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Context of 'June 28, 2005: Senate Energy Bill Provision Would Divert Offshore Oil and Gas Royalties to Louisiana Coastal Restoration'

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US Congress approves plans to construct a defense facility on the island of Diego Garcia in the Chagos Archipelago. (British Royal Courts of Justice 10/9/2003)

After 71 days of negotiations, Congressional Republicans announce that they have agreed on an energy bill that would provide some $20 billion in tax breaks for power companies. (Hulse 11/15/2003; Chaddock 11/19/2003) President Bush voices his support for the bill—drafted mostly by Republicans—which he says will make the US “safer and stronger” by helping to “keep the lights on, the furnaces lit, and the factories running.” He also states, “By making America less reliant on foreign sources of energy, we also will make our nation more secure.” (Hulse 11/15/2003; US President 11/24/2003) To facilitate the bill’s passage through Congress, “negotiators sprinkled in dozens of sweeteners sought by states and congressional districts,” including nearly $1 billion in shoreline restoration projects, tax credits for a company that manufactures fuel from compressed turkey carcasses, and a provision doubling the use of corn-based ethanol as a gasoline additive. The Republican lawmakers also dropped a section that would have opened the Arctic National Wildlife Refuge to oil exploration, as Democrats had made clear that they would vote against any bill containing such a provision. But the Republicans decided against including a Democrat-favored plan to require large utility companies to steadily increase their use of energy from clean, renewable sources such as wind and solar power. (Hulse 11/15/2003; Morgan and Behr 11/16/2003; Pace 11/16/2003; Chaddock 11/19/2003) The bill includes:
bullet A provision introduced by House Majority Leader Tom DeLay that would provide energy companies and universities with $2 billion in subsidies over the next 10 years for research and development of ultra deep-water oil exploration techniques and “unconventional” natural gas extraction. (Behr and Morgan 11/16/2003; Pace 11/16/2003; Chaddock 11/19/2003)
bullet A controversial provision granting Gulf Coast refiners of the fuel additive MTBE $2 billion in subsidies to assist them in the phasing out of MTBE production. The phase-out, originally proposed to take 4 years, is extended to 10 by the bill. MTBE, or methyl tertiary-butyl ether, which helps decrease smog, is known to contaminate groundwater. The new energy bill would also prevent communities from bringing product liability lawsuits against the manufacturers of MTBE. Tom Delay was a strong supporter of this provision, as were other legislators from Louisiana and Texas, where MTBE is produced. (Hulse 11/15/2003; Behr and Morgan 11/16/2003; Pace 11/16/2003; Chaddock 11/19/2003)
bullet A section dealing with the electric grid that would require large power companies to meet new mandatory reliability standards. (Hulse 11/15/2003; Wald 11/16/2003)
bullet Royalty relief to the owners of marginal oil and gas wells. The program would apply to approximately 80 percent of all wells on federal lands. (Chaddock 11/19/2003)
bullet A provision that would allow taxpayer money to fund the clean-up of leaking underground gasoline storage tanks (LUST). (Natural Resources Defense Council et al. 11/17/2003)
bullet A provision authorizing Alaska’s “Denali Commission” to use over $1 billion on hydroelectric and other energy projects on Alaska Federal Lands. (Natural Resources Defense Council et al. 11/17/2003)
bullet A provision permitting urban areas like Dallas-Ft. Worth, Washington, DC and southwestern Michigan to further delay efforts to reduce air pollution, “an action that will place a significant burden on states and municipalities down-wind of these urban centers.” (Natural Resources Defense Council et al. 11/17/2003)
bullet $100 million/year in production tax credits for the construction of up to four light-water nuclear reactors. (Morgan and Behr 11/16/2003; Chaddock 11/19/2003)
bullet Loan guarantees for building a $20 billion trans-Alaska natural gas pipeline. But officials of ConocoPhillips, a major backer of the project, complain that the bill’s incentives are insufficient to get the project moving. (Pace 11/16/2003; Morgan and Behr 11/16/2003)
bullet Tax incentives to encourage wind power generators, energy-efficient homes and hybrid passenger cars running on gasoline and batteries. Additionally, it sets aside funds for equipping government buildings with photovoltaic cells and developing energy-efficient traffic lights. The package also allocates $6.2 million to encourage bicycle use. But according to a preliminary estimate by the American Council for an Energy-Efficient Economy, these progressive reforms would eliminate only about three months worth of energy use between now and 2020. (Morgan and Behr 11/16/2003)
bullet A repeal of the 1935 Public Utility Holding Company Act, which limits utility industry mergers. This provision was a top priority for the electric power industry and the White House. (Morgan and Behr 11/16/2003) Senator Pete V. Domenici, Republican of New Mexico and chairman of the conference committee charged with resolving differences between the House and Senate bills, acknowledge to the New York Times that the bill will likely be criticized. (Hulse 11/15/2003)

