A shortfall in Louisiana’s expected share of federal offshore oil and gas royalties is forcing the state to delay some critical coastal restoration projects and a program that helps fund infrastructure improvements.
The state’s Coastal Protection and Restoration Authority this week unveiled its spending plan for the fiscal year that starts in July, reflecting the fact that a key source of federal oil revenue for Louisiana will come in at only about half of what was expected.
The result is that some projects are on hold, including levees, floodgates, pump stations and surge barriers throughout coastal Louisiana, and the coastal authority will not help with the cost of several road and bridge projects.
“We had to take a hard look internally at our coastal restoration projects,” said Chip Kline, deputy director of the Governor’s Office for Coastal Activities. “There are many projects that we would not be able to move forward with.”
Some segments of the Morganza to the Gulf of Mexico Project, a 98-mile levee to protect people, property and marsh around Houma from hurricane storm surge, are on hold. Several other projects will be delayed in St. Bernard and Plaquemines parishes, as well as other parts of the coast, Kline said.
The coastal authority's staff also plans to put on hold a program that allocates up to 10 percent of the state's royalty money to infrastructure projects, such as roads and bridges, in areas directly affected by wetlands loss. That means the authority will not contribute to seven projects in four parishes, Kline said, though it doesn’t necessarily mean the projects won’t go forward.
Among them are a project to shore up a portion of La. 300 along Bayou Terre aux Boeufs in St. Bernard Parish and another to elevate a portion of La. 1 between Golden Meadow and Leeville in Lafourche Parish. That road is often inundated by tidal flooding. It leads to Port Fourchon, Louisiana’s southernmost port and a base for offshore oil and gas companies.
“These are important projects, but our focus has always been hurricane protection and restoration projects,” Kline said.
He said the infrastructure program will be on hold for at least five years, or until Louisiana gets more revenue.
Projects still scheduled to go forward in the next fiscal year include canal closures, levees and other stabilization projects slated for levee districts in and around Lafourche Parish, Lafitte, Grand Isle and St. Charles Parish.
The state also plans to relocate drainage canals, raise levees and conduct studies to determine how to best mitigate flooding in Plaquemines, St. Charles, St. James, St. Tammany and Vermilion parishes.
The coastal authority’s 2019 fiscal year plan projects $649.5 million in revenue, which is less than the $763.8 million in revenue in the current fiscal year.
The royalties the authority had been counting on come from the federal Gulf of Mexico Energy Security Act, or GOMESA. That law, the only source of recurring federal funds dedicated to combating land loss in Louisiana, allocates a portion of federal oil and gas royalties to states along the Gulf of Mexico, based on a complicated formula.
For years, Louisiana has been expecting an annual payout of about $175 million, with the first big payment due this spring. About $140 million of that would have gone to the coastal authority. Now, the agency expects to collect only about $70 million.
Although the formula for splitting up the money has been set, the dollar amount has always been subject to change because it’s tied to the health of the oil and gas industry. In recent years, the price of oil has dropped and energy production in the Gulf of Mexico has declined.
Still, local officials question how federal estimates could have been so far off. U.S. Rep. Garret Graves, R-Baton Rouge, said he worries that federal agencies might have found a way to artificially cut royalty payments because of their opposition to the program.
“I’ve posed questions to the Department of the Interior to help clarify whether or not there’s funny business going on,” he said.
Kline said he and Graves have met with Interior Secretary Ryan Zinke and demanded the federal government provide projections at least five years in advance so Louisiana can plan ahead.
The state is also planning to hire a financial analyst so Louisiana officials can make their own forecasts, Kline said. “We’re not just sitting on our hands,” he said.
In the meantime, U.S. Rep. Steve Scalise and U.S. Sen. Bill Cassidy are working to raise a $500 million annual cap on the amount of revenue that can flow to Gulf states through GOMESA. That proposal, inserted last month into the Senate’s version of the GOP tax plan, would open the door for more money once offshore production increases.