Three Leagues, Three Leagues, Three Leagues Onward…

A recently proposed bill would grant coastal states much more say in developing their own offshore minerals. Extending marine boundaries to 10.4 miles, supporters note, would cut down a wide swath of drilling moratoria and call up sorely needed state revenues.

Talk about a tough sell.

A piece of proposed legislation hatched recently from the House Commerce Committee office would extend the offshore territorial jurisdiction of some 19 coastal states (20 if you include Hawaii, and even more if you add U.S. territories with seats in Congress) so they would receive a larger share of royalties and other revenue from offshore minerals leasing and development.

The bill probably would require overturning many of the long-standing precepts of both the Outer Continental Shelf (OCS) Lands and Submerged Lands Acts, both passed in 1953 amid significant controversy connected with state-versus-federal jurisdiction over offshore lands and seabed and subsea mineral resources. And since the federal government has long received the lion's share of offshore oil and gas leasing and tax revenues by dint of those two laws, many legislators and federal bureaucracies probably couldn't be expected to embrace such major changes.

The proposed bill, titled the State Enhanced Authority for Coastal and Offshore Resources Act of 2003 (SEACOR), does not yet have sponsorship by any specific lawmaker. However, it's being circulated around Washington D.C., and though no formal introduction has been made, most members of Congress are said to have seen it.

Of course, the most controversial part of the bill is that it assumes that existing congressional and presidential moratoria on mineral leasing off a number of coastal states on both the east and west coasts and off Florida would be revoked.

Despite the fact that rescinding the moratoria might be extremely difficult, the "carrot" to coastal states, say SEACOR proponents, is much-needed additional revenue. Brandished in a political atmosphere in which everybody is pressed to pay their fair share, SEACOR would guarantee that coastal states be among those who receive theirs. And because even the hardest anti-offshore drilling liners in Congress couldn't totally ignore a larger chunk of what once was federal revenue, SEACOR likely would start catching on, particularly if its proponents were to grow in number.

But the bill also contains other key elements that, while controversial on the surface, could constitute ways to at least partially solve one of this country's most pressing energy problems.

First of all, it provides a stronger recognition of state interests in controlling development of offshore mineral and other resources. It provides state governments with the greater power closer to the coastline, and the federal government with the greater power farther from the coastline.

The following are among the priorities set forth by SEACOR:

  • State water boundaries would be extended to those now set off Texas and Florida, which are 3 marine leagues (10.4 statute miles). Each state would control all activity within this new boundary (currently, with the two exceptions, the boundary off states is only 3 miles offshore).

  • The federal government would share 27 percent of the revenues from existing federal leases inside the new boundary.

  • For future leasing in the new jurisdictional area, the state can issue specific "natural gas leases" (for drilling and producing dry gas and condensate only), sharing 50 percent of the revenues of those leases with the federal government. The state would share in graduated lesser revenue percentages from new leases beyond that distance.

  • States could veto all or part of any OCS oil and gas leasing up to 50 miles from shore as proposed by the U.S. Secretary of the Interior.

  • Beyond 50 miles (in 25-mile increments up to 100 miles), the states could veto general oil and gas leasing; however, the Interior Secretary could still offer the specific "natural gas leases" in those areas, in any case.

  • So-called "impact sharing" of revenues by one state with adjacent states would be allocated on a formula reflecting the extent to which the adjacent state permits OCS activity, including the distance that the activity must be located from the coast. Part of this allocated revenue would be shared with each state's coastal subdivisions, including cities and counties.

  • From straight revenues received, each state must allocate 40 percent as "revenue sharing" of which one-half goes to the state itself, with the other half being shared with all 50 states, in percentages based on population.

  • All coastal states would receive a royalty incentive for producing natural gas from offshore methane hydrates deposits.

  • A similar royalty reduction incentive would go to production of gas from hydrates produced on Alaska's North Slope.

  • The bill contains additional elements, many of them complex in nature. However, SEACOR backers believe that a separate direct benefit would be a significant boost in the nation's natural gas supply, derived directly from specific exploration for natural gas off the entire U.S. coast, rather than just off the Gulf Coast. A larger domestic gas supply, in turn, could exert a dampening effect on prices, which likely would get an enthusiastic response from both U.S. citizens and from industries that use gas for fuel or feedstock.

    If the costs for home and industrial gas consumption go as high this winter and next summer as some predict, the bill could get "legs" enough to attract any number of House members--and Senators for a companion bill--willing to wave it aloft formally in Congress.

    The bill recognizes that the potential for environmental harm from natural gas exploration and production is significantly less than that for crude oil. However, it leaves the decision to allow crude oil E&P to the individual states. Those that don't want oil wells and pipelines off their shores can prohibit them. Those that do even have to ask for permission from adjacent states. But ultimately, the "risk" of drilling for offshore oil would be accepted--or declined--at the state level.

    Proponents point out that this also would help eliminate the role that citizens, lawmakers, and conservationist groups in one state may play in dictating what happens off other states.

    A vocal SEACOR champion is the Industrial Energy Consumers of America (IECA), a national cross-industry trade association with offices in Washington. According to executive director Paul Cicio, IECA member companies include manufacturers for which the availability, use, and cost of energy, power, or feedstock play a significant role in their ability to compete domestically and overseas. They hope to see the lower gas prices implied in SEACOR enactment. (To find out more, check the Industry Energy Consumers of America website.)

    A number of other trade groups support the SEACOR idea, but most are treating it currently as an "interesting" one. Most seem to be waiting to see if any lawmakers actively pursue introducing it formally.

    According to Cicio, SEACOR came out of the Commerce Committee too late to be combined into the current omnibus Energy Policy bill, which continues to be delayed by pre-conference committee haggling.

    He added, however, that "rumors" are circulating to the effect that the concepts contained in SEACOR might serve to spawn a separate, much larger omnibus Natural Gas Policy bill, equal in size to--and perhaps even more important than--the Energy bill. So, it would seem, the "sell" of SEACOR might not be as hard as it first appeared.

    But when such a bill could be introduced is anyone's guess, Cicio noted, adding that if consumers end up paying considerably higher prices for gas this winter, the impetus for it might grow more intense by, say, late spring or early next summer. Of course, with next year being a major election year, the chances of such a bill being introduced probably would still be iffy. But if gas prices continue to stay high beyond November 2004, its chances could improve.

    The road from proposed legislation to a bill on the President's desk is a long, winding one. And with SEACOR, the road could get muddy, as well.