Order Code IB10149
CRS Issue Brief for Congress
Received through the CRS Web
Outer Continental Shelf:
Debate Over Oil and Gas Leasing
and Revenue Sharing
Updated October 27, 2005
Marc Humphries
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress
CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
Offshore Leasing System
Federal Distribution of OCS Revenues
Offshore Leasing Moratoria
California Leases
Lease Development in the Gulf of Mexico
Barriers to Development
LEGISLATION
FOR ADDITIONAL READING
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Outer Continental Shelf:
Debate Over Oil and Gas Leasing and Revenue Sharing
SUMMARY
Budget reconciliation provisions ap-
five-year leasing programs that specify the
proved by the House Resources Committee
time, location, and size of the leases to be
October 26, 2005, would allow states to opt
offered. The outer continental shelf is defined
out of longstanding moratoria on oil and gas
as submerged lands, subsoil, and seabed
leasing on the outer continental shelf (OCS).
between the seaward extent of states’ jurisdic-
States that agreed to allow such leasing would
tion and the seaward extent of federal jurisdic-
receive a larger share of royalty revenues.
tion.
The OCS moratoria, which prohibit
States with offshore energy development
leasing on most federal offshore lands, have
have been seeking to receive a direct share of
been an important issue in the debate over
the federal revenues generated by those activi-
energy security and the potential availability
ties. Currently, the affected states receive
of additional domestic oil and gas resources.
revenue indirectly from offshore oil and gas
Congress has enacted the moratoria for each
leases in federal waters. This is in contrast to
of fiscal years 1982-2006 in the annual Inte-
states with onshore leases on federal lands,
rior Appropriations bill. Proponents of the
which receive a direct share of the oil and gas
moratoria contend that offshore drilling would
leasing revenues. The state share of OCS
pose unacceptable environmental risks and
revenues would be increased by a bill intro-
threaten coastal tourism industries.
duced by Senator Landrieu on September 22,
2005 (S. 1765).
President George H.W. Bush, in 1990,
responding to pressure from the states of
The possibility of oil and gas production
Florida and California, and others concerned
in offshore areas covered by the moratoria has
about protecting the ocean and coastal envi-
sparked sharp debate in Congress. A proposal
ronments, issued a Presidential Directive
to require the Department of the Interior to
ordering the Department of the Interior not to
conduct a comprehensive inventory of OCS
conduct offshore leasing or preleasing activity
oil and natural gas resources drew heated
in places other than Texas, Louisiana, Ala-
opposition, although it was ultimately in-
bama, and parts of Alaska — areas covered by
cluded in the Energy Policy Act of 2005 (P.L.
the annual legislative moratoria — until 2000.
109-58, Section 357). Opponents of the OCS
In 1998 President Clinton extended the prohi-
inventory saw it as a first step toward lifting
bition until 2012.
the OCS leasing moratoria. The House Re-
sources budget reconciliation package would
The Outer Continental Shelf Lands Act
also repeal the inventory requirement.
(OCSLA) of 1953, as amended, provides for
oil and gas leasing of OCS lands in a manner
Even if more of the OCS is opened to oil
that protects the environment and returns
and gas leasing, there may be constraints to
revenues to the federal government in the way
development, such as the availability of off-
of bonus bids, rents, and royalties. OCSLA
shore drilling rigs and production platforms.
requires the Secretary of the Interior to submit
Congressional Research Service ˜ The Library of Congress
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MOST RECENT DEVELOPMENTS
Budget reconciliation provisions approved by the House Resources Committee October
26 would let states to opt out of longstanding moratoria on oil and gas leasing on the outer
continental shelf (OCS). Titled the Ocean State Options Act of 2005, the OCS provisions
would give states allowing such leasing a larger share of royalty revenues.
A bill introduced by Senator Landrieu September 22, the Louisiana Katrina
Reconstruction Act (S. 1765), would increase states’ share of certain OCS revenues.
