Posted on December 14, 2022
Whether Louisiana and other coastal states with offshore energy production soon receive additional billions in royalty payments depends on the partisan fight over funding the federal government that will dominate Congress this week.
Reinvesting In Shoreline Economies and Ecosystems Act of 2022, called RISEE, would do a lot of things, such as set up a revenue-sharing framework for the burgeoning wind energy industry. More important for Louisiana and other states along the Gulf of Mexico, RISEE would remove the caps on what the federal government pays states in royalties for offshore energy production in federal waters. That would reap billions of dollars annually for state and local governments, extending to all states with a coastline under the legislation.
After years of work and a rare unanimous committee vote in July, RISEE was set for the final votes to enact it into law. But the legislation languished on the calendar — a victim of an enormous waiting line of bills needing further action and of deliberative Senate procedures that require specified waits between multiple votes before a measure is passed. If RISEE doesn’t clear legislative hurdles in 19 days, supporters have to start over from scratch — really, that deadline is Friday, when the 117th Congress is scheduled to end.
Those same eccentric Senate rules also give the RISEE bill one final chance, provided the legislation can be attached and tied to the vote on the annual spending authorization measure. Both Louisiana’s U.S. senators — Bill Cassidy, R-Baton Rouge, and John N. Kennedy, R-Madisonville — are lobbying leadership to attach RISEE like a Christmas tree ornament to the bill or bills that would authorize spending on federal government programs and agencies for the coming year.
If Congress fails to pass the spending package by Friday, the federal government shuts down. And if RISEE is not attached to the annual spending bill or if the spending bill fails and government shuts down, it’s back to the drawing board for promoters. They will have to begin again in January when the new 118th Congress takes office.
“This is the result of several years work to increase funding for coastal restoration for Louisiana,” Cassidy said Friday. He and Rhode Island Democratic Sen. Sheldon Whitehouse co-sponsored the legislation.
“We are working with House and Senate members of both parties to get it passed into law. This is the closest we’ve been to getting this win for Louisiana,” Cassidy added.
As oil and gas plays closer to shore started petering out and drilling technology improved, the federal government over the past 50 years opened up and incentivized more drilling and production in the deeper waters controlled by the national government.
About 2 million barrels of oil per day can now be produced in the federal waters off the coast of Alabama, Texas, Louisiana and Mississippi alone. That’s about 700 million barrels annually — close to 20% of all U.S. oil production, according to the U.S. Bureau of Ocean Energy Management, Regulation and Enforcement.
Until 2006, Louisiana and the other Gulf states got none of that money because the oil and natural gas was being produced in U.S. territorial waters that begin roughly nine nautical miles offshore. The Gulf of Mexico Energy Security Act, called GOMESA, was then passed and created a revenue sharing framework to offset local impacts of an activity that raises significant money for the federal government.
Louisiana’s 2020 cut under GOMESA was $155.7 million, which was split between state and parish governments. Texas, Mississippi and Alabama receive money from their GOMESA shares.
But the kick from the federal government could be much more.
Due to budget and political issues back in 2005-2006, GOMESA caps how much money the federal government pays the states regardless of the amount the state’s share actually generates.
RISEE would lift that cap and expand federal revenue sharing to 38 coastal states, including those lining the Great Lakes.
The legislation also would establish a revenue-sharing model from the very beginning of the nascent offshore wind energy industry, which generates power using windmills. The United States government netted $4.37 billion from the sale last week of six wind leases off the coasts of New York and New Jersey. That would amount to about $1.64 billion for the states under the 37.5% uncapped revenue share detailed in RISEE.
RISEE also would create a dedicated revenue stream to the National Oceans and Coastal Security Fund, which provides grants to coastal and Great Lakes communities to respond to coastal erosion, sea level rise, and make improvements to coastal infrastructure.
“So, it’s really a significant piece of legislation that has multiple benefits to every coastal state in America and every coastal community,” Mary Landrieu said Friday. The former Louisiana U.S. senator was instrumental in getting GOMESA passed in 2006 and is now advising the Louisiana Coastal Protection and Restoration Authority.
