Governor Seeks Oil Revenue For Louisiana
Blanco Threatens to Block Federal Auction Of Offshore Leases if Proceeds Aren't Shared
By CHRISTOPHER COOPER
June 5, 2006; Page A4
WASHINGTON -- Federal officials want to open part of the Gulf of Mexico to oil drilling this summer. But their plans are being complicated by Louisiana Gov. Kathleen Blanco, who says she'll try to derail the effort unless Washington shares the proceeds with her state.
Gov. Blanco is bucking an industry she generally has favored, and risks the ire of Washington, which is providing billions of dollars in reconstruction money to her storm-racked state. Even so, she says she will try to block the August auction of offshore oil properties in the western Gulf unless the federal government agrees to help restore the state's wetlands, which scientists say are disappearing at an alarming rate.
These scientists say decades of oil exploration have taken a toll on Louisiana's marshes, which are seen as the most effective way to combat storm surges that accompany hurricanes, such as those of Katrina and Rita, which hit the state last year. It is a problem Congress began addressing last year, when it agreed to provide some $500 million in restoration money. But with federal estimates projecting the state will need as much as $16 billion to restore the Bayou state's marshes and swamps,
Ms. Blanco wants a sustained stream of money to address the problem.
Unlike onshore oil drilling, in which the federal government shares royalties from leased lands through a 50-50 split with the state, Washington has never shared the proceeds from the biggest offshore properties it leases to energy companies.
Ms. Blanco aims to change this. "All we want is what the interior states get," said Blanco spokeswoman Denise Bottcher, who says Gov. Blanco risks angering Congress and the Bush administration just as Capitol Hill is debating the merits of providing several billion dollars in reconstruction money to the state.
"I think where they could be vindictive is on the levee money," Ms. Bottcher said. "But you can't build levees to protect New Orleans if the coast isn't there."
It is unclear whether
Ms. Blanco can force the cancellation of the August lease sale, but she may be able to delay it, since she can file an objection with the Interior Department. If the department rejects her complaint,
Ms. Blanco can appeal to the Commerce secretary. If the Commerce secretary overrides her,
Ms. Blanco has hired a Washington lawyer and threatened a suit. Because that suit would be heard in federal court in New Orleans, a venue presumably sympathetic to her case, some industry officials say
Ms. Blanco's threat could delay or force the cancellation of two oil lease sales in the northern Gulf of Mexico, one in August and one scheduled for next spring.
The western and central Gulf is one of the few areas off the continental U.S. where drilling is allowed, and accounts for about 30% of the nation's domestic oil production. Auctions of these properties generally are held twice a year.
"Some might see this as an idle threat,"
Ms. Blanco told a group of activists in New Orleans last week. "They shouldn't. For decades, Louisiana has made its case. We have asked for a reasonable share of outer continental shelf revenues. And we were snubbed."
The proceeds from offshore oil auctions in the Gulf are significant: With oil prices at historical highs, an auction of offshore oil tracts off Louisiana in March fetched nearly $1 billion in bids from a variety of integrated and independent exploration companies. Though the properties in the proposed August action aren't thought to contain as much oil or natural gas as those in the prior sale, the Interior Department -- which supervises the process -- expects the auction to generate spirited bidding.
It is not unusual for governors to block offshore drilling. Florida has battled Washington in recent years to ban such activity, arguing that the potential for spills vastly outweighs the economic benefit.
Though the Louisiana congressional delegation supports
Ms. Blanco's decision to challenge Washington for a share of the offshore lease proceeds, the strategy troubles some members. The Bush administration endorsed a $4 billion proposal to improve the levee system around New Orleans, but it is included in a supplemental spending bill languishing on Capitol Hill. With enthusiasm for Gulf Coast reconstruction waning in some quarters, congressmen such as Bobby Jindal, a Republican who represents a slice of suburban New Orleans, fret that payback could be in the offing if
Ms. Blanco follows through on her threat. Mr. Jindal and Mary Landrieu, the state's senior senator, have sponsored bills that would force the federal government to share offshore oil lease proceeds.
Mr. Jindal supports
Ms. Blanco's goal of forcing the federal government to share the proceeds but avoided endorsing her legal strategy, saying he would rather "make it moot" by winning passage of his bill. Mr. Jindal says he has been told by the House leadership that his bill will get a hearing this month.
Last week,
Ms. Blanco formally complained that the proposed sale conflicts with Louisiana's coastal-management plan. Her attorney, William Szabo, said he assumes the Interior Department's Minerals Management Service will overrule the governor, after which the Commerce secretary will determine whether her objection has merit. If Commerce overrules her, Mr. Szabo said he intends to file suit against the Minerals Management Service in New Orleans, to block the sale.
A spokesman for the Interior Department said it is considering its response to
Ms. Blanco's objections.
The oil industry opposes the governor's move. Larry Wall, a spokesman for the Mid-Continent Oil and Gas Association, which represents a number of potential bidders for the offshore tracts, says Gov. Blanco is spiting herself by opposing the sale.
He points out that the state gets revenue, indirectly, from the leases, through a severance tax on oil and gas production when the properties are developed. "If she blocks the lease sale, she's going to block revenue sharing," Mr. Wall said. He said that while the association doesn't object to a revenue share from federal auctions, he fails to see the urgency. "We have paid the state billions in royalties and severance taxes over the years, and none of that has been set aside for coastal restoration," Mr. Wall said. "This is not a new problem."
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Several point to make :
Why do they continually refer to her as Ms. Blanco - a subtle disrespect - the title they should be using here is Gov. Blanco....
CA and FL recieve 75% of their offshore leases - if we received a more equidable portion then we might not need as much Federal Funding - but that also means the the Feds would not have CONTROL of the monies - and we are talking A LOT of money.
If the Feds had allotted more to preserving the Wetlands as we have been begging for YEARS - then we might not have the level of damages from Katrina and Rita. Every mile of Wetlands decreases a foot of a hurricane's storm surge. The Barrier Islands have that title for a reason.