Bruce J. Hebert
December 11, 2006
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With both houses of the United States Congress having passed historic revenue sharing legislation for Louisiana this past weekend, the state stands poised to finally receive a dedicated stream of recurring revenue that is expected to be used to begin restoring the state’s rapidly eroding coastal wetlands.
Approved by comfortable margins in both the U.S. House and the U.S. Senate, the measure was sent to President George W. Bush early Saturday. With his signature on the bill, Louisiana is set to receive a portion of oil and gas royalties derived from drilling off its mineral rich coast.
Most of the money Louisiana stands to gain from new offshore oil production will not kick in for another 10 years, however, the committed revenue flow means the state can begin selling bonds to finance coastal protection projects immediately.
The bill’s provision dealing with the revenue sharing issue calls for the state to receive an estimated $200 million annually through 2017. However, the funds will more than double after that period as Louisiana stands to get as much as $650 million yearly as additional revenue provisions in the legislation take effect.
The proposed law will open an 8.3 million-acre tract of the Gulf of Mexico to drilling, and the new sharing formula will apply to new leases in that area immediately.
Returning to a sharing formula originally offered in 1949 by President Harry Truman, Louisiana and neighboring Gulf Coast states will receive 37.5 percent of federal royalties from new oil and gas leases off of their coasts.
Louisiana rejected the offer in 1949, and has since lost out on billions of oil revenue sharing dollars.
Over the first 30 years, lawmakers project the state could earn about $13 billion, all of which is to be used for storm protection and coastal restoration.
“Today, the U.S. Senate confirmed its strong support for Louisiana and the entire Gulf Coast by passing this important and historic legislation”, said U.S. Sen. Mary Landrieu (D). Landrieu was a chief sponsor of the legislation along with U.S. Sen. Pete Domenici R- New Mexico. “After nearly 60 years, this provides Louisiana a significant share of oil and gas royalty revenue produced off our shores,” she said.
U.S. Sen. David Vitter (R) also praised the passage of the bill, noting, “The bill will provide critical resources to fund comprehensive coastal, flood and hurricane protections sought in other legislation.”
Royalty money from the legislation will be shared by three other coastal states including Alabama, Mississippi and Texas. The final legislative product was a compromise of a much more generous House version of the bill and a trimmed down Senate version which was eventually adopted and passed after it became evident that the White House was much more likely to embrace the scaled down Senate one.
U.S. Rep. Charlie Melancon (D) was also buoyed by the passage of the long awaited legislation. “Today is a historic victory for Louisiana,” Melancon said in a release. “After decades of producing energy for our country and getting almost none of the royalties; after decades of watching our coastal marshes, estuaries and barrier islands wash away into the Gulf; after decades of fighting in Congress for a fair royalty sharing agreement, we finally have a deal,” he said.
Melancon also noted that the state lost over 200 square miles of coastland due to the ravages of Hurricanes Katrina and Rita in 2005.
The legislation also calls for a two-year extension of the Gulf Opportunity (GO) Zone tax incentives, which provides favorable opportunities for companies to locate in parishes hit by the recent hurricanes. The measure includes Terrebonne and Lafourche parishes.
GO Zone incentives were initially approved in late 2005 after hurricanes Katrina and Rita ravaged the southern coast of Louisiana. The tax breaks allow businesses to take a 50 percent tax reduction for new facilities or equipment purchased in areas affected by the storms. The measure was intended to stimulate investment and jobs across the region.
The vote on the oil revenue sharing measure was twice delayed as Congressional leaders argued other aspects of the tax package it was attached to. The measure included provisions for a host of items n ranging from the extension of college cost tax breaks to building more energy efficient homes to protecting Medicare funds.
The final vote came as this Congress was closing.
File photo • Tri-Parish Times/ In 1949, Louisiana lawmakers thumbed their noses at President Harry Truman’s offer of 37.5 percent of the oil revenues generated along the states coast. The decision cost the state billions in revenue. Early Saturday, Congress approved a measure that will include Louisiana in revenue sharing, providing essential dollars to restore the hurricane-ravaged coastline.
