President Trump’s ambitious plan for expanded drilling off the coasts has caused quite a stir.
As initially proposed, the plan would open up for development 98 percent of undiscovered, technically recoverable oil and gas resources in offshore areas owned by the federal government. There are 47 potential lease sales off the nation’s coasts that, if leased, could increase government revenue and GDP by billions while creating hundreds of thousands of jobs.
But if Trump wants to pursue his plans of energy dominance, he should share the spoils of energy development with the states.
{mosads}Governors of coastal states have largely expressed that they do not support expanded offshore drilling as currently proposed, and why should they? With relatively low energy prices and many states not having favorable or any revenue sharing agreements for the proposed areas, these governors see little to gain.
But what if Congress and Trump made states equal partners with the federal government for offshore energy production? That’s how energy production on federal lands works. States containing federal land split the revenue from oil, gas, and coal lease sales equally with the federal government.
It’s a much better deal for states than what there is for offshore leases. For leases that occur within three miles of a state’s shore, the relevant state receives just 27 percent of revenue while the federal government receives the rest.
Beyond 3 miles, states on the Atlantic coast receive nothing while Gulf Coast states receive 37.5 percent for sales in select areas under the Gulf of Mexico Energy Security Act.
Those closest to energy development should have a greater share in its benefit. All energy production has tradeoffs. For example, state and local governments may need to build additional infrastructure from roads to ports to handle offshore energy development. Or a state may have environmental concerns with offshore drilling. But if states are equal partners with the federal government, state lawmakers can spend the money to better meet the needs of their constituents, making offshore oil development worthwhile.
All Americans benefit with greater energy resources — just look at how technological advances made recovering oil and natural gas from shale deposits possible and then impact it’s had on consumer prices.
The U.S. Energy Information Administration found that annual household spending on energy peaked in 2008 at $5,300, but then fell by $747.3 in 2014 largely because of decreases in gasoline, natural gas, and home heating oil. Families saved more money as prices declined because of the huge increase in supply of oil and natural gas from largely onshore drilling.
To continue these savings, Americans should look to offshore production of energy, which if reformed to make states equal partners, is a triple win for GDP, job growth, and government revenue.
A study by the Institute for Energy Research found that opening up the Atlantic, Pacific, and Eastern Gulf to energy development would increase GDP by $39 billion annually over the first seven years and $114 billion over the next three decades.
Moreover, there would be job growth — 502,000 jobs and a total of $5.8 trillion in combined revenue for federal, state, and local governments have been estimated. This revenue could go towards reducing the national debt, strengthening state governments’ underfunded pensions, and other budget priorities.
Congressional plans for revenue sharing draw bipartisan support. The SECURE American Energy Act is a step in the right direction and increases share of revenue going to states to 37.5 percent.
“It is encouraging to see legislators from both parties come together to craft policy that would stimulate responsible energy production and add more good paying jobs to our economy — the SECURE American Energy Act proves that this is possible,” Rep. Vicente González (D-Texas) notes. Along with Rep. González, the bill is sponsored by House Majority Whip Steve Scalise (R-La.), Chairman Rob Bishop (R-Utah.), and Rep. Henry Cuellar (D-Texas).
To build support for his plans of energy dominance, Trump should make coastal states equal partners in offshore energy production.
Grant Kidwell is the director of the Energy, Environment and Agriculture Task Force at the American Legislative Exchange Council (ALEC).