The Department of the Interior is required to conduct a comprehensive inventory of
OCS oil and natural gas resources by the Energy Policy Act of 2005 (P.L. 109-58, Section
357), signed by the President August 8. The inventory requirement would be repealed by the
House Resources budget reconciliation package.
BACKGROUND AND ANALYSIS
Oil and gas leasing has been prohibited on most of the outer continental shelf (OCS)
since the 1980s. Congress has enacted OCS leasing moratoria for each of fiscal years 1982-
2006 in the annual Interior Appropriations bill, allowing leasing only in the Gulf of Mexico
(except near Florida) and parts of Alaska. President George H.W. Bush in 1990 issued a
Presidential Directive ordering the Department of the Interior not to conduct offshore leasing
or preleasing activity in areas covered by the annual legislative moratoria until 2000. In 1998
President Clinton extended the offshore leasing prohibition until 2012.
Proponents of the moratoria contend that offshore drilling would pose unacceptable
environmental risks and threaten coastal tourism industries, while supporters of expanded
offshore leasing counter that more domestic oil and gas production is vital for the nation’s
energy security.
The possibility of oil and gas production in offshore areas covered by the moratoria has
sparked sharp debate in Congress. A proposal to require the Department of the Interior to
conduct a comprehensive inventory of OCS oil and natural gas resources drew heated
opposition, although it was ultimately included in the Energy Policy Act of 2005 (P.L. 109-
58, Section 357). Opponents of the OCS inventory saw it as a first step toward lifting the
OCS leasing moratoria.
Budget reconciliation provisions approved by the House Resources Committee October
26, 2005, would allow states to opt out of the OCS leasing moratoria and give states that
allowed such leasing a larger share of royalty revenues. The OCS inventory in the Energy
Policy Act would be repealed. The Committee estimates that the leasing provisions would
raise $600-$800 million for the federal government over five years but only $300 million
over 10 years because of the larger state revenue share.1
1 Evans, Ben. “House Panel Votes to Open Refuge to Oil Leasing, Expand Offshore Drilling.” CQ
(continued...)
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Although no similar OCS leasing provision is included in the Senate budget
reconciliation package, there has been interest in the Senate in leasing additional acreage,
immediately, within Lease Sale 181 (discussed later in this report) in the Eastern Gulf of
Mexico (GOM). Industry analysts believe this area contains significant natural gas deposits.
The area of interest, not included in the moratoria, was removed from the original lease sale
because it was considered too close to Florida’s coastline, and was placed off-limits until
after the current five-year leasing plan (2002-2007). Most of the Eastern GOM and the
Pacific and Atlantic coasts are included in the OCS moratoria.
Offshore Leasing System
The Outer Continental Shelf Lands Act (OCSLA) of 1953, as amended, provides for the
leasing of OCS lands in a manner that protects the environment and returns revenues to the
federal government in the form of bonus bids, rents, and royalties. OCSLA requires the
Secretary of the Interior to submit five-year leasing programs that specify the time, location,
and size of the leases to be offered. Each five-year leasing program entails a lengthy multi-
step process including environmental impact statements. After a public comment period, a
final proposed plan is submitted to the President and Congress. The latest plan went into
effect July 1, 2002. Public hearings for the 2007-2012 leasing program are underway. States
and interest groups are filing comments on future lease sale areas for the 2007-2012 leasing
program.
The offshore leasing program is administered by the Minerals Management Service
(MMS), an agency within the Department of the Interior. The MMS is scheduled to conduct
20 OCS oil and natural gas lease sales during the current five-year program from 2002-2007.
Half of those sales will be in the Western or Central Gulf of Mexico (GOM), two in the
Eastern GOM and the remainder around Alaska. Alaska’s lease sales will be held in the
Beaufort Sea, Norton Basin, Cook Inlet (not referenced on map below), and the Chukchi
Sea/Hope Basin (see figure 2). To date, nine of the twelve GOM lease sales and four of the
seven Alaska lease sales have taken place. MMS defines the OCS as submerged lands,
subsoil, and seabed between the seaward extent of states’ jurisdiction and the seaward extent
of federal jurisdiction.
