The province of Alberta gets 30 percent of its revenue from bitumen royalties, which has been their advantage over less energy-rich provinces. With the U.S. domestic energy supply on the upswing, and the government avoiding the need to revise budgets despite lower prices, it seems they’re coming to terms with the limitations of said advantage. Meanwhile, governors of coastal states want a greater share of revenue from offshore energy production. Let’s hope they’d manage it better than Alberta.
The Outer Continental Shelf Governors Association has come together in support of a large percentage of offshore energy royalties, most of which goes to the federal government. Sen. Lisa Murkowski (R-AK) is preparing legislation that would automatically direct 27.5 percent of royalties to states that house wind, oil, natural gas and wave power production off their coasts, with an extra 10 percent if appropriated for conservation and energy research. They’re all due to receive $500 billion in capped royalties by 2017; Murkowski’s bill would lift that cap.
The prospect of enhanced revenue sharing has been discussed as early as 2010. Sen. Jeff Bingaman (D-NM), who heads the Senate Committee on Energy and Natural Resources, wasn’t a fan:
The fiscal consequences of such a loss would be devastating, particularly given the enormous demands on the federal Treasury and our need to reduce the deficit. There is no justification for using these significant national resources to provide benefits only for a few coastal states and their citizens.
This snippet comes from a letter also signed by Sen. Jay Rockefeller (D-WV) and then-Sen. Byron Dorgan (D-ND). Landlocked energy-producing states get 50 percent of royalties from coal (i.e. West Virginia) and natural gas (i.e. North Dakota). The coastal states are a bit trickier; the Bingaman-Rockefeller-Dorgan letter goes on to point out that under current law, coastal states receive 100 percent of the royalties from energy produced within three miles of their coastlines. Beyond that, the Outer Continental Shelf is federal territory.
I personally believe these states could do a better job spending the money, especially if such a large portion of it would be earmarked for conservation. But getting past the legal restrictions on offshore territory that states can claim will require a much greater effort that a mere adjustment of percentages. In addition, except among lawmakers from coastal states, there won’t be an appetite to direct revenues away from the federal Treasury for a very long time.
I admire Murkowski’s success in uniting coastal states around a common goal. If she can include landlocked states in pursuit of national standards for energy royalties to states – which wouldn’t happen anyway – I’ll nominate her for premier of Alberta.