Obama seeks to tap offshore royalties for climate
OREANDA-NEWS. President Barack Obama's administration wants to redirect the bulk of offshore oil and natural gas royalty revenue that the federal government pays to the Gulf producing states to pay for climate change adaptation programs in US coastal states.
Alabama, Louisiana, Mississippi and Texas since 2006 have received 37.5pc of revenue the federal government collects from US Gulf of Mexico oil and natural gas leases, subject to a cap that reached $500mn last year.
Obama's fiscal 2017 budget proposal would repeal the arrangement starting next year, which would save $3.25bn over 2018-2026. The Interior Department has not released details of the proposal.
But the budget plan plans to use half of the proposed savings from reforming the federal-state royalty sharing arrangement to pay for a new Coastal Climate Resilience program to fund climate change adaptation projects in states and local governments deemed at risk.
The climate program would spend $1.65bn in 2017-2026.
The Obama administration and the lawmakers over the past five years have tried to tackle the federal-offshore royalty sharing to reduce the amount the four Gulf producing states receive. Past proposals included sharing that revenue with states that would allow greater energy exploration off their coasts or spending a greater proportion of funds to promote offshore renewable energy production. None has succeeded in securing consensus in Congress.
The proposed 2017 budget for the Interior Department also calls for reforms of federal oil and natural gas management designed to raise royalties from public and offshore areas by a total of $1.2bn in 2017-2026. The proposed reforms include establishing minimum royalty rates for oil and natural gas, raising the onshore royalty rate, piloting a price-based sliding scale royalty rate and eliminating royalty relief for deep gas production.
The proposed royalty reform will be phased in over a five-year period, with the change expected to raise an additional $20mn for the fiscal 2017 and rising to $120mn in 2021.
The budget proposal would raise inspection fees for the offshore oil and gas production facilities by $11mn/yr by charging the operator for each inspection instead of a fixed annual inspection fee. The change ensures that operators of facilities subject to more frequent inspections carry a larger burden, the Interior says.
The Interior's Bureau of Land Management plans a $48mn hike in inspection fees, which it says will help pay for a quicker turnaround in permit applications. Public lands under the Bureau's management in the fiscal 2014 year accounted for 11pc of the US dry natural gas production and 5pc of crude output.