Increased Revenue Sharing Of Offshore Energy Makes Good Consumer Sense

Matthew Kandrach | President, CASE

Offshore energy production can provide key revenue to our coastal states for our crumbling infrastructure and struggling public school systems, while allowing U.S. consumers to reap the rewards of reliable and affordable energy for their homes and cars. That’s why the Department of Interior’s proposal to expand offshore energy development should be coupled with an expansion of royalty revenue sharing between the federal government and states.

American consumers gain from increased domestic oil and gas production and the benefits that go along with it, including increased better-paying jobs, stimulated tourism and restaurant industries, and billions in revenue that U.S. energy production generates for the nation’s economy. Currently the U.S. oil and gas industries support 9.8 million jobs, or 5.6 percent of our total employment.

If not for help from offshore energy production, consumers would bear the expense of heavy dependence on imported oil and gas, the cost of which reached $435 billion in 2011. Today we are far less dependent on imports, but measures need to be taken to expand offshore oil and gas development to ensure today’s energy security isn’t fleeting. Additionally, relying less on foreign countries for our energy means that we are slowing working towards self-sufficiency and minimizing the leverage those countries may potential hold over us – ultimately strengthening our national security.

Currently, most states only receive revenue from offshore drilling if a federal lease falls within three miles of its coastal border. However, Gulf Coast states qualify to receive revenue for select leases beyond three miles under a statute enacted in 2006. Reforming government management of royalty revenue from offshore energy production would be the icing on the cake for consumers. If Congress expands revenue sharing to include all states with oil-and-gas production off their coasts, there will be an immediate financial incentive for coastal states and consumers to support and understand the economic benefits of the plan.

Revenue sharing makes sense for several reasons. It would make it easier for coastal states to close their own budget gaps and pass along some of the revenue to coastal communities. This would help build public support for an expansion of offshore drilling, which would bolster U.S. energy production, increase domestic investment, create jobs, and generate additional revenue for the federal government.

Onshore energy development proves the current economic benefits associated with energy exploration and production. States with federal land where drilling is done receive half of the associated revenue. This policy is credited with aligning costs and benefits of energy development, which in turn boosts the economies of local communities while generating support for energy development.

Far from being a burden on the federal government, revenue could play a vital role in opening untapped areas of the Outer Continental Shelf to oil and gas development. Currently, 94 percent of the technically recoverable oil and gas offshore is off-limits to energy producers. The Interior Department’s proposed five-year plan for offshore energy development would provide access to nearly all of our offshore acreage. But this plan will only get us halfway there if we can’t build public support behind new exploration. We urge Congress to consider the benefits of offshore energy coupled with the case for revenue sharing for consumers and their families in our coastal states, when analyzing the newly announced offshore leasing plan.

Matthew Kandrach is President of CASE, Consumer Action for a Strong Economy, a free-market oriented consumer advocacy organization.


The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.

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