We often talk about the significant benefits of Louisiana’s oil and gas industry to our nation’s energy supply, American jobs and local economies, but did you know energy production in the Gulf of Mexico is also critical to saving our coast?
As a result of the Gulf of Mexico Energy Security Act (GOMESA) of 2006, investments by Louisiana’s oil and gas industry in the Gulf will soon fuel coastal restoration and protection projects as well, with hundreds of millions of dollars from offshore drilling revenue coming to Louisiana and three other Gulf states. It’s another example of the powerful positive impacts of offshore energy development.
GOMESA officially recognizes the efforts and contributions of states like Louisiana in supporting America’s energy supply and generating federal revenue. Each year, the federal government collects $5 billion-$8 billion in offshore royalty revenue, much of it from right here in the Gulf of Mexico.
For the first time in our nation’s history, GOMESA provides a way to compensate Gulf states and coastal communities with a much-deserved and long overdue portion of royalty revenue collected from the Outer Continental Shelf (OCS) in the Gulf. The funds are allowed to be used for coastal protection purposes, including conservation, restoration, hurricane protection and infrastructure directly affected by wetland loss.
Beginning in 2007, Phase 1 of GOMESA allocated 37.5 percent of qualified OCS revenues from two very limited areas in the Central Gulf to Louisiana, Texas, Alabama and Mississippi. This has generated less than $2 million/year in recent years for Louisiana. Phase 2 of GOMESA maintains the 37.5 percent but considerably expands the offshore area from which OCS revenue will be shared beginning in 2017, which should considerably increase Louisiana’s share of revenue as well.
Regulations for this second phase were released in December, and the offshore area now included in the program is nearly the entire Western and Central Gulf planning areas from Texas to Alabama. There is a cap on annual revenue sharing payments from the federal government, however, with a limit of $500 million/year. As such, it is estimated Louisiana will receive $176 million for its first revenue sharing payment in 2018, with approximately $140 million dedicated to the state through the Coastal Protection and Restoration Authority and $35 million to be shared by eligible coastal parishes.
As required by state law, these monies will be used strictly for integrated coastal protection and restoration projects to save our working coast and ensure we can continue to live and work in our precious coastal region for decades to come. The need is huge; Louisiana’s current Coastal Master Plan updated in 2012 identifies and prioritizes $50 billion in protection and restoration projects.
GOMESA revenue generated by Louisiana’s offshore energy industry will be an important funding stream for these critical efforts, but removing some hurdles would allow industry’s investments to make an even greater impact.
The Louisiana Mid-Continent Oil & Gas Association (LMOGA) has joined members of our congressional delegation and other industry and environmental organizations to call for an end to the cap on GOMESA revenue-sharing funds. Officials expect the $500 million cap will be reached each year before the 37.5-percent share is reached, greatly limiting funding states could receive if the cap did not exist. With the cap removed, the more Louisiana’s offshore industry invests in the Gulf, the more money could be generated for restoring our coast and protecting our coastal communities.
Furthermore, proposed new federal policies like the Well Control Rule could potentially cripple our offshore energy activity, shutting down drilling and ultimately risking the dollars needed to restore our coast.
Finally, we will be monitoring President Barack Obama’s proposed budget this spring and be ready to act should it include the suspension of GOMESA, as the administration attempted last year.
Just as Louisiana’s coastal communities provide vital support for Louisiana’s offshore energy industry, a vital offshore energy industry has the power to help save Louisiana’s coast. Let’s make that happen.
For more information, visit www.lmoga.com or call (225) 387-3205.