Lease sales are conducted through a competitive, sealed bonus bidding process, and
leases are awarded to the highest bidder. Successful bidders make an up-front cash payment,
called a bonus bid, to secure a lease. A minimum bonus bid is determined for each tract
offered. Over the past 13 years annual bonus revenues have ranged from $85 million in 1992
to $1.4 billion in 1997. Bidding on deepwater tracts in the mid-1990’s led to the surge in
bonus revenue.2 Bonus bids totaled $523.4 million in FY2004. In addition to the cash bonus
bid, a royalty rate of 12.5% or 16.66% is imposed on the value of production depending on
1 (...continued)
Today. October 26, 2005.
2 Department of the Interior, FY2002 Budget Justifications, p. 63.
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location factors, or the royalty is received “in-kind.”3 The rate could be higher than 16.66%
depending on the lease sale. Annual rents are $3-$5 per acre, with lease sizes generally
ranging from 2,500-5,760 acres. Initial lease terms of 5-10 years are standard and leases
continue as long as commercial quantities are being produced. Bonding requirements are
$50,000 per lease and as much as $3 million for an entire area. The Secretary of the Interior
may reduce or eliminate the royalty established by the lease in order to promote increased
recovery.
Federal Distribution of OCS Revenues
Federal revenues from offshore leases were estimated at $5.3 billion in FY2004 by the
MMS. Over the previous 10 years (1994-2003) revenues from federal OCS leases had
reached as high as $7.5 billion in 2001. Revenues were as low as $3.2 billion in 1999.
Higher prices for oil and gas are the most significant factors in the revenue swings. Of the
$5.3 billion revenue in FY2004, $4.6 billion was from royalties.
Figure 1. Distribution of Revenue from Federal and
Indian Leases, FY2004
(million of dollars)
U.S. Treasury
$4,663.50
Land & Water Conservation Fund
$899.00
Historic Preservation Fund
$150.00
American Indian Tribe & Allotees
States' Share
$344.30
$1,248.70
Reclamation Fund
$924.50
U.S. Treasury
Land & Water Conservation Fund
States' Share
Reclamation Fund
American Indian Tribe & Allotees
Historic Preservation Fund
These revenues are split among various government accounts. Revenues from the
offshore leases are statutorily allocated among the coastal states, Land and Water
Conservation Fund, the National Historic Preservation Fund, and the U.S. Treasury. For
distribution of all revenue from federal leases, see figure 1. The states’ share from offshore
leases was $75.8 million out of $1,248.7 million in total state receipts. States receive 27%of
3 A royalty-in-kind payment would be in the form of barrels of oil or cubic feet of natural gas.
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OCS receipts closest to state offshore lands under section 8(g)4 of the OCSLA amendments
of 1985. A dispute over what was meant by a “fair and equitable” division of those receipts
was not settled until 1985 with the enactment of P.L. 99-272.5
For onshore public domain leases, states generally receive 50% of rents, bonuses, and
royalties collected. Alaska, however, receives 90% of all revenues collected on public
domain leases.
Coastal Impact Assistance
States with offshore energy development in federal waters6 have been seeking to return
a significant portion of the federal revenues generated to these states. They particularly want
more assistance for coastal areas that may be most affected by onshore and near-shore
activities that support offshore energy development. Proponents of these proposals look to
the rates at which funds are given to jurisdictions where energy development occurs within
those jurisdictions on federal lands, and seek revenues that will help coastal states respond
to adverse onshore effects of offshore energy development. Coastal destruction has received
more attention in Louisiana, where many square miles of wetlands are being lost to the ocean
each year. And one of the causes of this loss is thought to be wide-spread energy related
development. Currently, the affected states receive revenue indirectly from offshore oil and
gas leases in federal waters. This is in contrast to states with onshore leases on federal lands,
as noted above.
