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STATE PERSPECTIVES ON 

OFFSHORE REVENUE SHARING 

OVERSIGHT HEARING 

BEFORE THE

COMMITTEE ON NATURAL RESOURCES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

Wednesday, July 27, 2011 

Serial No. 112-54 

Printed for the use of the Committee on Natural Resources 

( 

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html 

or 

Committee address: http://naturalresources.house.gov 

(II) 

COMMITTEE ON NATURAL RESOURCES 

DOC HASTINGS, WA, Chairman 

EDWARD J. MARKEY, MA, Ranking Democrat Member 

Don Young, AK 

John J. Duncan, Jr., TN 

Louie Gohmert, TX 

Rob Bishop, UT 

Doug Lamborn, CO 

Robert J. Wittman, VA 

Paul C. Broun, GA 

John Fleming, LA 

Mike Coffman, CO 

Tom McClintock, CA 

Glenn Thompson, PA 

Jeff Denham, CA 

Dan Benishek, MI 

David Rivera, FL 

Jeff Duncan, SC 

Scott R. Tipton, CO 

Paul A. Gosar, AZ 

Rau ́l R. Labrador, ID 

Kristi L. Noem, SD 

Steve Southerland II, FL 

Bill Flores, TX 

Andy Harris, MD 

Jeffrey M. Landry, LA 

Charles J. ‘‘Chuck’’ Fleischmann, TN 

Jon Runyan, NJ 

Bill Johnson, OH 

Dale E. Kildee, MI 

Peter A. DeFazio, OR 

Eni F.H. Faleomavaega, AS 

Frank Pallone, Jr., NJ 

Grace F. Napolitano, CA 

Rush D. Holt, NJ 

Rau ́l M. Grijalva, AZ 

Madeleine Z. Bordallo, GU 

Jim Costa, CA 

Dan Boren, OK 

Gregorio Kilili Camacho Sablan, CNMI 

Martin Heinrich, NM 

Ben Ray Luja ́n, NM 

John P. Sarbanes, MD 

Betty Sutton, OH 

Niki Tsongas, MA 

Pedro R. Pierluisi, PR 

John Garamendi, CA 

Colleen W. Hanabusa, HI 

Vacancy 

Todd Young, Chief of Staff 

Lisa Pittman, Chief Counsel 

Jeffrey Duncan, Democrat Staff Director 

David Watkins, Democrat Chief Counsel 

(III) 

CONTENTS 

Page 

Hearing held on Wednesday, July 27, 2011 .......................................................... 1 

Statement of Members: 

Hastings, Hon. Doc, a Representative in Congress from the State of 

Washington .................................................................................................... 1 

Prepared statement of ............................................................................... 3 

Markey, Hon. Edward J., a Representative in Congress from the State 

of Massachusetts ........................................................................................... 3 

Prepared statement of ............................................................................... 5 

Statement of Witnesses: 

Alexander, Ryan, President, Taxpayers for Common Sense ......................... 14 

Prepared statement of ............................................................................... 16 

Domenech, Hon. Douglas W., Secretary of Natural Resources, 

Commonwealth of Virginia ........................................................................... 6 

Prepared statement of ............................................................................... 8 

Graves, Hon. Garret, Chairman, Coastal Protection and Restoration 

Authority, Office of the Governor, State of Louisiana ............................... 10 

Prepared statement of ............................................................................... 12 

Additional materials supplied: 

‘‘Estimates of Phase II GOMESA Revenue Sharing Based on Central 

and Western Gulf of Mexico Estimated Production, Revenues’’ 

submitted for the record by Representative Grijalva ................................. 36 

Marron, Donald B., Acting Director, Congressional Budget Office, Letter 

to The Honorable Pete V. Domenici, Chairman, Senate Committee on 

Energy and Natural Resources, submitted for the record ......................... 40 

Parnell, Hon. Sean, Governor, State of Alaska, Letter to The Honorable 

Doc Hastings and The Honorable Edward Markey submitted for the 

record ............................................................................................................. 47 

(1) 

OVERSIGHT HEARING ENTITLED ‘‘STATE 

PERSPECTIVES ON OFFSHORE REVENUE 

SHARING.’’ 

Wednesday, July 27, 2011 

U.S. House of Representatives 

Committee on Natural Resources 

Washington, D.C. 

