ShellPlatform

Shell’s Olympus platform produces oil and natural gas from the Mars field in the Gulf of Mexico off Louisiana's coast. The platform will be joined in the Mars-Ursa production area by Kaikias, a project that subsidiaries of Royal Dutch Shell and Mitsui Oil Exploration Co. are undertaking.

WASHINGTON — With the flourish of a marker across a huge human-sized check, Interior Secretary Ryan Zinke on Thursday signed off on the first major tranche of federal offshore oil revenue earmarked for Gulf states.

Louisiana's cut of the $188 million pot: $82 million, the vast majority of it already set aside for coastal restoration projects.

The cash comes courtesy of the Gulf of Mexico Energy Security Act, or GOMESA, a 2006 law that set up a formula to split some of the federal government's revenue from offshore drilling in the Gulf of Mexico with Louisiana, Mississippi, Texas and Alabama.

Louisiana and the other states have received a trickle of money under the first phase of the GOMESA deal — but the massive check Zinke signed on Thursday represents the first substantial payday for Louisiana, which has more oil platforms off its coast than the other three states and will therefore get the largest cut.

The $82 million figure is tens of millions less than federal and state officials had initially projected during rosier times for oil producers. A multi-year downturn in oil prices and a steep falloff in new oil exploration in the Gulf of Mexico is largely responsible for the downturn in revenue. Some have also blamed stricter regulations for offshore drillers, imposed by the Obama administration after the 2010 Deepwater Horizon disaster killed 11 workers and spilled millions of barrels of oil into the Gulf, for slowing production.

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But the payment will provide a major boost for coastal protection and restoration projects in cash-strapped Louisiana, where state lawmakers in Baton Rouge are currently grappling with a several-million-dollar budget shortfall. Under Louisiana's constitution, the GOMESA funds are dedicated to coastal restoration or protection work.

Roughly $66 million will go to the state. The other $16 million will go directly to 19 coastal parishes, with amounts ranging from $517,000 to $1.6 million.

The check dwarfs previous payouts under the GOMESA law in its much more limited Phase 1, the very first of which came in 2009. Before Thursday, a grand total of $37 million in federal Gulf of Mexico offshore oil revenue had been shared with Louisiana, Alabama, Mississippi and Texas.

"The dedication of these funds to address our coastal issues is the smartest investment we can make," Louisiana Gov. John Bel Edwards, a Democrat, said in a statement.

"This $82 million will be critical in our state's efforts to fight coastal erosion and I’ll continue to fight for more revenue sharing so that we can restore our coast, which is our first line of defense against future Gulf storm," said House Majority Whip Steve Scalise, R-Jefferson. 

"We have been waiting for this day for a long time," said U.S. Rep. Garret Graves, the Baton Rouge Republican who worked on the GOMESA legislation as a congressional staffer and ran the state's Coastal Protection and Restoration Authority under former Gov. Bobby Jindal.

"The effort to get a fair share of offshore energy revenues dates back many decades and every penny of these funds announced today will be invested in urgent coastal restoration and hurricane protection efforts to protect our communities and economy," Graves said.

"This money will help us restore our beautiful coast so that we can continue to provide oil, natural gas and seafood to the rest of the nation," said Sen. John Kennedy, R-Louisiana.

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The announcement came just hours after lawmakers on the House Natural Resources Committee wrapped up a hearing, chaired by Graves, on the GOMESA revenue-sharing arrangement and efforts to stanch the rapid erosion of Louisiana's coast. 

Former U.S. Sen. Mary Landrieu, a Louisiana Democrat who helped shepherd the original legislation through the U.S. Senate and now lobbies on behalf of oil and gas companies, testified. So too did Terrebonne Levee Board Chairman Reggie Dupree, a former state senator who drafted the constitutional amendment dedicating GOMESA funds to coastal restoration work; Port Fourchon Executive Director Chett Chiasson; and John Barry, a New Orleans-based author and former Southeast Louisiana Flood Protection Authority-East board member.

