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Louisiana coastal projects are funded by an unlikely source. What happens when the money runs out?

A dredging pipe is primed before sediment is placed at the site of the $100 million Spanish Pass project in Venice on Wednesday, Nov. 3, 2021. The project is building a 7-mile ridge and marsh with Mississippi River sediment to buffer Barataria Bay against future storm surge. State officials warn that funds for such projects will be harder to find after 2031, when money from BP Deepwater Horizon oil spill settlements will have run out.

Posted on March 29, 2023

They’re calling it the “coastal cliff” — and Louisiana could almost literally fall off the edge.

It refers to that day in 2032 when Louisiana’s available funds for building hurricane protection and coastal restoration projects drops from the present average of more than $1 billion a year to just $200 million or less. That’s because financing related to the 2010 BP Deepwater Horizon oil spill will run out by then, and the state has not yet succeeded in finding a way to replace that yawning budget gap.

It’s why a delegation of state and local officials walked the halls of the U.S. Capitol last week, meeting with 71 members of Congress to gain their support for legislation that would give Louisiana a greater share of Gulf offshore oil and gas revenue. That revenue sharing might also include offshore wind energy development expected to begin in the Gulf later this year.

Without that legislation or some other funding mechanism, building projects to slow the land loss tearing away at Louisiana’s coast becomes far more challenging in the years ahead. The chairman of the state’s Coastal Protection and Restoration Authority, Chip Kline, recently spoke of the dangers that future problem poses to Louisiana’s ambitious 50-year, $50 billion master plan for the coast.

“You are reverting back to the coastal program of the mid-2000s,” Kline said of the looming funding gap at a recent meeting of the authority’s board. “You’re going to go from a $1.7 billion annual plan that is implementing projects that have been envisioned for years, and if we don’t supplement that with additional revenues, the progress is going to halt.”

Coastal Protection and Restoration Authority chairman Chip Kline, left, and other state officials discuss revenue sharing options that would benefit coastal restoration and hurricane flood risk reduction in Louisiana with House Majority Leader Steve Scalise, R-Jefferson, on Wednesday in a U.S. Capitol conference room.

One solution under discussion is the Lower Energy Costs Act, federal legislation sponsored by House Majority Leader Steve Scalise, R-Jefferson. It includes a version of what was previously known as the BREEZE Act, which would increase state revenue sharing of offshore oil and gas revenue from 37.5% to 50%. It would also extend revenue sharing to offshore wind energy in federal waters, including the Gulf of Mexico.

Coastal authority executive director Bren Haase said the state now has a “trifecta” of positives supporting restoration and flood protection: a science-based plan, political will to move projects forward and funding.

“But of the three, the most fragile is funding,” he said, and that’s been clear since the approval in 2007 of the initial Coastal Master Plan, which is updated every six years.

‘Wouldn’t be done’

It was the settlement funds and fines stemming from the Deepwater Horizon disaster that allowed many of the goals of the first three versions of the Master Plan to move forward, Haase said. But the state’s coastline will continue to erode, despite the projects that have been or are being completed, and flood risks will continue to pose challenges, he said.

“We often cite the stat that we’ve secured about $20 billion or $22 billion for the coastal program, and folks say, ‘Man, you’re almost half-way there!’” Haase said, referring to the $50 billion Master Plan. “Well the reality is that if we were to implement $50 billion worth of coastal restoration and protection over the next several years – even though that would be nearly impossible to do — we still wouldn’t be done with this problem. This is not a problem where you can expend a certain amount of money and say, ‘We’re good, we’re done,’ and walk away from it.”

The state counts 23 different revenue streams to fund restoration and flood risk reduction projects in its plan for the 2024 fiscal year, to be considered by the Legislature later this spring.

This chart shows how $1.74 billion proposed for the state’s 2024 annual coastal restoration and hurricane flooding risk reduction plan would be spent.

The biggest chunks are coming from BP funds:

  • $5 billion through a settlement stemming from the federal Oil Pollution Act, with all the money going to restoration projects, including more than $2 billion set aside for the Mid-Barataria Sediment Diversion. The last of the money will be delivered in 2031.
  • The National Fish & Wildlife Foundation was given $1.272 billion dedicated to Louisiana barrier island restoration and sediment diversion projects as part of a settlement of criminal charges with BP and Transocean, owner of the Deepwater Horizon oil rig.
  • The state also expects to receive just over $1 billion from the federal RESTORE Act, which is distributing the major share of Clean Water Act fine money collected from BP and its drilling partners to Gulf Coast states. That money also is being delivered in annual installments that will end in 2031.

The state’s next biggest — and more permanent – supply of money for coastal projects comes from the federal Gulf of Mexico Energy Security Act, known as GOMESA, which provides the state with 37.5% of revenue from certain offshore oil and gas projects in federal waters off the state’s coast.

The trip to Washington was aimed at removing a cap that limits annual payments to the state under that law to about $132 million a year and to 20 coastal parishes to about $33 million a year. State officials think that, if the cap is removed, additional exploration and production in the Gulf could result in the state receiving $285 million a year and parishes receiving $70 million a year by 2032.

Help from the wind?

Less clear is the potential funding the state might receive if Congress were to extend GOMESA revenue sharing to offshore wind energy production. A recent lease sale off the coast of New York resulted in a payment to the federal government of $4.37 billion.

Rep. Joseph Orgeron, R-LaPlace, has pre-filed a bill for the upcoming legislative session that would amend the state Constitution to require money from offshore wind to go into the state’s coastal trust fund, where it could only be used for restoration or flood risk reduction projects.

This graphic compares revenue from 2023 and 2024 with revenue streams that may be available in 2032 after money connected to the BP oil spill will no longer be available.

The state expects to continue to receive some funds through the federal Coastal Wetlands Planning, Protection and Restoration Act, which is dedicated to restoration projects.

Since its inception in 1990, this law has resulted in the state getting between $30 and $80 million a year, with the money coming from a federal tax on fuels used by small engines, such as outboard motors. The state is required to put up 15% of its own money as part of this program. No changes are expected in this law.

The state also already dedicates a share of its own mineral revenues to the coastal protection and restoration trust fund, but while this resulted in up to $30 million a year available for projects in the past, reductions in oil and gas production in the state have left only $12 million being available in recent years.

Beyond those, coastal projects have benefited from a share of state surplus dollars in 2007, 2008, 2009, 2018, 2020, 2021, 2022, and possibly again this year. But the amounts also have been limited, ranging from $51 million in 2021, to an average of $263 million for the 2007-2009 years.

Officials hope that revenue could be gained from the potential for coastal restoration projects to capture and hold carbon emissions. Wetland grasses use carbon dioxide to grow, and when they die, the carbon within the organic material gets buried in sediment, and can stay in place until the land beneath the wetlands is eroded.

The problem is attempting to monetize the sequestration by selling credits to businesses that need to show they are reducing carbon emissions, or by getting federal funding for the credits. Development of such a plan is likely several years away, although a consortium of northeastern states already has created a similar voluntary credit plan.

There is also potential revenue coming to the state through the filing of 43 lawsuits against oil and gas companies by coastal parishes, which proponents of the suits say could result in billions of dollars in damage payments or restoration projects. The lawsuits are seeking to force oil firms to pay for damage their operations have done to the coast over the years.

The U.S. Supreme Court last month refused to hear an appeal by energy companies, sending the first of those lawsuits back to state court. The first of the cases could see a court date as early as this fall.


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