A concern I have about APA: oil drilling revenue to states

[MH1]

Ok this might have been addressed here but if so I missed it. Also I've at least skimmed most of the stuff by JK or quoting him, that's been posted here, about the APA, and I have not seen him mention it once. But when this was mentioned on NPR as part of the bill, a chill ran down my spine - and not the good kind. And NPR may be dubious as a liberal outlet (not necessarily a bad thing) but I don't think they would have made something like this up. So if someone has time to look into this and give your thoughts, I'd be interested in hearing why you think I shouldn't be worried. (if that is what you think!)

So here's what I heard on NPR. The bill includes stipulations giving some control over offshore drilling back to the states. Sounds good, right? I would have thought so in theory, too. One feature is that states will have some veto authority over offshore drilling within x miles from their shore. (if i understand correctly) That's completely good, can't see anything wrong with it. Until this: states will also get a huge % of revenue that would otherwise go to the federal government. I think I heard 37 %. Okay not sure what that revenue is, taxes and fees maybe? But in any case it sounds like a significant chunk of change for state governments struggling to balance their budgets.

So if I got the facts right (and maybe I didn't), does anyone else see what I see? State gov'ts theoretically having some say in offshore drilling, but being shackled by the need for funds into having to approve the drilling anyway? Two words: Marcellus Shale. (ok you might not have heard of it - it's in PA - so make it 3 words).

Your thoughts?

[beachmom]

1. Damn, this is the first I have heard of this.

I'm not going to be on line much longer for the weekend, but I definitely will keep my eyes peeled for any info.

The only thing to note on my Enviro Twitter feed was this one:

http://twitter.com/Common_Oil_Spil

Latest tweet:

nom nom nom nom nom



Kind of is where my brain is at on all this.

[MH1]

2. Well I hope I am wrong but I think that oil spill is going to be A LOT bigger issue

than people have made it even yet.

I was posting about it on Facebook when the media was mostly ignoring it, the first week or so after the explosion. Then the media figured out, hey this might be a story, so now they're covering it. But I have seen too many truly incredibly scary scenarios postulated and I have zero confidence in BP or anyone else trying to stop the flow. And too much oil has already been released. (I'm in the camp that the spill volume has been grossly underestimated all along)

So anyway I think it might be good that Kerry has opened the discussion on his bill at this time, while attention is (somewhat) riveted, but maybe not ... I think after the true magnitude of the gulf spill is realized, there will be - or at least should be - a whole different attitude about offshore drilling and energy in general. Now the bill is out there, will it be easier to amend it to make it stricter? Or would it have been easier to start with a better bill?

ah well I am really tired and probably rambling so I will leave it at that for now. I'll be interested to see if you come up with anything on this question. :)

[Mass]

4. There is no doubt the bill is not that good. The problem is not what the bill contains

but to get something rolling. We need a bill and there are way too many Dems who dont want it, some of them loved by the netroots.

I was happy to see Harkin and Brown (not ours, the one in OH) support the bill. Hopefully, they will be able to add some additional safeguards, but I doubt it. See how Murkowski has blocked the bill that capped liabilities for spills.

[karynnj]

6. Not rambling at all - great points

I think that the oil spill woke enough people up (including the Obama administration) that Kerry was able to add some additional pieces to tighten up procedures and to allow the states potentially affected to veto it. (Note those states will not be getting a share of the royalties.) I suspect the real world impact of all of this is to make drilling less likely. Adding in any safeguards adds cost. Added costs push marginal projects into the non-economic side of the equation.

As to a better bill, where would it come from and how would it get the votes when it is not clear that this will. I assume that this will get all the environmentally conscious votes, so there will not be any "extras" to pick up there. As you eliminate any concession, you will lose the people who required that. The problem is that there are not 60 Senators like Kerry saying that we need to do this and lets find the economically least painful way to do it.

Where I think you could have a shift is if, say, the people in VA shift against off shore drilling. Their Senators would likely follow. If there are enough of them who shift, Kerry could tighten that part of the bill.

But, other than possible amendments - and we mostly have to hope that they can avoid poison pills or things that weaken it, it is likely that this is really the best that has a prayer of passing. Kerry and his staff have spent a fantastic amount of time on it - and Kerry likely knows the reason and ramifications of every concession made - and I trust he fought for the best bargain he could get, Unfortunately, I think the alternative is that Reid will allow Bingaman to pass the energy only bill - that contains most of the bad parts of this bill. If that passes, it will likely be at least 2013 before another attempt at a climate change bill is made.

