Giving states incentive for offshore production

Sen. Kay Bailey Hutchison:

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Earlier this month, Congress took a critical first step toward increasing domestic energy production by passing the Gulf of Mexico Energy Security Act of 2006. This bill opens 8.3 million acres in the Gulf of Mexico for oil and gas production while providing a political path forward to accessing additional energy reserves off the Atlantic and Pacific coasts that remain off limits.

While this bill will immediately expand oil and gas exploration, a less obvious, but perhaps even more important, part of this legislation is an innovative revenue-sharing program between the federal government and states that feel the impact of such resource development. This revenue-sharing program is a model for future nationwide offshore energy exploration and development proposals.

Over the next several years, as Texas, Louisiana, Mississippi and Alabama enjoy tremendous economic and environmental benefits from this bill, other states will be encouraged to allow the offshore exploration and development that our nation desperately needs.

Newly accessible areas in the Gulf of Mexico known as leases 181 and 181 South are expected to contain more than 1.2 billion barrels of recoverable oil and 5.8 trillion cubic feet of natural gas. This is enough oil to fuel 87 million cars per year and enough natural gas to heat and cool 6 million homes for the next 15 years, or six times our current annual Liquefied Natural Gas imports.

In 1981, Congress enacted a moratorium on offshore drilling, and oil and natural gas production is currently prohibited in 85 percent of America's territorial waters. This has impeded our ability to inventory undeveloped areas that likely contain untapped resources. However, state legislatures beholden to anti-exploration special interests will soon witness an influx of revenue to Gulf Coast states for environmental protection.

When production begins in the newly opened areas, Texas, Louisiana, Mississippi and Alabama will receive income through federal revenue sharing. Private companies that sign production leases with the federal government will pay royalties on minerals extracted from the Gulf of Mexico. Each state will then receive an equitable share of these revenues, which must be used to protect important national ecosystems and prepare for unforeseen natural disasters. These funds will support projects such as wetlands restoration, hurricane protection, beach enhancement and infrastructure construction to preserve our coastlines.

I anticipate that millions of dollars each year will be directed to our state. Beginning in 2007, Texas will receive a guaranteed 10 percent of eligible production revenues from within leases 181 and 181 South, and beginning in 2017, Texas will receive between 21 percent and 28 percent of eligible revenues from new production in Gulf of Mexico planning areas outside leases 181 and 181 South.

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Notice what states with long coast lines are not getting any revenue--Florida and California. The prefer to stay with pristine prissiness over doing something about the domestic production shortfall. Now the environmental wackos who control those states can pay even more for their attempts to starve this country of energy. That 1981 act has to be one of the dumbest pieces of energy legislation in history. It is absolutely in defensible. But the same people who were responsible for that massive failure of energy policy are still attempting to starge this country of energy resources despite the cost to the US economy and the necessity of having to fund our enemies such as Hugo Chavez.