The Committee met, pursuant to call, at 10:04 a.m. in Room 

1324, Longworth House Office Building, Hon. Doc Hastings 

[Chairman of the Committee] presiding. 

Present: Representatives Hastings, Gohmert, Lamborn, Wittman, 

Fleming, Duncan of South Carolina, Tipton of Colorado, Labrador, 

Landry, Johnson, Markey, Napolitano, Holt, Grijalva and Luja ́n. 

The CHAIRMAN. The Committee will come to order. The 

Chairman notes the presence of a quorum, which under Rule 3(e) 

is two Members. 

The Committee on Natural Resource is meeting today to hear 

state perspectives on offshore revenue sharing. Under Committee 

Rule 4(c), opening statements are limited to the Chairman and the 

Ranking Member. However, I ask unanimous consent that any 

Member who wishes to have an opening statement be part of the 

record. Without objection, so ordered. 

Before I recognize myself to make my opening statement, as 

people are probably aware, there are a few other issues floating 

around the Capitol today and our respective caucuses and conferences are meeting right now to discuss those issues, but I do appreciate very much the witnesses for being here. 

I will recognize myself now for five minutes. 

STATEMENT OF HON. DOC HASTINGS, A REPRESENTATIVE IN 

CONGRESS FROM THE STATE OF WASHINGTON 

The CHAIRMAN. Revenue sharing from offshore energy production 

has long had support in Congress, but its implementation is incomplete and limited to only a few Gulf states. I do recognize that 

offshore revenue sharing is not universally supported and has its 

opponents. 

Today I hope the Committee can have a constructive conversation and that Members concentrate on how best to move forward 

on a proposal that is both fair and responsible. We should focus on 

how best to share offshore revenue, because the Committee will be 

taking up this matter legislatively after the August work period. 

2 

As we begin this conversation, I believe it is crucial to recognize 

that revenue sharing will increase American energy production by 

creating new incentives for opening new offshore areas for drilling. 

More American energy production equates to more jobs, a stronger 

economy and more revenue. 

The argument will undoubtedly be made today that the Federal 

Government cannot afford revenue sharing; that somehow the 

Federal Government cannot find a responsible way to fairly share 

offshore revenues with the states that are impacted. Ironically, 

those making this argument are the same folks who voted in the 

last Congress to give $58 billion in stimulus spending directly to 

state and local governments. 

This argument that we cannot afford to share offshore revenue 

ignores the fact that this policy will open the door to new energy 

production in new areas. Currently the Federal Government is not 

collecting any revenue from energy production off the Atlantic 

Coast because this area is not open for exploration and production. 

A revenue sharing proposal would help spur energy development in 

the Atlantic and other offshore areas, generating revenue for the 

Federal Government. 

It is interesting to note that the firmest opponents to offshore 

revenue sharing in many respects are the same people who fundamentally oppose offshore drilling. This is quite a different argument to make; that revenue sharing unfairly gives away Federal 

revenue, when if they had their way they wouldn’t be collecting 

revenue from offshore in the first place. 

When it is all boiled down, a revenue sharing proposal is and 

must be about fairness. It must be fair to the coastal states by applying to all producing states equally and recognizing that they 

have a tremendous stake in the costs and inherent risk to offshore 

energy production and so they should share in the rewards. 

A revenue sharing proposal must also be fair to the American 

people. Our offshore oil and natural gas resources are Federal resources that belong to all Americans. This is a fact that we cannot 

forget. 

As I stated at the outset, I am actively reviewing revenue 

sharing proposals, and I intend for the Committee to address this 

legislatively after the August district work period. For the record, 

such a bill will be offset and comply with the House Cut-Go rules 

and protocols. 

Also on the agenda after August is action on organic legislation 

to reorganize the Department of the Interior’s management of offshore energy. On Monday, I unveiled a discussion draft of such 

legislation, and I welcome those comments and suggestions of 

people that have any comments and suggestions on them. 

Each of these proposals further the goal of increasing responsible 

offshore energy production to create jobs, to protect our national 

security and generate more revenue for the Federal Government 

and the coastal states that partner with the Federal Government. 

