- The Washington Times - Monday, May 17, 2010

Democratic senators from landlocked states aren’t happy about a proposal to offer huge cash incentives to coastal states willing to drill for oil and natural gas off their shores.

And environmentalists are aghast it’s in the Senate’s new climate bill.

“There is no substitute for a moratorium on offshore drilling — which is the only way that we can ensure that the kind of disaster we are experiencing in the Gulf does not happen again,” Sierra Club Executive Director Michael Brune said while commenting on the bill.

But for Virginia and other coastal states, the measure could produce a cash windfall by allowing them to keep 37.5 percent of the federal revenue generated — up to $500 million annually through 2055 — a whopping increase from the status quo, 0 percent.

The potential revenue pot from leasing underwater drilling rights to oil companies is massive. The federal government in 2008 collected about $23 billion in offshore oil- and gas-drilling revenues.

“This could mean a huge amount of money, in addition to taxing authority and other things that states might have related to on-shore facilities, the jobs and the rest of it,” said Daniel Kish, senior vice president for policy with the Institute for Energy Research, an oil-industry-backed think tank.

As a massive oil spill continues to threaten the Gulf Coast, legislation introduced last week by Sen. John Kerry, Massachusetts Democrat, and Joe Lieberman, Connecticut independent, ultimately aims to reduce fossil-fuel use and curb carbon emissions, and gives coastal states the option to reject federal drilling up to 75 miles from their shores. But the incentive to drill is frustrating activists and some lawmakers who typically support environmental concerns and efforts to tackle climate change.

Sen. Jeff Bingaman, New Mexico Democrat and chairman of the Energy and Natural Resources Committee; Sen. John D. Rockefeller IV, West Virginia Democrat and chairman of the Commerce, Science and Transportation Committee; and Sen. Byron L. Dorgan, North Dakota Democrat and chairman of the Appropriations energy and water development subcommittee, sent a letter to colleagues last month saying that royalties generated from resources in federal waters should continue to flow to the Treasury Department.

“Such a giveaway [to the states] would increase the federal budget deficit, reduce future federal budget revenues, and send funds that should belong to the entire country to just a few of the coastal states,” the senators wrote.

“The fiscal consequences of such a [financial] loss would be devastating, particularly given the enormous demands on the federal Treasury and our need to reduce the deficit.”

The senators’ argument rings hollow, some say, because inland states typically get a significantly bigger cut of royalties for oil and gas produced on federal land than what is proposed for coastal states.

The states’ revenue-sharing provision in the bill also isn’t sitting well with environmental groups.

“In the midst of a disastrous oil spill, we have a bill that incentivizes offshore oil drilling,” said Greenpeace Executive Director Phil Radford. “It seems that after a year and a half of wrangling, the only people who can be happy with this bill are the fossil-fuel industry lobbyists.”

Oceans activist Regan Nelson, writing on her blog for the Natural Resources Defense Council, added that the bill provides no oversight or accountability, and no restrictions on how states could use the money.

“The bill actually encourages drilling without any new safeguards in previously protected areas like the East Coast,” she wrote.

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