Connecting state and local government leaders
House Republicans are pushing a plan that would financially incentivize states to drill for oil and gas and punish those that don’t.
WASHINGTON — Local government advocates this week criticized a draft bill that would grant states “exclusive jurisdiction” over oil and gas drilling on federal land and give them a higher share of royalties, but also impose a stiff penalty if they halt production.
The House Subcommittee on Energy and Mineral Resources discussed the Enhancing State Management of Federal Lands Waters Act, which would increase states’ share of mineral revenues from 50 percent to 60 percent if they opt to increase production on specific federal parcels. States that decide to reduce production would only receive 20 percent of revenues moving forward and would pay a lost production fee to the Treasury Department.
Similarly, coastal states would be able to determine the Outer Continental Shelf lease blocks included in the final offshore drilling sale proposed by the Trump administration—47 parcels currently up for grabs. Those states that withhold parcels would owe unfinalized “indemnifications” to the Treasury Department, while those that include more blocks would receive a higher revenue sharing percentage.
State mineral management plans would still be subject to Interior Secretary Ryan Zinke’s approval.
“Once again, Washington is pushing its beliefs onto local citizens, instead of listening to their vehement opposition,” said Ben Cahoon, the mayor of Nags Head, North Carolina during congressional testimony on Thursday. “Oil and gas development poses a real threat to the fishing, tourism and recreation-based businesses along the East and West coasts that each year generate around $180 billion in gross domestic product and support nearly 2.6 million jobs.”
The Republican mayor called indemnifications a “ransom” they would need to pony up to protect the “coastal way of life,” pointing out the bill would impose hundreds of millions of dollars in penalties on states where there hasn’t been offshore drilling in decades.
Environmental groups including the National Wildlife Federation and Hispanics Enjoying Camping, Hunting, and the Outdoors also spoke out against the draft measure.
The Trump administration in January announced that it would open up drilling along the coasts. It shortly exempted Florida from offshore drilling and most states have since requested meetings with Zinke to exempt their jurisdictions to no avail.
States that attempt to halt offshore drilling would impose “a localized will on a nationally owned, widely enjoyed benefit,” said Rep. Paul Gosar, an Arizona Republican and chairman of the subcommittee.
“Such attempts to strand federal assets come at the expense of the American taxpayer,” Gosar said. “The ideas presented today increase the states’ role in federal mineral management while identifying the taxpayer if the state chooses to leave the mineral undeveloped.”
Rep. Alan Lowenthal, a California Democrat and the committee’s ranking member, argued the opposite: that the legislation prioritized the fossil fuel industry over everyday Americans. Blue states that prioritize conservation will be punished—California as much as $1 trillion for a 10-year reprieve—when public land management is essentially handed to oil and gas companies in each state, Lowenthal said.
“In effect this title is a bribe to take public lands out of the public’s hands,” he added.
Proponents of the proposal disagreed. Federal ownership of mineral land has “taken decision rights away from the states,” when they can approve drilling far quicker than the federal bureaucracy, said Nick Loris, a Heritage Foundation energy and environment fellow.
Loris said the proposed reforms would make the industry more responsive to price changes and create jobs and suggested opening lease auctions to all parties to encourage cooperation.
“Congress could go even further by applying the same reforms to all energy investments on federal land and waters,” he said. “States should have the same incentives and choices the draft legislation provides to oil and gas for all other energy projects, whether it is a solar farm in Nevada or offshore wind in the Atlantic.”
World energy demand continues to grow and could be predominantly be fed by coal, oil and gas for the next 10 to 30 years, said Myron Ebell, the Competitive Enterprise Institute’s Center for Energy and Environment director.
Federal royalty sharing makes up a large portion of states like Wyoming’s budget, Ebell said, and mineral resources could jump start other rural economies.
“If a state wants a moratorium on offshore development, they can actually get it,” he added. “They can say, ‘We want a moratorium, and here’s what we’re willing to pay for it.’”
Dave Nyczepir is a News Editor at Government Executive’s Route Fifty and is based in Washington, D.C.
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