[MH1]

12. Likewise, good points

especially if in some cases a state gets to say no when they have no $ on the line.

[Mass]

3. Revenue sharing has been there for a while now. It was published when they talked about

adding measures concerning drilling. The terms you describe are correct.

I dont like the drilling at all, but if states are going to allow drilling, I don't see why the state cannot benefit from it. I dont think they should authorize states to drill, but this is a different question.

[MH1]

8. I guess I didn't know it

or maybe things just didn't connect in my brain until the other day when I heard it on npr.

the problem is if the state benefits directly, there will be strong incentives to blow off environmental risk and take the money while the taking is good. Just like PA is doing with Marcellus Shale (and with an allegedly Democratic governor. ok I'd better not get started on that...)

[karynnj]

5. That is in there - and I think it is 37.5% of the royalties

Royalty is another name for tax. The government in awarding a lease requires that a per unit (gallon etc) amount be given to the government in return for the lease. There has been a fight between Senators like Dorgan saying that the state should get none of the revenue - and he is not one who was demanding they have a say. As ND is land locked, he preferred all the money going to the federal government.

Kerry spoke of it as being fair so they can use it to protect their shores. Now, there is no such constraint in the bill that they use it this way. To me, it seems fair they "lose" something in having this off their shore along with whatever ancillary things are needed on shore. It is only fair to reward them for it. Not to mention, this does help gain some votes.

However, as you say it could be used to close budget gaps or special projects that do not have anything to do with it. There is an issue of environmental justice which Kerry will not be able to legislate on the states. Here though, the impact will be on the shore, if there is one, and in general the shore will not be the area that gets hit with all the other bad things and often is where people with some clout live.

I do see your problem that it could give states the incentive to allow drilling - just as now poor communities in some areas volunteer to take things like trash transfer stations. There it is bad that poor areas, where people can least deal with consequences, get most of the bad things. It is somewhat better that they volunteer and get paid for it than just getting it because they have the least clout. In a way that is the best analogue that I can think of for this.

It seems fair that they get the royalties, but I have misgivings that it could push states to approve. In a sense, it lets coastal states become Alaska if they want - where everyone gets a check - or more likely it results in lower taxes than otherwise accomplishing the same thing.

But, you need to remember that the bill for the first time gives states the ability to say no, which they previously did not have.

[MH1]

10. The term I'm thinking is "moral hazard"

I think I'd like to have states have the ability to say no to drilling, but not get the funding if they say yes. Too much incentive for bad decisions.

[karynnj]

17. One compromise would be that they get the money

but it has to be used to protect against environmental hazards -ie cleaning the shore and the wetlands and building a contingency fund to used to help people like fishermen and tourist industries if there is a spill. Even if the oil companies pay, it would not be immediate.

i get the concept of moral hazard here - the bill gives companies the ability to dangle what looks to be "free" money before them. What I don't know is what constitutes approving it for the state. Is that left to the state? If it is a referendum, at least the majority of people (who vote)make the judgment.

[ProSense]

7. This might provide some additional background

Senior Dems warn against sharing offshore drilling revenue with states

Dear Colleague:

We are writing to express our serious concern about proposals to shift Outer Continental Shelf (OCS) revenues from the federal Treasury to coastal states. This issue may arise in the context of the Senate’s upcoming work on the budget for fiscal year 2011 as well as during debates on other measures including climate and energy legislation.

We strongly oppose diversion of this important source of federal revenue, and we strongly urge you to resist its inclusion in any legislative vehicle. As you may recall, a state “revenue sharing” amendment was offered to the budget resolution for FY 2010 in April 2009, and it was defeated by a vote of 60-38. A similar effort was defeated by a vote of 13-10 during markup of S. 1462 in the Senate Energy and Natural Resources Committee in June 2009.

The OCS receipts are one of the most significant sources of revenue to the U.S., amounting to billions of dollars each year. These revenues will total about $6 billion in 2010 and are estimated by the Minerals Management Service (MMS) to total over $40 billion over the next five years.

