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Murkowski plan would give Alaska bigger cut of offshore oil revenue

Patti Epler

Sen. Lisa Murkowski, R-Alaska, is hoping to push through an amendment to federal legislation slated to go before the Senate Energy and Natural Resources Committee Thursday that would give Alaska and other coastal states a significant cut of any offshore oil and gas revenue.

Murkowski is joining with Sen. Mary Landrieu, D-La., in a bipartisan pitch that would be part of a broader measure aimed at improving safety in energy exploration and production in federal waters.

The federal government currently collects rents on leases in the Outer Continental Shelf whether they are producing or not and royalties in areas where oil and gas production is occurring. The Interior Department shares some of that income with the states. Onshore on federal lands, states also get some of the money and in Alaska that cut is 90 percent on many leases.

Murkowski and Landrieu are arguing for a revenue-sharing deal that would give coastal states 37.5 percent of royalties on offshore production. Of that, 20 percent would be passed on to local communities that shoulder the burden of roads, docks, pipelines and other facilities.

"This is a very important issue for Alaska because of the potential for the Chukchi and Beaufort seas," said Robert Dillon, Murkowski's aide for the energy committee. "The coastal communities are going to bear the risk and the costs for infrastructure so the money should properly go to those communities and the state to offset their contribution to the national security."

How much money that would mean to Alaska and the local communities is unclear since oil companies like Shell that want to operate in the Arctic offshore are still waiting for permits before they can begin exploratory drilling. Production is still years away.

But Interior Department records show that the federal government collected more than $47.3 million in rents and royalties from oil and gas activities in Alaska in 2010. That was money from 41 producing leases and 346 non-producing leases both on and offshore. Ten years ago, 37 producing and 197 non-producing leases accounted for about $11.5 million in federal rents and royalties.

Last year, about $21.6 million of the total was from leases in the so-called 8(g) area -- acreage that is between three and six miles offshore. State ownership extends three miles off the coast and the 8(g) area is just past that. Currently, the federal government gives 27 percent of the 8(g) money to the state.

Dillon said the 37.5 percent in revenue sharing the senators are seeking in the proposed amendment would be on all federal leases and in addition to the 8(g) split.

The federal government shared about $40.5 million with the state in 2010 from both onshore and offshore collections.

And, depending on how extensive oil and gas development becomes in the Arctic, the payoff could be significant. Energy operations off Louisiana, for instance, brought in more than $213 million for the federal government in 2010, according to Interior Department records. In Texas, it was more than $85 million.

In 2006, the Gulf Coast states succeeded in winning a 37.5 percent revenue-sharing deal but most of it won't kick in until 2016, according to The Hill political blog that has been following the debate.

Landrieu told The Hill she is hopeful the amendment will have broad appeal because it also allows coastal states that don’t have oil and gas operations off their shores to share in royalties and leases from renewable energy projects, like wind farms or tidal power facilities.

Still, the White House opposes it and energy committee chairman Sen. Jeff Bingaman, D-N.M., is reportedly not sold on it either.

Alaska's biggest offshore player, Shell Oil Co., says it is supportive of revenue sharing as a way to help out states that take on the burden of offshore development.

"It's always been our view that revenue sharing is the fairest way to compensate energy producing states, especially states like Alaska that play such a significant role in our nation's overall energy supply and security," said Shell Alaska spokesman Curtis Smith.

Contact Patti Epler at patti(at)alaskadispatch.com