This Committee has already acted aggressively to advance increased American energy production during the first half of this 

year, and our pace will only accelerate when Congress reconvenes 

in September. I would just remind Members to get rested, and we 

will look for a very robust time after the break. 

3 

I thank the witnesses for being here, and I will introduce them 

in a moment. With that, I yield to the distinguished Ranking Member, Mr. Markey. 

[The prepared statement of Mr. Hastings follows:] 

Statement of The Honorable Doc Hastings, Chairman, 

Committee on Natural Resources 

Revenue sharing from offshore energy production has long had support in Congress, but its implementation is incomplete and limited to only a few Gulf Coast 

states. I do recognize that offshore revenue sharing is not universally supported and 

has its opponents. Today, I hope the Committee can have a constructive conversation and that Members concentrate on how best to move forward on a proposal that 

is fair and responsible. We should focus on how best to share offshore revenue because the Committee will be taking up this matter legislatively after the August 

work period. 

As we begin this conversation, I believe it’s crucial to recognize that revenue sharing will increase American energy production by creating new incentives for opening 

new offshore areas to drilling. More American energy production equates to more 

jobs, a stronger economy, and more revenue. The argument will undoubtedly be made today that the federal government cannot afford revenue sharing. That somehow the federal government cannot find a responsible way to fairly share offshore revenue with states. Ironically, those making 

this argument are the same folks who voted last Congress to give $58 billion in 

stimulus spending directly to state and local governments. 

This argument that we can’t afford to share offshore revenue ignores the fact that 

this policy will open the door to new energy production in new areas. Currently the 

federal government is not collecting any revenue from energy production off the Atlantic Coast because this area is not open for exploration and production. A revenue 

sharing proposal would help spur energy development in the Atlantic and other offshore areas, generating new revenue for the federal government. 

It’s interesting to note that the firmest opponents of offshore revenue sharing are 

the same people who fundamentally oppose offshore drilling. This is quite a contorted argument to make—that revenue sharing unfairly gives away federal revenue, when if they had their way, we wouldn’t be collecting revenue from offshore 

drilling in the first place. 

When it is all boiled down, a revenue sharing proposal is, and must be, about 

fairness. 

It must be fair to coastal states by applying to all producing states equally and 

recognizing that they have a tremendous stake in the costs and inherent risk of offshore energy production, and so they should share in the rewards. 

And a revenue sharing proposal also must be fair to the American people. Our 

offshore oil and natural gas resources are federal resources that belong to all Americans. This is a fact we must not forget. 

As I stated at the outset, I’m actively reviewing revenue sharing proposals, and 

I intend for the Committee to address this legislatively after August. For the record, 

such a bill will be offset and comply with House Cut-Go rules and protocols. 

Also on the agenda for after August is action on organic legislation to reorganize 

the Department of Interior’s management of offshore energy. On Monday, I unveiled 

a discussion draft of such legislation. I welcome those with comments and suggestions to share them. 

Each of these proposals further the goal of increasing responsible offshore energy 

production to create jobs, protect our national security, and generate more revenue 

for the federal government, and the coastal states that partner with us. 

This Committee has already acted aggressively to advance increased American energy production during the first half of this year, and our pace will only accelerate 

when the Congress reconvenes in September. Get rested by Labor Day, because it 

is going to be a very active autumn. 

I thank the witnesses for being here today and look forward to their testimony. 

STATEMENT OF HON. EDWARD J. MARKEY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MASSACHUSETTS 

Mr. MARKEY. Thank you, Mr. Chairman, very much. So we are 

here at a very interesting time. The reason that this is so sparsely 

attended today is that almost all the Republicans are huddled in 

4 

one room trying to find with Speaker Boehner a way to find a trillion dollars worth of revenue. Actually not revenue. Revenue means 

taxes. It could mean royalties too, I suppose. 

But to just find a trillion dollars to tide us over for the next six 

months or so before we go back into crisis again and keep a cloud 

over the American economy so the trillions of dollars on the sidelines the private sector is not investing because of economic uncertainty stays on the sidelines so that this recession just continues 

without being fully remedied with competence in the marketplace 

being restored. 

So what are we doing here today? Well, what we are doing here 

today is finding a way to take more revenues out of the Federal 

Government, the revenues that are paid by oil companies to the 

Federal Government for the right to drill for oil off of the coastline 

of the United States, actually not reducing, but increasing the deficit at the Federal level that is causing the crisis that we have 

right now. 