Revenue sharing proposals that have been offered by some Senators would allocate 37.5 percent of OCS revenues to state and local governments. If this formula were applied to all oil and gas resources in the OCS, the federal treasury would lose hundreds of billions of dollars over the life of these offshore resources as compared to what will be received under existing law.

The fiscal consequences of such a loss would be devastating, particularly given the enormous demands on the federal Treasury and our need to reduce the deficit. There is no justification for using these significant national resources to provide benefits only for a few coastal states and their citizens. Rather, they must be available for the important public needs of all Americans.

In addition to the vital issue of fiscal responsibility, there are other important policy reasons for retaining the current law. The resources of the OCS belong to the entire nation, not any one state. In 1947, the Supreme Court clearly ruled that the offshore areas are owned by the United States as an important feature of national sovereignty. In contrast to federal lands onshore, the offshore resources do not lie within the border of any state and do not affect the property tax base of the states.

In addition, our coastal states already receive significant revenue as a consequence of associated offshore production. Under existing law, coastal states can claim a seaward boundary of up to three miles from their coastline (nine miles for Gulf Coast States), and these States receive 100 percent of the revenue from development of offshore minerals in these waters. Further, coastal states receive 27 percent of all bonuses and royalties for mineral production in the three miles seaward of the states’ waters to compensate for any drainage that could occur as a result of production in Federal waters. In 2010, six coastal states will receive an estimated $79.4 million under this so-called “8(g)” provision, and these payments are estimated to total about $590 million over the next five years. More than $3 billion has been paid to these states under this provision since it was enacted.

Again, we urge you to oppose the inclusion in any legislation of provisions directing federal OCS receipts to the states. We should not divert these important revenues from the federal Treasury and the benefit of all Americans.

Sincerely,

Jeff Bingaman Byron Dorgan Jay Rockefeller

Not sure what the implications are, but it seems that these Senators are concerned about the government losing revenues.

[MH1]

9. I figured it must be a pot-sweetener to get republican votes

and this letter seems to suggest that too.

I can only imagine support for rerouting funds from federal to state is coming from a) the beneficiary states and b) Grover Norquist-tes (wanting to shrink the government by depriving it of funding)

I wouldn't have a problem with the states getting funding, I just think it's like having alcohol in the home of an alcoholic ... they know it's bad if they drink it but that's not going to stop them.

[ProSense]

11. Actually, the culprit is

Landrieu.

[MH1]

13. figures.

[ProSense]

14. With Dems

standing up for coal and oil, it's amazing a bill we're at this point.

It'll be a miracle if they can improve the bill.

[MH1]

15. money in politics

and there's lots of money coming from coal, oil, and nuclear.

not so much from dolphins and lizards

:banghead:

[Mass]

16. So, basically, those three want to drill, but without money for the states who

have the risk. Interesting, particularly considering Dorgan's position on drilling. He would push the 75 miles limit to 45 miles.

http://thehill.com/blogs/e2-wire/677-e2-wire/76787-dorgan-calls-climate-bill-unlikely-in-2010-pushes-for-energy-measure

Not sure what that means, aside from a battle for money, but this is not pro-clean energy because those three are not pro clean energy.

[ProSense]

18. That's what it looks like.

It's a battle for money.

[karynnj]

19. Note they are all from landlocked states

Throwing out nonsense that they get all the revenue for things three miles out is disingenuous. Note the outcry to wind turbines 5 to 20 miles out.

Look at what is happening in the gulf. North Dakota, New Mexico and West Virginia do not bear the burden here. The entire risk is to the coastal states. Just as MH argued well that there is a moral hazard in the state case, their is a moral hazard to the federal case. Note that none of these three (to my knowledge) have spoken of reducing drilling due to the risk. It is likely easy for them to ok it happy they get the money. I don't think any of them are environmentalists.

[sandnsea]

20. Western states get/got timber money

It's to make up for the loss of property tax money since so much of the state is federal land. It was originally based on timber sales so there is always an incentive to cut more timber. A lot of local people won't vote for a school tax increase because they say we should just go cut some trees. Still, there's been enough opposition that we've been able to slow it down quite a bit, although not as much as I'd like. We also passed a law on offshore drilling before the federal issue even came up. We're expanding wind and wave energy mostly. So state governments can say no with the support of the people.

