Vol. X No. 18
June 3, 2005

Coastal Piracy

The energy bill has become an annual ritual in Washington, and every time Congress starts working on it, greedy legislators start salivating. They know that in the desperate chase to get an energy bill passed, the bill’s main backers will do just about anything to buy votes. This gives some lawmakers a golden opportunity to trade their votes for a prized project in their home state or district.

Now being written in the Senate, the energy bill is loaded with costly, wasteful pieces of pork, but one boondoggle shines above them all: a $2.5 billion giveaway to coastal energy-producing states out of federal Outer Continental Shelf (OCS) oil and gas royalty revenues. A few senators claim that their states need this money to deal with the impacts of OCS drilling, and that their states deserve the money because of their geography. This is nonsense.

For starters, the Outer Continental Shelf is a national resource solely owned by the United States of America, not by any one state. While coastal states are always eager to get their hands on a share of offshore royalty revenues – and they do, since they get 100% of all revenues from drilling within 3 miles of their coasts, and 27% of royalty revenues for between 3 and 6 miles from the coastline – the OCS is a national resource, and royalties from oil and gas drilling on the OCS should benefit the entire country. As it stands, Louisiana alone is projected to get more than half of the $2.5 billion in the Senate’s energy bill.

These states also say that they need the money to help repair their damaged coastline – but none of the $2.5 billion is specifically earmarked toward that end. So while this handout is called “coastal impact assistance,” the states that end up getting this cash can spend it however they well please.

You might think that senators would be happy with this new arrangement. Think again. Some coastal legislators, led by Sen. Mary Landrieu (D-LA), are pushing for more – much, much more. In May, Sen. Landrieu introduced a new bill called the SCORE Act, which would redirect 50% of all OCS royalty revenues to the coastal energy states, beginning in 2011. If this bill ever sees the light of day, it will sap the U.S. Treasury of billions of dollars of foregone revenues each year – money that the federal government needs to pay down the debt.

Sen. Landrieu wanted badly to get her revenue sharing plan into the energy bill when it was being marked up in committee, but she failed. Now, she’s vowed to move heaven and earth to make sure Louisiana gets its money.

In its own energy bill that passed in April, the House of Representatives included a similar provision that would redirect billions of dollars of OCS revenues into a new slush fund over the next several decades. When the public found out about the new slush fund, the legislators who wrote it got slammed. Even the typically industry-friendly Wall Street Journal editorialized against the slush fund, calling it a “lesson in miniature in what’s wrong with the Congress.”

But Sen. Landrieu’s plan makes the House slush fund look like chump change. And unless she’s stopped, taxpayers of the next generation are the ones who will take it on the chin.

For more information, contact Keith Ashdown at (202)-546-8500 ext. 110 or keith@taxpayer.net