing, this legislation will prohibit leasing 
within 125 miles of the State of Florida in the new eastern Gulf of 
Mexico planning area until June 30, 2022. Additionally, it prohibits 
leasing within 100 miles of the State of Florida in the new central 
Gulf of Mexico planning area, and east of the western boundary of the 
181 area until June 30, 2022. Similarly, under the provisions of S. 
3711, no oil and natural gas leasing, preleasing and other activities 
east of the military mission line may occur until June 30, 2022. This 
was done to accommodate the military training missions that occur from 
military installations located in Florida. After 2022, the Department 
of Defense may veto leasing plans if such would interfere with these 
exercises.
  Under the Gulf of Mexico Energy Security Act, 50 percent of the 
receipts resulting from the collection of bonuses, rents, and royalties 
from leases in the new areas will be deposited in the general fund of 
the U.S. Treasury. The other 50 percent will be spent, without further 
appropriation action, for payments to States and to provide financial 
assistance to States in accordance with section 6 of the Land and Water 
Conservation Fund Act of 1965--16 U.S.C. 460l-8. Of this amount, 25 
percent will provide financial assistance to States in accordance with 
section 6 of the Land and Water Conservation Fund Act of 1965--16 
U.S.C. 460l-8--the ``state-side'' of the Land and Water Conservation 
Fund. The other 75 percent of this amount will be disbursed by the 
Secretary of the Interior, without the need for appropriation, to the 
four Gulf producing states of Texas, Louisiana, Alabama, and 
Mississippi. These amounts are not subject to appropriation or further 
authorization.
  It is the intent of this legislation that the State of Louisiana and 
all of the recipient States shall have the immediate capacity to bond 
anticipated future revenues they expect to receive from that portion of 
the Outer Continental Shelf Federal revenues to which they will be 
entitled to under this act and to allow the States, if they so decide, 
to get immediately underway hurricane and coastal protection projects 
within the scope of this act pursuant to such financing. There is 
nothing in this act that is intended to prohibit or impede the right of 
the four recipient States to bond anticipated future revenues they 
shall receive from this act.
  The receipts that derive from the leasing in areas newly opened by 
the

[[Page S11678]]

Gulf of Mexico Energy Security Act will be allocated among the four 
gulf producing States of Texas, Louisiana, Alabama, and Mississippi to 
each state in amounts based on a formula established by the Secretary 
by regulation--that are inversely proportional to the respective 
distances between the point on the coastline of each gulf producing 
State that is closest to the geographic center of the applicable leased 
tract and the geographic center of the leased tract. Thus, for each 
lease, the Department of the Interior will determine the distance from 
the center of that lease to the nearest point on the coast of each of 
the four producing states and allocate the qualified revenues derived 
from that lease according their respective distances with the farthest 
getting the least and the closest getting the most, but with none 
receiving less than 10 percent.
  A detailed example will help to illustrate how this will work in 
practice. Imagine that OCS lease A that is producing $10,000 in 
qualified--shared--revenues each year. The distance from lease A to the 
nearest points in the four gulf producing States is: 260 miles to 
Texas, 80 miles to Louisiana, 100 miles to Mississippi, and 90 miles to 
Alabama. The sum of these distances is 530 miles. The inverse 
proportion of the distance from the lease to each State's shore is: for 
Texas 530/260, for Louisiana 530/80, for Mississippi 530/90. Therefore, 
the States revenues from that lease would be allocated as follows: 10 
percent or $1,000 for Texas, 33 percent or $3,300 for Louisiana, 27 
percent or $2,700 for Mississippi, and 30 percent or $3,000 for 
Alabama. In this example Texas is precisely far enough away to receive 
10 percent of the total under the formula. However, if Texas were 
somewhat farther away, it would still receive 10 percent of the total 
because of the provision in S. 3711 that guarantees a minimum share to 
each gulf producing State.