A portion of the money also has to go towards environmental restoration and clean-up, so that makes states more responsible for the consequences of their decision to drill. I think they've gotten away with bluffing for a long time and this just calls their bluff.

And really, the only way to end offshore drilling is to end the gasoline engine. That's everybody's responsibility.

[MH1]

21. Good points

ending the gasoline engine - is there increased support for mass transit in the APA bill? Bike lanes in cities? Or does that remain the responsibility of states like PA, whose rural representation prevents all but the most meager improvements in urban transit?

[karynnj]

22. Good to hear that a portion of the money has to go to environmental clean up

I agree with your conclusion - we need to ultimately end the use of gasoline engines.

[Island Blue]

23. This worries me.

As many of you probably know, I live in one of the states that could possibly be affected. Not only that, but I live about 3 miles (as the crow flies) from the Atlantic Ocean. Needless to say, Senator Kerry has not been my favorite person during the past couple of weeks so I've kept my mouth shut.

Anyway,about the revenue sharing. Part of me says, if you're going to fuck up the place that I call home and the place that I love, and take the very real chance of causing irreparable damage to the ocean, estuaries and swamps and all of the life within, then hell yeah, I expect my state to benefit from the disaster waiting to happen. Of course I'm not willing to take that gamble and don't want offshore drilling at all - anywhere. My fear is that this might very well be a gamble that the rest of my state will be willing to take. North Carolina is a pretty large state, spanning 500+ miles east to west. We're also broke. This is a bad combination. Why should someone in the mountains, or someone in the central part of the state give a crap about what happens on the coast if they are somehow benefiting from oil revenue. The majority of the state's population lives west of I-95. They will never have to worry or even think about the impending disaster. All they do is reap the benefits. I'm afraid they've just found a magical answer to all of their budget woes.

Sorry for this rambling mess of a post. BTW, I would be equally pissed off if they proposed opening up the leases which exist off the coast of New York or Massachusetts. Not that that would ever happen of course. ;-) I'm just scared. There is so much at stake here. So much damage that can (and will) be done. I will fight it every step of the way. That I can promise.

[MH1]

24. I think you explained the issue well

I think if anything, the money should be routed into some kind of fund that later can be used for funding cleanups. Preferably, a fund that somehow invests in clean energy technology or mass transit - things to get us OFF of oil. But in a way, or with some kind of reserve, that if a disaster happens, it can be made available fairly quickly. Of course the oil companies themselves should be footing the bills but as we know now, their liability will be capped. even if the cap is raised there will still be a cap at some point.

But the states should not have direct access to the funds to use in whatever way needed to balance their budgets. That would just be a really bad idea, imo.

[beachmom]

25. Hi, I.B. I feel for your situation. It just stinks. Here is what I have been thinking about:

Nigeria has had the equivalent of an Exxon Valdez every year. THEY will always have offshore drilling with no environmental protections. And when I hear that, I feel like all Americans really need to think things through more. We want to drive our cars as long as someone else pays the ultimate price. The truth is this oil spill in the gulf is due to all of our sins of using too much oil. And whether that drilling occurs by you, by my parents in Florida, out in Alaska, or in Kazakhstan, all that oil goes into one global oil market pot. That when we stop it near us, it HAS to be drilled somewhere else. Somewhere poorer, more desperate, less powerful than where we stopped it.

That is the moral dilemma.

I understand your annoyance with Sen. Kerry and (I assume) Pres. Obama who opened up on offshore drilling. But in a weird kind of way, it has woken me up to the reality that our dependence on oil (ALL oil, not necessarily foreign oil) is so negatively affecting us. The key to stopping disasters like what is now transpiring in the gulf is not to ban offshore drilling for the States but to lessen the need to ever drill oil. In that sense I am for a more radical solution -- get off oil as soon as possible. Because it really is becoming unsustainable if we need to drill 5,000 feet down just to get the stuff.

[Island Blue]

29. It is a moral dilemma, isn't it.

It is especially a dilemma for someone like me who lives in a rural part of the state/country. It's 80 miles to the closest city (Chesapeake), 30 miles to Wal-Mart (which I very rarely go to), etc. Public transportation is nonexistent. I personally do my best to limit my driving. Other people don't.