Each pointed out ways that federally built levees — most constructed after the catastrophic Great Mississippi River Flood of 1927 — have helped drive coastal land loss by preventing the naturally meandering river from depositing new sediment across south Louisiana through bayous and occasional floods.

Further destruction of the coast, Landrieu said, would directly threaten some of the country's largest ports and an incredible concentration of oil and gas infrastructure.

"It’s not just the coast that’s gone, it’s the economic vitality of the United States," Landrieu said.

The panelists all called for the federal government to increase the percentage of its offshore oil revenue sent to the states. Landrieu and Graves repeatedly pointed out that states with federally owned "onshore" oil and gas deposits get a 50 percent cut of the federal revenue.

GOMESA, once it goes into full effect, splits 37.5 percent of deepwater oil revenue between the four states — but also includes caps on the total amount of money shared by the federal government.

Sen. Bill Cassidy, R-Louisiana, noted that a provision he inserted into the tax law passed earlier this year lifts those caps in 2020 and 2021. The change will potentially mean $100 million in additional revenue for Louisiana if oil prices rebound.

Graves said he's currently drafting a bill to boost the amount but acknowledged that congressional budget rules make diverting more federal oil revenue to Gulf states a potentially unpopular move among Capitol Hill lawmakers from other states.

Offshore oil revenue is counted in the "baseline" federal budget, meaning that any dollars sent to Louisiana or other Gulf states would need to be offset with cuts elsewhere in the budget. 

The GOMESA program has found itself repeatedly under attack in Washington. President Donald Trump and former President Barack Obama both proposed eliminating the program entirely and using the money to plug holes elsewhere in the federal budget, though Congress blocked any changes to the program.

Trump reversed course this year and kept the revenue-sharing arrangement in the White House's draft budget, in part after intense lobbying from Louisiana lawmakers.

Graves noted a number of studies — including one by the Congressional Budget Office, the federal government's nonpartisan fiscal scorekeeper — indicating that for every dollar invested in flood-prevention and other mitigation projects, the federal government ends up saving more money in future disaster recovery and other costs.

The congressman said he hopes to find a way to use those figures to sell a change.

Although Thursday's panelists and Louisiana politicians are in agreement over the need for federal cash to aid the state's coast, they clashed at Thursday's hearing over how much responsibility oil and gas companies — which dredged channels through coastal marshes to drill wells and build pipelines — hold for repairing damage along the coast. Canals dug by oil companies have, along with navigation canals and other channels cut in the marsh, helped speed erosion.

The most vocal critic of the oil and gas industry on Thursday was Barry, who led the Southeast Louisiana Flood Protection Authority-East's 2013 multi-billion-dollar lawsuit against dozens of oil and gas companies for the destruction of wetlands and subsequently lost his seat on that board in a clash over the suit with Jindal.

A wave of recent lawsuits by parishes against oil and gas companies over coastal erosion has become a political as well as legal battlefield in the state. Edwards, the governor, has encouraged local governments to sue and said his administration would sue on their behalf if they don't.

Industry groups and a number of prominent Republicans have opposed the lawsuits, calling them both unnecessary and a potential threat to thousands of jobs in the state.

Barry on Thursday cited studies by oil and pipeline companies that concluded the industry bears particular responsibility for coastal erosion and land-loss and accused the industry of flouting state and federal rules requiring them to repair damage done by work along the coast.

U.S. Rep. Mike Johnson, R-Bossier, called that criticism overblown and said the oil and gas industry "gets an undue amount of the blame" for the destruction of the state's coast.

Dupree, meanwhile, said his levee district hasn't sued the industry because of the outsize role oil and gas companies play as landowners and employers in the area.

"Basically 90 percent of our economy is oil and gas," Dupree said. "Without working with them, we will not be there very much longer."

Follow Bryn Stole on Twitter, @BrynStole.