In a six-page letter to the congressional conference-committee charged with combining the House (see April 21, 2005) and Senate (see June 28, 2005) versions of the 2005 Energy Policy Act (HR 6), Energy Secretary Samuel W. Bodman expresses the Bush administration’s strong opposition to a provision that would grant coastal oil-producing states like Louisiana a share of the royalties from offshore oil and gas operations. Historically, the royalties have been paid exclusively to the federal government. (McKnight and Gaudet 7/21/2005; Gaudet 7/23/2005; Scherer 9/1/2005) Bodman writes in his letter that “The administration strongly opposes” the new funding. “These provisions are inconsistent with the president’s 2006 budget and would have a significant impact on the budget deficit.” (Scherer 9/1/2005) The statement also says, “The administration recognizes that coastal Louisiana is an environmental resource of national significance and has worked closely with the state of Louisiana to produce a near-term coastal wetlands restoration plan to guide how the next phase of restoration projects in Louisiana will be identified, prioritized, and sequenced.” (McKnight and Gaudet 7/21/2005) Craig Stevens, the press secretary for the Department of Energy, later explains to Salon: “We didn’t object to the idea in principle. [Rather, we objected to] part of the way it was crafted.” (Scherer 9/1/2005) Bodman also takes issue with the House’s WRDA bill (see April 13, 2005). WRDA, or the Water Resources Development Act, provides federal authorization for water resources projects. The House bill would require the federal government to pay 65 percent of the cost of the Louisiana Coastal Area (LCA) restoration project, leaving the remaining 35 percent for state and local governments to pay. “The cost-share paid by the general taxpayer for the Everglades restoration effort is 50 percent, and this should likewise be the maximum federal contribution for the Upper Mississippi River and Illinois Waterway and coastal Louisiana restoration efforts.” If the Fed’s portion of the bill were 65 percent, the letter argues, it would “create expectations for future appropriations that cannot be met given competing spending priorities within the overall need for spending restraint, including deficit reduction.” Adam Sharp, spokesman for Senator Mary Landrieu (D-LA), notes however that the 50-50 cost-share formula for the Everglades is an exception to the Corps’ practice, not the rule. Indeed, in January (see January 2005), the Corps recommended the 65-35 cost share formula in its report on the coastal plan to Congress saying that such a split would be “consistent with existing law and Corps policy.” (McKnight and Gaudet 7/21/2005)

the US Army Corps of Engineers submits the final draft of the Louisiana Coastal Area (LCA) Ecosystem Restoration Study to Congress for WRDA authorization. WRDA, or the Water Resources Development Act, provides federal authorization for water resources projects. The Corps recommends that Congress approve a federal-state cost sharing ration of 65 percent federal, 35 percent state. A 65-35 split would be “consistent with existing law and Corps policy,” the Corps says. (McKnight and Gaudet 7/21/2005)

The Senate Environment and Public Works Committee approves the Water Resources Development Act (WRDA) of 2005 (S.728), which includes authorization (but not appropriation of funds) for the $1.9 billion Louisiana Coastal Area (LCA) Ecosystem Restoration Study. The federal contribution to the project would be 65 percent, with the State of Louisiana, paying the remainder. “This legislation is a major breakthrough toward ensuring the future of our unique way of life in coastal Louisiana,” Rep. David Vitter, (R-LA), says in a statement. “It is critical for this authorization to be included in WRDA so that Congress can aggressively appropriate federal funds to restore Louisiana’s coast.” (Shields 4/17/2005)

