La. Governor Moves to Block Lease Sale Over Revenue Sharing

Louisiana's governor moved yesterday to block the federal government's August Gulf of Mexico lease sale over the lack of offshore oil and gas production royalties shared with coastal states.

Gov. Kathleen Blanco (D) sent a letter to the Minerals Management Service declaring the planned western Gulf Lease Sale 200 is "inconsistent" with state planning under the Coastal Zone Management Act.

The move raises the stakes in the battle by Blanco and the state's congressional delegation to ensure that any new offshore drilling legislation provides Louisiana with billions in revenue.

State officials say revenue sharing is needed to help protect and restore the state's fast-eroding coastline, and they argue Hurricane Katrina's devastation makes their needs more urgent.

"It is now abundantly clear that that future leasing activity in the Gulf of Mexico cannot be permitted to occur until there is an adequate plan for ensuring the devastation Louisiana and other coastal states experienced in 2005 is never repeated," Blanco wrote. She added there must be adequate resources to "restore and offset" further damage to the states "environment, resources and infrastructure."

MMS spokesman Gary Strasburg said today the agency would likely respond to the letter before the scheduled sale date.

Blanco is also preparing to sue to block the sale. She reiterated in a statement yesterday that she will take legal action unless a federal plan is in place to share revenues or includes the "steps acceptable to the state" to protect and restore its environment and the energy infrastructure along its coast.

In a letter to Sen. David Vitter (R-La.) yesterday announcing the formal protest with MMS, she said the litigation would occur unless there is revenue sharing.

Revenue sharing plays major role on Hill

Both chambers of Congress are struggling to expand domestic offshore production and the revenue sharing issue is playing a major role in debates on both sides of the Capitol.

Yesterday the House Resources Committee held a hearing on a drilling and revenue sharing bill -- sponsored by Rep. Bobby Jindal (R-La.) -- that provides states with coastal production with 50 percent of royalties from production further than 12 miles from shore, and 75 percent when the production is closer.

In the Senate, Gulf Coast state senators from Louisiana, Mississippi, Texas and Alabama are trying to attach a revenue sharing plan to legislation opening a large portion of the Gulf of Mexico's Lease Sale 181 area.

MMS director Johnnie Burton told House lawmakers yesterday the administration is open to a "dialogue" with Congress on the revenue issue but called Jindal's bill far too costly to federal revenues. She repeatedly cited negative effects on the deficit. Jindal has said his bill would provide Louisiana tens of billions of dollars over several decades.

There appears to be a gap between the Bush administration's position and lawmakers who want significant revenue sharing in areas where offshore production is already allowed -- namely the western gulf. Burton yesterday said during a House Resources Committee hearing on Jindal's bill that the administration could back "appropriately structured revenue sharing from new areas."

Jindal's bill would allow states where offshore production is banned to "opt-out" of the coastal leasing bans -- and share revenues. The bans cover both coasts and much of the eastern Gulf of Mexico. But a primary goal of Jindal and other Louisiana lawmakers is sharing revenues from the leasing off their shores, where production is already authorized.

The Resources Committee hopes to mark up an offshore drilling plan next week in anticipation of making it part of a broader set of energy measures that House leadership hopes to have on the chambers's floor in roughly two weeks. It is not yet clear what the plan the committee ultimately marks up will look like.

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