Bill would set up state-run corporation to manage OCS revenue

Louisiana’s future share of a new stream of Gulf of Mexico oil and gas drilling royalties would be managed by a separate, state-run public corporation, under legislation approved last week by a Senate committee.

The corporation, called the Louisiana Coastal Protection and Restoration Financing Corporation, would follow state voter-approved plans to spend the dollars on storm protection, flood control and coastal restoration.

But the bill by Sen. Reggie Dupre and pushed by Gov. Kathleen Blanco’s administration also would give the state a mechanism in upcoming years to borrow against the funds to get upfront cash for coastal projects sooner than the state would get dollars under the regular royalty schedule, said Scott Angelle, Blanco’s natural resources secretary.

The measure was approved without objection by the Senate Finance Committee, heading next to the full Senate for debate. Senators on the committee, however, said they were concerned about the construction of the proposal and whether it would strip dollars from coastal projects or benefit one coastal area over another.

The new offshore royalty sharing plan, approved by Congress in December, opens 8.3 million new acres in the Gulf of Mexico to oil and natural gas drilling. Gulf Coast states will receive 37.5 percent of the royalties generated by the new oil and gas leases off their coasts. Louisiana stands to gain billions of dollars in new money, which will pour into a trust fund dedicated to wetlands restoration and hurricane protection.

Eventually, Louisiana officials expect the state to receive as much as $650 million a year or more by 2017, but before that, the boost is expected to be only about $20 million a year on average, Angelle said.

The Blanco administration is considering whether to sell part of the state’s new oil and gas revenue stream for upfront cash to start coastal restoration and protection work immediately, similar to the way the state sold a portion of its tobacco settlement dollars.

The state would receive a lump sum payment, which it could invest and funnel directly into projects, by selling bonds to investors and paying them off through the annual oil and gas royalty payments, Angelle told the Senate Finance Committee.

“Some of these projects cannot wait 10 years for this money,” said Dupre, D-Montegut.

But another layer of approval from lawmakers and the State Bond Commission before the oil and gas revenue stream could be sold would be required, under Dupre’s bill.

The corporation created in Dupre’s bill would be largely controlled by Louisiana’s governor with a 15-member board, including the governor or the governor’s designee, the governor’s natural resources secretary and seven gubernatorial appointees. Any borrowing done by the corporation would be outside Louisiana’s debt limit.

Sen. Chris Ullo, D-Harvey, said the bill seemed to create a complicated way to fund coastal restoration projects, and he said he worried the structure could set up a group that benefits one coastal area over another in Louisiana.