The legislation governing offshore drilling in the Gulf of Mexico is getting closer to its second phase, and in anticipation, Alabama’s coastal counties are preparing for revenue shares that could more than quadruple in the next two years.
In 2006, after a moratorium on new oil exploration was lifted, President George W. Bush signed the Gulf of Mexico Energy Security Act (GOMESA). The act granted oil companies flexibility within their existing leases, set limitations and boundaries for oil exploration in the Gulf and established a program to share federal oil revenues with states that have counties along the Gulf Coast.
Beginning in 2007, just under 38 percent of the revenue from bonus bids, rentals and production royalty began filtering to Texas, Louisiana, Mississippi, Florida and their coastal political subdivisions.
A number of factors, including proximity to active leases, determine each state’s yearly share, and once that number is determined 80 percent goes to the state government and 20 percent is split between coastal counties.
Since 2009, Mobile County has received more than $1.2 million in GOMESA funding, which can be used for land conservation, hurricane preparedness projects, coastal protection and other environmental efforts.
GOMESA was designed to prevent over-harvesting of an area that produces the majority of the United States’ oil and natural gas. As a result the law was split into two phases, and second phase greatly expands the number of leases involved in the revenues shared beginning in 2017.
The U.S. Department of Interior and its Office of National Resources Revenue (ONRR) are tasked with collecting and distributing the money generated from federal offshore leases. On May 9, ONRR program analyst Karen Osborne briefed the Mobile County Commission on the changes that will occur in GOMESA’s second phase.
“Right now the leases in the revenue sharing program are in two very small areas known as the ‘181 area.’ That’s where the leases are that generated the revenues we’ve been sharing with states since 2009,” Osborne said. “Starting in 2017, we start sharing revenues from every lease issued in the Gulf since the law passed in 2006. That’s the majority of the Gulf of Mexico, so it ramps up significantly.”
To quantify, Osborne said there have only been 79 active leases since 2008, but when the western portion of the Gulf is added in Phase II that number will jump to more than 3,000. Per the legislation, the second phase will be active through the year 2055, while revenue generated from the 181 area will be shared indefinitely.
Environmental Services Director Bill Melton said Mobile County could start seeing increased funding from Phase II leases as early as March 2018. Though no projects have been specifically identified or prioritized, he said the funding has acceptable uses that are similar to the Coastal Impact Assistance Program the county has used to preserve hundreds of acres of wetlands and build a recycling center in West Mobile.
Though the revenues are subject to fluctuate with oil prices and demand, President Barack Obama’s 2017 budget estimated total revenues at around $750 million. According to Osborne, that leaves $281 million for the states and could mean an estimated $8 million split between Mobile and Baldwin counties.
“Around $4 million could be coming to the county as early as March 2018, and you have to consider that as the lower end of the projected allocations because of the current oil and gas market,” Melton said. “I plan to make a recommendation that some kind of plan be put together to prioritize some of the projects [the commission] would like to do.”
Across the bay, Baldwin County officials aren’t so sure GOMESA funding will meet those projections, and Commissioner Chris Elliott told Lagniappe there wouldn’t be a particular plan until there is more time to assess what revenue might actually be available.
Elliott said he’s hopeful whatever funding the county receives can be leveraged on the bond market to get more funding sooner, which could help address infrastructure needs in Baldwin County.
“I would much rather look at what the long-term payout is and the possibility of leveraging that money to accomplish some of our larger goals specific to the coast, as opposed to using it as it comes in for smaller $2 million to $4 million projects,” Elliott said. “Right now, the state doesn’t have the capital to accomplish what we need, infrastructure wise, in Baldwin County.”
Though GOMESA is similar to other programs used to fund environmental projects, it differs in that it also lists “hurricane preparedness” as an acceptable use. Louisiana has already used that provision to fund road work and other infrastructure projects, and Elliott is hoping Alabama can do the same for projects like the Baldwin Beach Extension or to fund some of the long-awaited Interstate 10 bridge project over the Mobile River.
“There is really only one thing county governments do to protect citizens from hurricanes — we evacuate, and that qualifies as an acceptable use,” Elliott said. “Though if we were going to use this for a larger project, it would have to be in concert with other funding sources.”
While GOMESA funds will help, Elliott said, it’s important local officials and coastal legislators continue to seek other funding — specifically referencing Alabama’s $1 billion BP settlement which is still in legislative limbo. Elliott said he doesn’t want state leaders in Montgomery to view GOMESA funding as a fix-all for the damages coastal counties experienced after the BP oil spill.
“The last thing I want is for the Legislature to say, ‘the coast is going to get some of this GOMESA money, they’re fine,’” Elliott said. “It’s absolutely not a solution for the infrastructure problems we’re facing in Baldwin County because it’s such a small and unpredictable amount of money over a long period of time.”
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