HTML _ IB10005 - Outer Continental Shelf: Oil and Gas Leasing and Revenue
3-May-2000; Lawrence Kumins; 8 p.

Abstract: The Outer Continental Shelf (OCS) was the source of $18 billion of oil and natural gas during 1998. This amounted to 25% of the nation's natural gas production and nearly 20% of the nation's crude oil. Nearly all of this output comes from the Central and Western Gulf of Mexico, where supporting infrastructure is already in place and there is little environmental opposition. Except for one sale in Alaska, no leases have been auctioned since 1991 in any other OCS region. The deep waters off Alabama, Louisiana, and Texas are the current focus of producer interest in the OCS. During 1998, the Interior Department's Minerals Management Service (MMS) collected $4.3 billion in royalties, rents, and bonus payments from new lease sales, a decline from the record level of $5.2 billion in 1997. Collections during FY1999 were only $3.3 billion, a decline which reflects the sharp drop in oil and gas prices. Oil prices began to recover in mid-1999 and were sharply higher at year-end. But, it is difficult to estimate the future course of OCS cash flow during a period of price volatility, and how revenue levels may be perceived in regard to funding new legislative proposals. Significant federal revenue from OCS leasing and production has been designated for the Land and Water Conservation Fund (LWCF) and the National Historic Preservation Fund (NHPF). But more of these designated funds have gone into the general fund (in special accounts) of the U.S. Treasury than have actually been appropriated. That situation, coupled with the interest of states in getting a greater share of rising OCS receipts -- especially high in 1997 -- led to legislation late in the 105th Congress. Bills introduced in the 106th Congress seek funding for coastal state impacts, LWCF, and wildlife programs (S. 25, H.R. 701). Other bills would provide funds for historic preservation and resource protection (S. 446, H.R. 798). A compromise version of H.R. 701 was reported out of the Resources Committee on November 10, 1999, by a 37-12 vote. The Clinton Administration proposed full $900 million funding for the LWCF in the FY2000 Budget under the Lands Legacy Initiative. Moratoria on leasing in environmentally sensitive areas of the OCS have been an issue in nearly every Congress since the early 1980s. A 1997-2002 OCS leasing plan from MMS appears to have satisfied major interests, and a presidential directive bans all leasing activity in sensitive areas through 2012. In August 1999, hearings were held on legislation (H.R. 33) to create a framework for decision making about oil and gas leasing off the Florida Gulf coast after 2002. On October 13, 1999, the House-Senate conference committee overturned a Senate-passed funding ban on a new royalty valuation system. MMS issued new rules for gas and oil valuation to become effective June 1, 2000. But in March, a producer suit overturned the nondeductibility of marketing costs for gas. In April, a similar suit was filed with regard to oil. [read report]

Topics: Energy, Natural Resources, Marine

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