There are two fundamental purposes for revenue sharing programs, according to the
Coastal Impact Assistance Working Group (an MMS advisory group): 1) to fund projects
that will mitigate the environmental and economic impact of OCS energy development,
including the need for infrastructure and public services, and 2) to help sustain development
of nonrenewable energy sources.7
Two federal revenue sharing programs addressed coastal impacts from OCS energy
development: 1) the now-expired Coastal Energy Impact Program (CEIP) established as an
4 The 8(g) revenue stream is the result of a 1978 OCSLA amendment that provides for a “fair and
equitable” sharing of revenues from 8(g) common pool lands. These lands are defined in the
amendments as submerged acreage lying outside the 3-nautical mile state-federal demarcation line,
typically extending to a total of 6 nautical miles offshore but which include a pool of oil common
to both federal and state jurisdiction. The states’ share of the revenue (27%) was established by the
OCSLA amendments of 1985 (P.L. 99-272) and is paid directly to the states. Payments to the states
previously had been placed in escrow, then were paid out between 1986 and 2001.
5 Department of the Interior, Minerals Management Service, Mineral Revenues 2000, p. 95.
6 State jurisdiction is typically limited to 3 nautical miles seaward of the baseline from which the
breadth of the territorial sea is measured. However, the state jurisdiction off the Gulf Coast of
Florida and Texas extends 9 nautical miles and for Louisiana, 3 imperial nautical miles. Federal
jurisdiction extends, typically, 200 nautical miles seaward of the baseline from which the breadth
of the territorial sea is measured.
7 Coastal Impact Assistance, Report to the OCS Policy Committee from the Coastal Impact
Assistance Working Group. October 1997.
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amendment to the Coastal Zone Management Act, and 2) the Section “8(g)” zone program,
established under OCSLA. A third program, the Land and Water Conservation Fund, has
also provided state funding from the OCS revenue stream, but the distribution of those
revenues has no connection with OCS activities. Even the CEIP program was not considered
a “true” revenue sharing program because its funding levels were not based on the amount
of leasing activity in the OCS.
A new Coastal Impact Assistance Program is established under the Energy Policy Act
of 2005 (P.L. 109-58) as an amendment to Section 31 of the OCSLA (43 U.S.C. 1356a).
Under this program, the Secretary of the Interior is to disburse, without further appropriation,
$250 million per year during FY2007-FY2010 to producing states and political subdivisions
according to specified allocations. The states must submit plans on how they will spend
these funds for approval by the Secretary of the Interior. Among other things, the funds are
designated for the restoration of coastal areas, mitigation of damage to natural resources, the
implementation of federally approved conservation management plans, and for infrastructure
projects.
Offshore Leasing Moratoria
The offshore leasing moratoria began with the FY1982 Interior Appropriations Act
(P.L. 97-100), which prohibited new leases offshore of California. The imposition of other
moratoria came about after many coastal states and environmental groups contended that
leasing tracts in environmentally sensitive areas might lead to activities that could cause
economic or irreversible environmental damage. Eventually the moratoria were expanded
to include New England, the Georges Bank, the mid-Atlantic, the Pacific Northwest, much
of Alaska, and a portion of the Eastern Gulf of Mexico. Because of environmental and
economic concerns, Congress for the past two decades has supported annual moratoria on
leasing and drilling in the OCS. Congress enacted the moratoria for each of fiscal years
1982-2006 through the annual Interior Appropriations bill.
President George H.W. Bush, in 1990, responding to pressure from the states of Florida
and California, and others concerned about protecting the ocean and coastal environments,
issued a Presidential Directive ordering the Department of the Interior (DOI) not to conduct
offshore leasing or preleasing activity in places other than Texas, Louisiana, Alabama, and
parts of Alaska until 2000 — the same areas covered by the annual moratoria. In 1998
President Clinton extended the presidential offshore leasing prohibition until 2012.
