Louisiana's Blanco: State Settles Offshore Leasing Lawsuit with MMS

The Interior Department's Minerals Management Service (MMS) has agreed to delay future offshore oil and natural gas lease sales off the coast of Louisiana until a complete environmental review of state's coastal region has been done, as well as forestall any exploration activities on the recently completed western Gulf Lease Sale 200, Louisiana Gov. Kathleen Blanco said Tuesday in announcing a settlement between the state and federal government.

The settlement, which Blanco disclosed at a press conference in Baton Rouge, resolves the lawsuit that Louisiana filed over the summer to block MMS from carrying out Lease Sale 200 off its coastline (see Daily GPI, July 31). U.S. District Judge Kurt D. Engelhardt of the Eastern District of Louisiana in late August rejected the state's bid for a preliminary injunction to stop the lease sale. But the decision was not a complete setback for Louisiana. The judge said repeatedly that some of the claims in the state's lawsuit against MMS had merit and that he was inclined to issue a permanent injunction following a hearing scheduled for Nov. 13. Engelhardt warned bidders to beware because the leases awarded could turn out to be worth little (see Daily GPI, Aug. 17).

It's unclear how the settlement will affect the 62 companies who pledged $340.9 million in August for the rights to drill in federal waters in the western Gulf.

In its lawsuit filed in July, Louisiana argued that the federal government failed to conduct an adequate environmental assessment of the damage to the state's coastline caused by Hurricanes Katrina and Rita before moving forward with the lease sale. The state claimed that MMS' environmental review of the lease sale fell short of the requirements of the National Environmental Policy Act, the Coastal Zone Management Act and the Outer Continental Shelf Lands Act.

"Because we have had the courage to fight, because we have had the courage to play hardball, because we have had the courage to take the facts to the federal judicial system and state our case, we are now in a position to send a clear message that there is a new day dawning in Louisiana," Blanco told reporters. "And that new day means, because of our success in forging an historic agreement, this generation and future generations of Louisianans will never be taken for granted again when it comes to the federal government's energy development on our coast," she said.

"This victory will ensure that our state has a real seat at the table, controlling our own fate as the federal government's number one offshore energy partners -- the heart of America's energy coast."

In addition to seeking a better environmental assessment, Blanco wants the federal government to give Louisiana a greater share of the federal royalties from Outer Continental Shelf (OCS) production offshore Louisiana to help restore the state's receding coastal areas.

Under current law, interior states that allow oil and gas drilling receive 50% of the royalties from production on federal lands. But coastal states that support offshore production, such as Louisiana, receive only a small fraction of the royalties on production from the OCS, with the bulk of the revenues going to the federal government. Blanco, as well as Louisiana's congressional lawmakers, are seeking to change that equation.

"Some continue to ask me if this lawsuit is really about money -- if it is really about oil and gas revenues...This lawsuit and this agreement are about states' rights and ensuring that the federal government abandons its 'business-as-usual' approach and recognizes the serious impacts to Louisiana's coast from offshore oil and gas leasing," Blanco said. But she acknowledged that her efforts are consistent with the state's desire to share a greater portion of the federal oil and gas royalties from offshore production.

President Bush earlier this month signaled that he supports giving coastal states, such as Louisiana, a bigger portion of offshore royalties (see Daily GPI, Oct. 13). "It is now time for the legislative branch to do its job. It's time for Congress to pass a revenue-sharing bill that will allow us to get on with the business of restoring our coast and protecting the communities that support this country's offshore energy supply."

Copyright 2006 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.

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