Taxpayers Stand To Lose $49 Billion In Offshore Drilling Gambit

CREDIT: AP Photo/Gerald Herbert, File

offshore oil rig

CREDIT: AP Photo/Gerald Herbert, File

Less than four years since the BP Deepwater Horizon disaster in the Gulf of Mexico, and with the cleanup and lawsuits ongoing, Congress is considering a proposal to incentivize the expansion of offshore drilling and dramatically reduce the amount of money that U.S. taxpayers are entitled to receive from the development of the resources that belong to them.

A new report released today by the Center for American Progress finds that the proposal — called the “Fixing America’s Inequities with Revenues Act” (FAIR Act) and sponsored by Sens. Mary Landrieu (D-LA), Lisa Murkowski (R-AK) — would cost U.S. taxpayers more than $49 billion by 2040 while providing a windfall to just five states.

The extraordinarily high cost of the legislation was previously unknown and unreported because the Congressional Budget Office only projects the cost of legislation over a ten year window, which for the FAIR Act is $6 billion by 2023. The FAIR Act lifts its cap on costs after ten years and thereby ensures that the most expensive provisions of the bill were not measured.

At issue in the so-called FAIR Act is the royalties that the federal government and states receive from private companies that drill on federal lands and waters. States currently collect 50 percent of all energy revenues on federal lands within their boundaries. Offshore, states were granted exclusive rights to minerals and revenues within the first few miles off their coasts. But the resources from federal waters further offshore, according to the Supreme Court, belong to all Americans. Still, Congress granted Louisiana, Mississippi, Texas, and Alabama up to $375 million a year of revenues from the federally-owned Outer Continental Shelf (OCS) starting in 2017.

But the FAIR Act would divert an even larger share of U.S. taxpayer revenue from oil and gas development on the OCS to those same four states plus Alaska, resulting in an enormous windfall. Louisiana alone would be paid an estimated $2 billion in 2025, 12 times what Colorado and Utah are currently receiving in federal energy payments, and 33 times more than what the average energy-producing state is receiving.

States graphic

There are, without question, significant natural resource revenue challenges facing the country and the CAP report provides a series of recommendations for addressing them. For example, a new mitigation fee paid by oil and gas companies would enable states and local communities to better address damages caused by development, and the full funding of the Land and Water Conservation fund would help protect coastal ecosystems and ensure that all Americans are benefiting from offshore oil and gas revenues.