Now, back in 2006 there was a bill which passed. It was rammed 

through. It was like the last thing Republicans did when they controlled the House and the Senate and the Presidency was to ram 

through a bill which gave a disproportionate share, upwards of 

$150 billion worth of royalty money, to four states down in the Gulf 

of Mexico. 

Now, that $150 billion is exactly how short John Boehner is right now in reaching a trillion dollars, but that $150 billion is gone and 

is not there for the Republicans to find because they gave it back 

to the states as a gift from the Federal Government. 

Now, this bill that we are going to consider today will take even 

more billions of dollars and take it from the Federal Treasury and 

hand it over to the states, kind of welfare for the states, which 

would be fine if the Federal Government was rolling in dough, 

which we are not. In fact, we are in a crisis right now, but here 

we are debating how we can take more money and give it away 

from the Federal Government and give it to the states. 

So Mr. Holt and I are going to introduce legislation which will 

rescind that 2006 law. We need that money back for the Federal 

Government. Otherwise we are going to have to cut Medicare, cut 

Medicaid, cut NIH funding, cut programs for the disabled in our 

country, cut defense spending. We need that money, OK? 

It is obvious that that was a huge mistake, given the crisis that 

we are in right now, but this bill is a big mistake. How can we 

even begin to discuss this subject right now, given the totality of 

the fiscal calamity which is now descending upon the capital markets of our country and the world because of the fiscal crisis of the 

Federal Government? 

So my advice would be that this is just a big mistake and seen 

in the totality of the total fiscal situation of our country unfortunately it is just something we can’t afford. You know, we would like 

to help the states out right now, but we are discussing cutting 

Medicaid funding for the states right now. 

We are discussing cutting programs across the board for the 

states that the Federal Government won’t be able to provide any 

longer. We can’t possibly be talking about actually a transfer of tax 

money, royalty money, to the states at this crucial time. 

5 

So Mr. Holt and I are going to respond to that with legislation 

not only on this bill, but on the legislation that passed in 2006 because hindsight is 20/20. We can see the 2006 bill is a big mistake, 

but you don’t have to be Dick Tracy to figure out that the bill that 

we are considering here today going forward prospectively is like 

putting straws into the revenues of the Federal Government and 

allowing the states to suck it out even as they already benefit from 

all the money that is within the first three miles off of their coastline. They get 100 percent of the revenues anyway. 

But the money that is deep offshore, that is Federal money. That 

is money for the whole country, not just for the states that immediately abut that water mass. And so I look forward to the hearing 

and the testimony of our witnesses. 

[The prepared statement of Mr. Markey follows:] 

Statement of The Honorable Edward J. Markey, Ranking Member, 

Committee on Natural Resources 

Thank you. 

It is hard to imagine a hearing that would be more tone deaf than the one the 

majority has scheduled today. We have less than one week to reach an agreement 

to reduce our federal deficit and raise the debt ceiling. But here the Republican Majority is holding a hearing to actually discuss increasing our deficit by diverting billions of dollars worth of oil drilling royalties away from the federal government and 

to the states. 

The Republican majority refuses to accept any increases in revenues by getting 

rid of tax breaks for billionaires and oil companies as part of a balanced approach 

to reduce our budget deficit and avoid national default, but they apparently have 

no problem diverting billions in federal drilling revenue. 

The revenue generated from oil and gas drilling on federal lands offshore is one 

of the largest non-tax revenue streams for the federal government. These oil and 

gas resources belong to all of the American people—not just those of the adjacent 

states. They are public resources that belong as much to someone living in Massachusetts or Ohio as they do to someone in Louisiana or Texas. These are resources 

that should help every American, not a select few. 

The revenue generated from these public resources goes to the federal treasury 

to help pay for Medicare and Medicaid. It helps to pay for our national defense. It 

helps pay for Pell Grants to educate our children. This money should be used to benefit all Americans. Yet the Republican Majority would like to use it as a bargaining 

chip to bribe cash-strapped states into accepting new drilling. 