The House passes its version of the 2005 Energy Policy Act (HR 6). One provision, secured by Louisiana Congressman Bobby Jindal, (R-Kenner), would provide Louisiana with up to $1 billion in offshore oil and gas royalties every year beginning in 2016. Louisiana and its coastal parishes would use the money to fund coastal wetland restoration efforts. Historically, offshore gas and oil royalties have been paid exclusively to the federal government, since these operations are conducted on federal territory. But Louisiana has long argued that a portion of this money should be used to help fund efforts aimed at restoring Louisiana’s coastal wetlands, the disappearance of which has been partly attributed to Gulf Coast oil and gas operations. A similar provision is included in the Senate version of the bill (see June 28, 2005). (Shields 4/17/2005)

The Senate passes its version of the 2005 Energy Policy Act (HR 6). Like the House version of the bill (see April 21, 2005), it includes a provision that would divert a portion of offshore oil and gas royalties to coastal energy producing states like Louisiana. But unlike the House version, which would give Louisiana $1 billion in royalties every year beginning in 2016, the Senate version would only provide Louisiana with $540 million over a four-year period beginning in fiscal year 2007. Louisiana would use the money to fund projects aimed at restoring the state’s coastal wetlands. The bill is referred to a conference committee (see July 29, 2005) charged with resolving the differences between the House and Senate versions. (Shields 6/23/2005)

Several prominent former Louisiana politicians sign a letter urging President Bush to support the 2005 Energy Policy Act (HR 6)‘s provisions for revenue sharing (see April 21, 2005) (see June 28, 2005). Endorsed by former Governors Mike Foster (R-LA), Buddy Roemer (R-LA), David Treen (R-LA) and former Senators John Breaux (D-LA) and J. Bennett Johnston (D-LA), the letter states: “Louisiana puts an average of $5 billion each year into the Federal treasury from revenues produced off its shore. Energy Bill provisions that would give a meaningful share of those revenues through direct payments to Louisiana and other coastal states that host so much of the nation’s energy production are critical.” (Burdeau 7/22/2005; Louisiana 7/22/2005)

In a letter to President Bush, Louisiana Governor Kathleen Blanco urges the president and his energy secretary, Samuel W. Bodman, to visit the Louisiana coast and see first-hand the deteriorating condition of the state’s coastal wetlands. She wants the administration to reconsider its objection (see July 15, 2004) to a provision in the House (see April 21, 2005) and Senate (see June 28, 2005) versions of the 2005 Energy Policy Act (HR 6) that would channel oil and gas royalties from offshore operations to coastal states for coastal wetland restoration. In her letter, she emphasizes how Louisiana’s disappearing wetlands is making the oil and gas industry’s vast network of pipelines increasingly vulnerable to damage. She also stresses that coastal wetlands have historically protected the coast from the full fury of hurricanes and, without this barrier, a major hurricane could devastate low-elevation coastal communities like New Orleans. “Let me show you the fragile wetlands that are the only protection for the thousands of miles of pipelines that connect this nation to 80 percent of its offshore energy supply and to a full third of all its oil and gas, both foreign and domestic. The vulnerability of those protective wetlands is all the more apparent to our two million coastal zone residents during this active hurricane season.” (Louisiana 7/20/2005; McKnight and Gaudet 7/21/2005)

A House and Senate conference committee working to consolidate conflicting House and Senate versions of the 2005 Energy Policy Act (HR 6) agree on a final draft. One conflict between the two versions was a provision that would require the federal government to share royalties from offshore oil and gas operations with coastal oil-producing states. The committee decides in favor of the Senate version (see June 28, 2005), which would provide coastal states with about $1 billion dollars over a period of four years. Most of the money, $540 million, would go to Louisiana. The House version (see April 21, 2005) of the bill would have provided $1 billion in oil and gas royalties annually to Louisiana, but not until 2016. That version was rejected as was a proposal put forth by the Bush administration (see July 22, 2005) that would have reduced Louisiana’s share to only $54 million. Bush signs the bill into law on August 8. (Alpert 7/26/2005; Milligan 9/1/2005)


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