‘Hardball’ issue on oil royalties has difficult history, future
By Jeremy Alford -
Mar 16, 2006
BATON ROUGE -- President Harry S. Truman offered Louisiana a sweet deal in 1949, an arrangement that state officials are still trying to get the feds to duplicate even today.
He offered fabled Gov. Earl Long all of the money oil companies pay the federal government in royalties within three miles from the shoreline and more than a third of everything further out. Unfortunately, as was the lay of the political land then, it wasn’t really Uncle Earl’s decision to make.
Leander Perez, the powerful boss of Plaquemines Parish who not only controlled people but also a wealth of mineral rights, refused to take the deal, even though other states would come along to snatch it up when offered. Perez was a greedy man by all accounts – he was known to redraw entire city boundaries to move along personal business deals – so it was no surprise when he held out for 100 percent of all royalties off Louisiana’s shoreline.
“Give ‘em Hell” Harry Truman, as he was called for his tenacious political style, told both of the Bayou State legends to stuff it. Today, Louisiana contributes more than $5 billion annually to the federal treasury from offshore oil and gas activity. And as a result of those hard-head tactics 57 years ago, the state only gets back a measly $39 million each year.
Nearly three generations of congressmen and governors have tried to remedy the situation, but the issue hasn’t budged a bit. Meanwhile, inland states such as New Mexico get back upwards of 50 percent of the oil-and-gas revenue they send to the federal government. Others even enjoy a 100 percent return, but few deposit as much as Louisiana.
The most recent incarnation of this campaign came last month when Gov. Kathleen Blanco made national headlines for her comments about sticking it to the feds.
“It’s time to play hardball, as I believe that’s the only game Washington understands,” she told lawmakers at the beginning of the most recent special session.
What Blanco means by “hardball” is her refusal to sign off on future federal offshore oil and gas royalties from Louisiana’s coastline. But Gary Strasburg, a spokesman for the Minerals Management Service, told The New York Times that Blanco’s approval of the leases is only an “intergovernmental courtesy” and wouldn’t stop the feds from getting their cash.
Additionally, even if Louisiana were to get a greater share of offshore royalties – partly for coastal erosion, as touted – the fund to hold such dedicated monies wouldn’t be ready. A constitutional amendment defining the fund was supposed to face voters in late April, but lawmakers moved it to the fall due to the disorder caused by the storms. Of course, if Blanco’s refusal to cooperate ends up in court, there’s no telling where her “hardball” tactics might lead.
A more practical approach is being taken in Congress by Rep. Bobby Jindal, R-Metairie, and Sen. Mary Landrieu, D-New Orleans. Seeing that block grants and one-time injections will only carry Louisiana so far during recovery, both have filed legislation that would raise all coastal states' shares of royalties to 75 percent for the area between three and 12 miles offshore, and eventually 50 percent further out.
It seems everyone from parish presidents and state representatives to congressmen from Virginia and special interest groups are in support of the Jindal and Landrieu bills.
Another tactic has also cropped up in legislation being pushed by Sen. Pete Domenici, a New Mexico Republican. He has been in talks with Gulf Coast lawmakers about adding a coastal restoration fund to his drilling bill, which would not exactly increase any royalty shares, but would provide a long-term funding mechanism.
Mark Davis, executive director of the Coalition to Restore Coastal Louisiana, is pleased to see the momentum building, but he has seen it before. Although the state has sympathy on its side and a governor willing to play “hardball,” Davis said the concept of greater revenue sharing is still a long way off and the state should be exploring other alternatives for long-term funding.
“Louisiana can’t afford to tie its wagon to a national revenue sharing campaign,” he said. “It’s just one option… I don’t think we should assume anything about the political environment right now. We’re still a long way from success and there are some huge road blocks. We’ve come close before and we’ve never actually crossed the goal line.”
Indeed, the stage was set three years ago when former Rep. Billy Tauzin, a Chackbay Republican, passed an energy bill through the House – as chairman of the House Energy Committee – with language granting Louisiana $1 billion over a number of years. Alas, it failed in the Senate by two votes. Again in 2001, Tauzin had brokered a deal for $600 million in another bill, but it too failed.
“We had done a great job of delivering the right message and making the case, but it got caught up in politics,” Tauzin said. “The objections came from appropriators who wanted to keep controlling the money every year.”
Rather than just handing a lump sum over to Louisiana, and possibly impacting programs in other states, Tauzin says lawmakers took a political stance and chose to maintain control over the purse strings. So while Louisiana might have the sympathy of the nation thanks to Katrina and Rita, that political reality remains.
Additionally, there’s always the danger that Louisiana’s efforts will be viewed as a money grab, especially when there’s such a positive spin on the state budget – even though one of the nation’s worst natural disasters hit about six months ago. When the governor proposed her $20.3 billion budget last week, it was not filled with cuts or cautionary verse, but rather pay raises for teachers and professors as well as status quo priorities.
Davis said Louisiana needs to figure out a way to leverage its needs and show Congress that more money is required to recover and strengthen the coast. He referred to it as the “free milk and the cow situation,” which isn’t working out.
“Why should (Congress) feel any pressure to help us?” he said.
Eventually, however, the federal government will learn – if they haven’t already – that paying to protect Louisiana now will be cheaper than paying to put the pieces back together again later, Tauzin said. Until then, Louisiana needs a solid strategy, one not based on “hardball” tactics that could possibly backfire, he added.
“I don’t think Louisiana needs to threaten,” Tauzin said. “I think Louisiana has the support and the sympathy and nation. If we squander it, it’s our own fault. The nation is ready to rally behind rebuilding and revenue sharing. I just don’t think we need to threaten to get there.”
Jeremy Alford can be reached at email@example.com.