Alaska wants share of fed's oil revenue

Posted: Thursday, April 10, 2008

State lawmakers say it's time for Alaska to receive a share of federal revenue collected from offshore oil and gas development.

Brian Wallace / Juneau Empire
Brian Wallace / Juneau Empire

On Wednesday, the House unanimously supported a Senate resolution calling on Congress to provide consideration already afforded to four states along the Gulf of Mexico.

The state bears infrastructure costs of offshore development and should receive compensation, said Sen. Bill Wielechowski, an Anchorage Democrat who sponsored the resolution.

But critics in Congress say this kind of provision is akin to an earmark and detracts treasury revenue that should be shared nationally, not locally.

The revenue sharing debate comes as the federal government and the oil industry are looking to develop large tracts of the Chukchi and Beaufort seas for oil and natural gas production.

In February, the Minerals Management Service held robust bidding for outer continental shelf leases in the Chukchi Sea.

Wielechowski estimates the state lost $975 million because it was left out of a 2006 law that brings the other states revenue from bid proceeds and production royalties.

"That's enough to fund education for a year in this state," said Wielechowski, who is also a member of the Senate Resources Committee. "It's really a matter of fairness."

The current law, called the Gulf of Mexico Energy Security Act, works like this:

• U.S. coastal waters within three miles offshore are considered state waters, so royalties and production taxes go to the state.

• In areas developed three miles to six miles offshore, states get a 27 percent cut of the royalties.

• Outside six miles, states receive no cut, except for Alabama, Mississippi, Louisiana, and Texas.

During a recent lease sale in the Gulf of Mexico, the four states are to collectively receive an estimated $24.9 million from those proceeds.

That prompted U.S. Rep. Ed Markey, a Massachusetts Democrat who is chairman of the Select Committee on Energy Independence and Global Warming, to call the revenue sharing: "the king of all earmarks, a giveaway that keeps on giving."

"These four states will reap windfall profits from this deal, giving the other 46 states the short shrift when it comes time to fund important programs," he said in a statement.

The Gulf has been teeming with oil production activity for decades, and companies are venturing farther and farther offshore as technology advancements have allowed.

Alaska officials are hoping the industry will have similar success in the Chukchi and Beaufort seas.

There are 24 billion barrels of recoverable oil and 104 trillion cubic feet of recoverable natural gas in those waters, according to Minerals Management Services estimates.

U.S. Sen. Ted Stevens, R-Alaska, said these developments are important to national security and domestic production.

Push back from people opposing offshore development kept Alaska out of the mix when the current law was drafted two years ago, Stevens said.

Stevens and fellow Alaska Republican U.S. Sen. Lisa Murkowski are pushing to get Alaska similar provisions this year.

"These projects are nothing to be sneezed at," Stevens said. "We don't want them to go away."

Even as the offshore drilling provides minimal state benefits - mostly new jobs for local workers - state lawmakers support the efforts.

"If the feds want to do it, then the feds should pony up part of the money to pay for the services that are required," said House Majority Leader Ralph Samuels, R-Anchorage.

"If we are going to have these large-scale developments up there and it's going to cost the state money to handle a federal development, then the state should get a piece of it."

The state's nonbinding resolution now goes to Gov. Sarah Palin. If she signs it, it will be forwarded to Congress.

"It's going to become much brighter on everyone's radar screen once Alaskans realize that these other coastal states receive revenue shares," Palin said.

"I think that it's time that Alaska start pushing that and promoting it, and I really would like to see a change there."

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