Despite the current Bush Administration’s interest in increasing the nation’s energy
supply, Interior Secretary Norton announced in December 2001 that it would be up to the
states to request a study of the potential oil and gas resources and leasing moratorium off
their shores. In addition, Secretary Norton would leave it up to the states to reconsider the
leasing moratoria off their coasts. Thus, at that time, there was no overarching executive
branch role in trying to lift the moratoria. Reaction to this stance had been somewhat mixed
because, as some saw it, she left the door open to leasing in areas now under the moratoria
even though the Bush Administration officially supports the moratoria.
Sales in the Eastern GOM have been especially controversial. A Bush Administration
plan (originating in the Clinton Administration) to lease 5.9 million acres in the Eastern
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GOM sparked considerable debate, although this area was not under a leasing moratorium.
No Eastern GOM lease sale had taken place since 1988. The lease sale 181 area was
considered by many to be too close to the shore and to environmentally sensitive areas. Some
tracts were as close as 17 miles from the Florida and Alabama coastline. The major concern
of those in Florida opposing the sale was impairing the value of tourism to the state. If an
accident were to occur, causing an oil spill, it could damage the state’s beaches and thus the
tourist industry. It also could severely affect the marine environment, opponents contended.
The original area of 5.9 million acres, estimated to contain nearly 8 trillion cubic feet
(tcf) of natural gas and 396 million barrels of oil, was reduced to 1.47 million acres after
intense pressure from environmentalists and state officials. The reduced lease sale 181
offered 256 blocks containing an estimated 1.25 tcf of natural gas and 185 million barrels of
oil. The sale took place December 5, 2001.
There are several blocks that were removed by the Administration from Eastern GOM
Sale 181 that could become available for re-lease after 2007, as part of the Administration’s
new five-year leasing program. The House Resources reconciliation package would require
lease sales for those blocks to be held in January and June of 2007. Industry groups contend
that Eastern GOM sales are too limited, given what they say is an enormous resource
potential, while environmental groups and some state officials argue that the risks of
development to the environment and local economies are too great.
The FY2006 Interior Appropriations Act (P.L. 109-54) continued the leasing moratoria
in other areas, including the Atlantic and Pacific Coasts. An amendment to lift the
moratorium in the Eastern Gulf of Mexico was offered (House Amendment 174,
Representative Istook) on the House floor during debate but rejected on a point of order. An
amendment (Representative Peterson) that would have lifted the moratoria on offshore
natural gas was defeated (see Roll Call vote No. 192, May 19, 2005).
However, the FY2006 Interior Appropriations Act did not include language to prohibit
oil and gas leasing in the North Aleutian Basin Planning Area. The FY2004 law (P.L. 108-
108) and FY2005 law (P.L. 108-447) similarly omitted this language. There is some industry
interest in eventually opening the area to oil and gas development as an offset to the
depressed fishing industry in the Bristol Bay area. Environmentalists and others oppose this
effort. The North Aleutian Basin Planning Area, containing Bristol Bay, is not in the MMS
current five-year (2002-2007) leasing plan.
The House Resources Committee’s budget reconciliation package would impose a
statutory leasing prohibition through June 30, 2012 on the OCS areas currently under
moratoria and revoke the 1998 Clinton leasing prohibition that covers the same period.
States could opt out of the leasing ban and receive 40% of OCS revenues. After June 30,
2012, states could petition for five-year moratorium extensions for OCS areas within 125
miles of their coastlines.
Also included in the Resources Committee’s reconciliation package is a requirement
that MMS offer “natural gas only” leases. Under current law, all OCS lease sales include
both oil and gas, and a lessee is required to develop the gas or the oil once discovered.
Natural-gas-only leases have been met with much skepticism by many experts in geology,
who note that most of these offshore fields are likely to contain both oil and gas. Proponents
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would like the states to be able to produce natural gas off their coasts with less concern about
potential damage from an oil spill.
Senator Pete Domenici, Chairman of the Senate Energy and Natural Resources
Committee, has expressed an interest in opening up offshore areas now under the moratoria
in a push to ease the “natural gas crisis”8 but has not introduced any legislation. The Senate
panel’s reconciliation package does not include OCS provisions.