And yes, I'm pissed at President Obama too. The choice to lift the moratorium form Virginia to Florida was pathetically political.

You're right though, this is partly NIMBY. I just fail to see the logic of drilling in the "Graveyard of the Atlantic". This explains it better than I can: http://www.outerbeaches.com/OuterBanks/AllAboutOBX/History/GraveyardAtlantic/

[beachmom]

26. Delete. Dupe.

[sandnsea]

27. I think it's a fight you can win

I also think it has to be a local fight. National groups and advocates can help, especially when it's something remote like the Arctic Refuge. But it's local groups that stop or significantly reduce logging of old growth around here, every single time. I really think it matters more to people when they realize their neighbor, their rational and responsible neighbor, has a different point of view. The thing is, now it's real. All the political posturing over something that may or may not happen is over. People have to face reality and learn about the oil that is there, the money, and the possible consequences. I bet a lot of people wake up in a hurry.

[Island Blue]

28. No doubt.

About 19 years ago Mobile Oil wanted to drill off our coast. They were set to begin the exploratory process. (This was during the reign of Bush I.) Local folks took control and said "no". We fought hard against it and stopped it. (I believe that's when the moratorium on all off shore drilling all up and down the east coast was implemented.) I have no doubt that the people of northeastern North Carolina will be up for the challenge (we have a long history of doing that). This time around though, I'm just not sure about the folks in the rest of the state.

[MH1]

30. 53% believe economic benefit outweighs potential harm, 60% support more drilling

http://www.msnbc.msn.com/id/37116587/ns/politics-more_politics/

Offshore drilling, immigration, terrorism
Despite the spill, 60 percent say they support allowing for more drilling off U.S. coasts, and 53 percent believe that offshore drilling’s potential economic benefits outweigh its potential harm to the environment.

And I'd rather activists be working on other stuff than tied up fighting idiocy, greed, and short-sightedness.

[sandnsea]

33. Abstractly, not personally

Everything changes when it's personal. What would you prefer activists work on? I can't think of much that is more important than educating people about the harmful effects of fossil fuels.

[Mass]

31. I understand, but it seems to me that this is the same NIMB syndrome that struck some in MA

with Cape Wind.

At some point during the Cape Wind debate, I said that people for and against the wind farms were mostly refusing to have the society debate concerning how energy questions should be managed. This debate for or against drilling is the same thing. We need energy. What energy? What can we do to change things.

Except if we are ready to make some serious restriction in the way we use electricity and drive cars, we will need oil. All you have to do is to go to DU (these great progressives) and see how many dont think they can live without their SUVs.

So, the real fight to fight is not whether they allow drilling or not. The real fight to fight is one we can all fight, look at our carbon footprint. Improve it. Look at what our community is doing to reduce energy spending. Cant they do better. Reduce the need for oil and coal and the need for drilling will disappear.

This is the typical example where people expect too much of politicians. We are the ones who make the things happen. The bill sucks, and I don't like these oil and coal provisions in it. It sucks as much as the healthcare bill sucks. But we need to set limits to carbon emissions. Setting these limits and setting strong CAFE standards is probably the best thing that can be done to avoid more drilling. For that, this bill needs to pass (improved if possible!). We need to make sure that funds are available in the bill or in a companion bill for mass transportation. We need to make sure funds are available for alternative energy sources and development (and they are).


In addition, while I understand that you are PO by these provisions, I hope you are PO to the caucus as a whole (minus a few exceptions), because there is very little doubt that these provisions would not be there if there was a chance to pass this bill without them. It may actually be my biggest frustration of all with this bill. What is it going to take for those in the Senate who care about these issues to go against those who want to drill.

[Island Blue]

32. I would GLADLY welcome wind farms.

(Not that wind can power vehicles, I realize.) We have a wicked amount of wind here. It blows nearly 24/7/365.

[sandnsea]

34. Wind can power electric vehicles

What kills me is that the northern states already have a system of plug-ins for vehicles. You have to plug in your block heater in the winter so there are lots of places with outdoor plugs. Why electric vehicles aren't tested in these locations is a mystery to me. People have to use electricity for the car heaters anyway. It wouldn't take much to convince them to use it to power their car instead. And you don't really travel distances in the winter unless you have to, it's just too dangerous. I think the problem is just lack of imagination.