“It does not expand or mandate offshore oil and gas drilling,” Landrieu said. “It simply says if the federal government and the communities agree to develop these resources, which is the process now, the coastal states and their communities will not be left alone to bear the total brunt and negative impacts of these federal revenue producing enterprises.”
Twenty-two senators from both parties have signed on as co-sponsors as have 23 representatives. Two dozen environmental organizations and trade groups as well as nine governors have written asking House and Senate leadership to pass RISEE.
But the passage of RISEE is subject to the vagaries of the federal government spending authorization fight that will take place this week. And, so far, Democrats and Republicans haven’t yet agreed on just how much money is available to spend, known as the top line. A higher top line would allow more money to be spent on programs administered by federal agencies, while a lower top line would reduce the amounts of funding available.
“With a week left before the deadline, we’re far behind because the Democrats have refused to negotiate on the top-line spending amounts and have yet to meet us at the negotiating table,” said U.S. Rep. Julia Letlow, the Start Republican who is on the House Appropriations Committee. “We still have countless issues to resolve in these spending bills, and I hope we can begin work on those soon.”
If lawmakers can’t come to an agreement, there’s the possibility of passing a continuing resolution, or CR, which would allow government to continue operating after Friday for a specified time at previous funding levels until Congress can find some agreement on the spending plan. But that would mean the Republicans, who became the majority in the congressional midterm elections last month, would in January take control from the Democrats.
House Minority Whip Steve Scalise, R-Jefferson, and the GOP leadership have voiced a preference to voting on the dozen appropriations bills that address spending in the individual agencies.
Democrats favor the idea of sticking everything into a single omnibus bill, which would circumvent many of the procedural hurdles in order to be passed by the end of the week.
Sen. Patrick Leahy, the Vermont Democrat who chairs the Senate Appropriations Committee, is expected to release an omnibus bill on Monday, the Democratic starting point for negotiations, said U.S. Sen. John N. Kennedy, a Madisonville Republican who is a member of the committee. He wants to see legislation that would reduce spending growth and lower of debt accumulation in order to better fight inflation.
Kennedy also said he thinks Senate Minority Leader Mitch McConnell, R-Kentucky, favors going with an omnibus spending bill that would be negotiated between the “four corners”— that is, the leaders of each party in each chamber: McConnell and House Minority Leader Kevin McCarthy, R-Calif., for the Republicans, and Senate Majority Chuck Schumer, D-New York, and House Speaker Nancy Pelosi, D-California, for the Democrats.
Under the rules, senators and representatives can decorate an omnibus Christmas tree with bills that haven’t made it through the process. That procedure allows leaders to secure votes of individual senators and representatives.
Attaching those legislative ornaments to the separate bills authorizing spending for each of the dozen major federal agencies also is allowed, but clearing the hurdles in the time available is difficult.
A continuing resolution, that is waiting until next year to decide, generally doesn’t allow for attaching additional measures because basically CRs authorize spending at current levels until a decision is made.
“I know Sen. McConnell has talked about the growing possibility of a CR, but I frankly think that’s trying to scare the Democrats,” Kennedy said. “The issue is whether Pelosi and Schumer will give in and if so, how much? If they do give in and McConnell determines it is a sufficient amount, he can put together the 10 Republicans to vote to pass omnibus.”
Landrieu said she doesn’t care whether the vehicle is in an omnibus or the dozen individual bills — as long as one of them includes the RISEE legislation.
“One, two, five, 12 bills, that’s not important. What’s important is that RISEE gets added and gets passed,” she said.
- Eliminates the state revenue sharing cap, currently at $375 million.
- Lifts the Land & Water Conservation Fund’s state-side funding cap of $125 million.
- Creates a new national offshore wind revenue sharing program with monies divided as follows: 50% to the Treasury, 37.5% to states, 12.5% to the National Oceans & Coastal Security Fund. How eligible states would receive dollars from offshore is determined by a formula contained in the legislation.
- Enhances transparency on how states fund projects.
- Clarifies that funding cannot be used on projects “primarily for entertainment purposes.”
- Eliminates the administrative fee to increase the federal revenues available for inland producing states.