California Leases
Congress has banned additional drilling in the Santa Maria Basin and Santa Barbara
Channel areas where there are leased tracts. Companies unable to develop their existing
California lease holdings are seeking compensation from the federal government. The
companies contend that over a billion dollars has already been spent to obtain the leases.9
In previous buyback settlements, firms have recouped their bonus bid payments but lost
possible future returns that would have been earned if commercial production were
achieved.10 In the case of the California offshore leases, the Clinton Administration
continued to extend the leases (through suspensions) that were granted between 17-33 years
ago, before the moratoria were imposed.
The last suspension by MMS, in 1999, extended 36 out of the 40 existing leases at issue
offshore California. This action was taken to give lease holders more time to “prove up” oil
reserves and for MMS to show consistency with state coastal zone management plans, as
required by 1990 amendments to the Coastal Zone Management Act (P.L. 92-583). A state’s
objection could prevent development of the oil and gas leases.
On June 20, 2001, the U.S. District Court for the Northern District of California struck
down the MMS suspensions, potentially allowing the leases to expire, because it held that
MMS failed to show consistency with the state’s coastal zone management plan. The Bush
Administration appealed this decision to a three-judge panel of the Ninth Circuit of Appeals
in San Francisco on January 9, 2002, and has proposed a more limited lease development
plan that involves 20 leases, using existing platforms and other necessary infrastructure.
However, on December 2, 2002, the Ninth Circuit panel upheld the District Court decision.11
The Department of the Interior did not appeal this decision and is currently working with
lessees to resolve the issue. A breach-of-contract lawsuit was filed against MMS on January
9, 2002, by nine oil companies seeking $1.2 billion in compensation for their undeveloped
leases is pending further action. The suit was filed with the Court of Federal Claims in
Washington, D.C.
8 Inside Energy Extra, October 6, 2005.
9 Inside Energy with Federal Lands, September 3, 2001.
10 Estimating future revenues with limited drilling is difficult at best because it is not possible
determine the extent (if any) or quality of hydrocarbons. According to the MMS the leased area
contains an estimated 1 billion barrels of oil and 500 billion cubic feet of unproved reserves.
11 Ninth U.S. Circuit Court of Appeals, California v. Norton, 01-16637.
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Recently, several oil and gas lessees involved in the dispute submitted a new round of
suspension applications to prevent lease termination and loss of development rights. In
response, the MMS has prepared six environmental assessments and found no significant
impact for processing the applications. However, under the Coastal Zone Management Act,
a consistency review by MMS and the state’s response to that review must occur before a
decision is made to grant or deny the requests. The State Coastal Commission ruled
unanimously on August 11, 2005, that the lease suspensions should not be renewed.
Following that decision, on August 12, a U.S. District Court ordered the MMS to conduct
additional NEPA studies of the 36 leases under suspension. MMS argued that it had
presented sufficient evidence for the judge to reach a decision on whether to allow MMS to
grant further suspensions. Senator Diane Feinstein of California has urged that the MMS
conduct additional studies or, if not, have the leases terminated.12
The House Resources budget reconciliation package would allow oil and gas lessees
holding leases within 100 miles of the coastlines of California and Florida the option to
exchange their leases for a new lease between 100 miles and 125 miles off the same state’s
coastline. Lessees who want to exchange their lease will be given priority based on the
amount paid in bonus bids for the original lease. If a partial lease tract is exchanged for a full
lease tract, then an additional bonus payment would be required.
Figure 2. MMS 5-Year Program Areas
12 Inside Energy, August 22, 2005
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Lease Development in the Gulf of Mexico
The MMS reports13 that there is great potential in the Central and Western GOM
deepwater regions. And as a result of the Royalty Relief Act of 1995, there has been
significant investment made (in bonus bids and annual rents) by major and independent oil
and gas companies. However, very little exploration and development has yet to occur
within the deepwater regions. The deepwater production in the GOM is promising and
expected to grow significantly over the next 20 years. There are, however, a limited number
of rigs available to drill and there are prospects elsewhere which could make any area
available for leasing less likely to get developed in the short-term.14
The amount of development of leases is significantly different in shallow and deep
regions. In the West and Central Gulf region, at less than 400 meters deep, about 40% of
the leased tracts have been producing since the 1990s, while a small and declining fraction
have been explored but did not produce. About 40% of the active leases at this depth have
not been explored.