  This process is repeated for every new lease located in the areas 
opened for leasing by this legislation. The totals for each state are 
added up. 20 percent of each state's allocable share and is disbursed 
directly to coastal counties, parishes or political subdivisions in the 
manner outlined under section 384 of the Energy Policy Act of 2006, 
Public Law 109-58.
  Under the legislation, the Gulf energy producing States of Texas, 
Louisiana, Alabama, and Mississippi will 37.5 percent of the receipts 
that derive from new leasing in areas of the Gulf of Mexico where oil 
and gas production occurred prior to enactment. Those receipts will be 
allocated among the states based on the amount of leasing and oil and 
natural gas production that has taken place over historically off each 
State's coast. The more leasing and production of oil and gas that has 
occurred off your coast, the greater your share of these receipts will 
be.
  The task of determining each State's share is not an easy one. The 
MMS will examine every lease tract in the central and western Gulf of 
Mexico, determine the revenues derived from its leasing and any 
ensuring production and add up the totals for each tract. Then, the MMS 
will determine the distance from the center of every lease tract that 
has been let since October 1, 1982, to the nearest point on the coast 
of each of the four producing States.
  Then the MMS will divide the total revenues generated by each lease 
by the proportional according to their respective distances, allotting 
the least to the farthest, and the most to the closest, but with none 
allotted less than 10 percent.
  After completing this exercise, the MMS will total up the amount 
allotted to each State. Each State's total will determine the 
proportional share of the new revenues from the gulf leases from areas 
where leasing has been allowed.
  Again, an example may help to clarify what is an admittedly complex 
formula: Imagine that 500 leases in this area had cumulatively produced 
$100 million since 1982. Then imagine MMS going through the process 
outlined above with each of these leases. When all is settled, 
Louisiana would be allotted $50 million, Texas $25 million, Mississippi 
and Alabama would both be allotted $12.5 million. Those allotments then 
become each State's proportionate share--Louisiana's allotment was 50 
percent of the total, so Louisiana would receive 50 percent of the 
shared revenues from every new lease located in the already-opened 
areas after the date of S. 3711's enactment. Texas would receive 25 
percent, Alabama 12.5 percent, and so on. Each year, each gulf State's 
allocation will be adjusted by the amount of leasing and production 
that took place near its shore in the preceding calendar year.
  And, as with the revenues shared from newly opened areas, at the end 
of each year, the totals for each State are tallied and 20 percent of 
each State's allocable share is disbursed directly to coastal counties, 
parishes or political subdivisions in the manner outlined under section 
384 of the Energy Policy Act of 2006, Public Law 109-58.
  Starting in 2017, this legislation would provide additional direct 
spending authority encompassing 50 percent of the receipts derived from 
new OCS oil and gas leases, purchased after the date of enactment, in 
the areas of the Central and Western Gulf of Mexico that were made 
available by the 2002-2007 Proposed Final Outer Continental Shelf Oil 
and Gas Leasing Program. Beginning in 2016, the bill would limit total 
direct spending under the bill in any year to no more than the sum of 
the receipts from the new areas plus $500 million.
  Additionally, the Gulf of Mexico Energy Security Act will offer 
monetary credits to firms that hold OCS leases located in areas that 
will be subject to the temporary moratorium on new leasing activity 
near Florida. These credits may be used for the purchase of a new lease 
in the Gulf of Mexico. The credits will be equal to the sum of the 
original bonus bid paid for the held lease and the rentals paid for the 
lease as of the date that the lessee notifies the Secretary of the 
Interior of the decision to exchange the lease or leases. Based on 
information from the Department of the Interior, the Congressional 
Budget Office has estimated that those credits would be worth $84 
million and would be redeemed soon after they were made available.
  In general, revenues shared with the coastal energy producing States 
under the Gulf of Mexico Energy Security Act should be treated in 
exactly the same ways as are revenues shared with States under the 
Mineral Lands Leasing Act 30 U.S.C. Sec. 181-287. These funds are not 
grants by any definition. Rather, they constitute income for the 
State--simply the State's fair share of revenues generated seaward of 
its coast. States have, in at least two occasions; used funds provided 
under the Mineral Lands Leasing Act as cost-share for other Federal 
programs. At this time in Louisiana's recovery, I envision this as a 
very much needed avenue for the State of Louisiana, as its citizens 
regain their feet following the destruction of Hurricanes Katrina and 
Rita.
  Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. FRIST. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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