Revenue Sharing Focus Misses Point — Energy!

By December 13, 2006Energy

News reports on the just-competed legislation to open up 8.3 million acres of the Outer Continental Shelf to energy exploration and development have focused on the new revenue sharing aspects, especially with respect to Louisiana. The Washington Post story Tuesday is typical (and it’s balanced, solid story).

[The] bill’s landmark aspect was a deal that diverts 37.5 percent of federal royalties from future drilling to the four Gulf of Mexico states — the same percentage Truman offered Long. The accord could ultimately be worth $650 million a year for Louisiana, the biggest beneficiary.

“This was the best Christmas present I could ever, ever have gotten or that the state of Louisiana could have gotten,” [Sen. Mary] Landrieu said in an interview yesterday.

The arguments, pro and con, focus on the environmental effects of new drilling, and Landrieu emphasies use of the new revenues to restore coastal wetlands.

All well and good, and the revenue-sharing arrangement definitely reflects a newsworthy policy shift. (On which the NAM does not have a position.) But let’s not forget the real accomplishment in the congressional action: U.S. consumers and manufacturers will be able to tap much-needed domestic energy supplies, relieving pressure on supply and thus, on price.

The Senate Committee on Energy and Natural Resources issued a detailed fact sheet on S. 3711, the underlying bill in the final legislation. On the subject of supply, please note:

Resource estimates for this area made available under this proposal are:

  • 1.26 Billion Barrels of Oil
  • 5.8 Trillion Cubic Feet of Natural Gas
  • The natural gas supply made available by this agreement is enough to heat and cool nearly 6 million homes for 15 years.
  • This informative fact sheet covers thoroughly the squeeze manufacturers have faced from rising natural gas and oil prices, which damages U.S. competitiveness. The recently passed OCS makes a positive contribution to easing that squeeze, and that point — the reason for the legislation in the first place — should not be overlooked.

    UPDATE: (9:55 a.m.): Today’s Wall Street Journal’s editorial review of the 109th Congress appreciates it:

    This is the first real energy-production bill to pass Congress in years and will open 8.3 million acres of the Outer Continental Shelf for drilling. The new acreage holds an estimated 5.8 trillion cubic feet of natural gas, adding to a dwindling North American supply that has been driving U.S. manufacturing jobs overseas. The bill also gives four Gulf states a cut of the royalty revenue, which may serve as a precedent for future drilling bills.