In the narrow region between 400 and 800 meters, most of the relatively few leases have
not been explored, but a small and increasing number have begun production. This pattern
is even clearer in the region greater than 800 meters deep, where a large number of leases
have been let, especially since 1995, and only a small fraction of them have been explored.
A major stimulus to exploration and development of a promising lease is the approach
of the end of the lease term. MMS officials contend they are vigorously terminating expired
leases and putting them up for reletting. MMS officials point out that, with a 10-year lease
period, the many deepwater leases let in the mid-1990s will be running out in the next few
years, which may stimulate increased activity in that region.
Barriers to Development
The high proportion of deepwater leases that have not been explored, in light of the high
productivity of those that have been developed, raises questions of barriers that may be
impeding full development of the region’s potential. While even developed regions have
many leases that are not explored, the fact that more than 90% of deepwater leases have not
been explored stands out.
According to MMS officials interviewed by CRS,15 the major factor in determining
exploration is the high cost of activity in the deepwater region, and also the relatively few
rigs that are available to operate there. Financing oil exploration and development is an
extremely complex process, frequently involving secondary markets for leases and farming
13 Department of the Interior, MMS, Deepwater Gulf of Mexico 2004: America’s Expanding
Frontier, OCS Report, MMS2004-021
14 Ibid, p.107
15 CRS analysts held frequent telephone conversations with MMS officials, and on January 18, 2005,
met in person for a conference of several hours.
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out development to obtain financing. According to MMS, no barriers exist to discourage or
penalize innovative and flexible financing schemes.
LEGISLATION
H.R. XXX (bill not yet numbered)
Budget Reconciliation. Ocean State Options Act of 2005. Title VI of the House
Resources Committee budget reconciliation package. Coastal states could opt out of the
OCS leasing moratoria and consider natural-gas-only or oil and gas leases, and receive a
larger share of OCS revenues. The proposal would repeal the comprehensive inventory of
OCS oil and gas passed earlier in the Energy Policy Act of 2005 (P.L. 109-58). Approved
by the Resources Committee October 26, 2005, by a vote of 24-16.
S. 726 (Alexander).
Natural Gas Price Reduction Act. Several provisions focus on the OCS: A coastal state
can request an estimate of the oil and natural gas lying seaward of the state; a state can opt
out or consent to the current OCS moratoria; states or lessees would have the option to
restrict OCS development to natural gas; states would receive at least 12.5% of all qualified
production revenues, which would be distributed to those states with an approved Coastal
Impact Assistance Plan; and royalty relief would be provided for lessees producing in deep
water. Introduce April 6, 2005; referred to Committee on Energy and Natural Resources.
S. 1765 (Landrieu)
Louisiana Katrina Reconstruction Act. Chapter One, Domestic Offshore Reinvestment
Act of 2005, Title VI would give 50% of the revenue generated from an OCS lease sale to
the adjacent coastal state. From the state’s share, 35% would be paid directly to the political
subdivisions in that state. The funds would be deposited into a trust fund, used for identified
purposes, and allocated according to an established formula. Chapter 2 — Offshore Fairness
Act of 2005 — would, among other things, extend the seaward boundaries of Louisiana from
3 geographical miles to 3 marine leagues contingent on the state meeting certain conditions
within five years after the date of enactment of this law. Introduced September 22, 2005,
referred to the Committee on Finance.
FOR ADDITIONAL READING
CRS Report RL31521. Outer Continental Shelf Oil and Gas: Energy Security and Other
Major Issues, by Marc Humphries.
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