Coastal states already get 100 percent of the revenue from all drilling in state 

waters, generally the first three miles from shore. In addition, the OCS Lands Act 

gives states 27 percent of the revenue from drilling in the first 3 miles of federal 

waters, generally 3 to 6 miles offshore. 

However, in the waning hours of the 2006 Congress, the Republican leadership 

rammed through legislation that sent revenues from offshore drilling in federal 

waters in the Gulf of Mexico to four states—Louisiana, Mississippi, Alabama and 

Texas. That bill set up what amounts to a new entitlement program for these four 

states that will result in a massive transfer of wealth from the federal government. 

According to the Department of the Interior, the revenue sharing provisions in 

that bill will cost the federal government $150 billion over the next 60 years. That 

is $150 billion that we will not have to reduce our deficit. 

Normally, welfare means the largess of the State. But with this oil welfare, it’s 

the largess going to the states. 

And it could actually get worse if a proposal in the Senate to eliminate the annual 

$500 million cap on what can be sent to the states were to become law. That proposal would divert an additional $224 billion of oil well welfare to those four Gulf 

States over the next 45 years. 

If we are serious about getting our fiscal house in order, we need to end the royalty giveaway to these four Gulf States. And we should certainly not be expanding 

this giveaway. 

That is why today I will be introducing legislation with Representative Holt that 

would put an end to this irresponsible fiscal policy. Our legislation would repeal the 

revenue sharing provisions enacted in 2006 and save U.S. taxpayers $150 billion 

6 

over the next 60 years. Our legislation would also ensure that all of those funds be 

used for deficit reduction. 

As the Republican majority is pushing us to the brink of financial disaster by demanding cuts to Medicare and Social Security in order to reduce the budget deficit, 

we simply cannot afford to send $150 billion that rightfully belongs to U.S. taxpayers to these four Gulf States. It’s time to stop this oil well welfare for the Gulf 

States and put this money to better use reducing the deficit and paying our bills. 

The CHAIRMAN. I thank the gentleman, I think, for his opening 

statement. 

Mr. MARKEY. You are welcome. 

The CHAIRMAN. As I am sure he thanks me. I welcome our witnesses. We have with us The Honorable Doug Domenech, the Secretary of Natural Resources for the Commonwealth of Virginia; The 

Honorable Garret Graves, the Chairman of the Coastal Protection 

and Restoration Authority, Office of the Governor of the State of 

Louisiana; and Ms. Ryan Alexander, Taxpayers for Common Sense. 

The rules here, just to give you the timing lights here, when the 

green light goes on you have five minutes, when the yellow light 

goes on you have one minute, and when the red light goes on that 

means that the time has expired. Without objection, your full statement will be in the record. If you can confine your remarks as close 

to five minutes, I would very much appreciate that. 

Secretary Domenech, you are recognized for five minutes. 

STATEMENT OF HON. DOUG DOMENECH, SECRETARY OF 

NATURAL RESOURCES, COMMONWEALTH OF VIRGINIA 

Mr. DOMENECH. Good morning, Mr. Chairman and Members of 

the Committee. I am Doug Domenech, Secretary of Natural Resources for the Commonwealth of Virginia. 

In my secretariat, I oversee six state environmental agencies and 

assist in implementing the Commonwealth’s energy policy. Thank 

you for inviting Virginia to share our thoughts on the importance 

of revenue sharing as a critical part of the development of offshore 

oil and gas resources. 

Governor Bob McDonnell has been clear from the day he took office in January of 2010 that his goal is to make Virginia the energy 

capital of the East Coast. We have been hard at work expanding 

opportunities for both conventional and renewable energy development onshore and offshore as part of an all-of-the-above strategy. 

As part of this strategy, the Governor has pushed hard for access 

to oil and gas revenues off the Virginia coast. We enjoy the bipartisan support of our General Assembly and our congressional delegation, including our U.S. Senators Warner and Webb, and a 

majority of Virginia’s delegation in the House of Representatives, 

in this effort. 

We are grateful to House Natural Resources Chairman Hastings 

and this Committee for putting forward bills that passed the House 

of Representatives to reinstate Virginia Lease Sale 220 after it was 

approved but then canceled by the Administration after the Deepwater Horizon tragedy. Governor McDonnell supports your diligent 

efforts in making offshore exploration and development a priority 

for our nation, and Virginia now asks for support of legislation to 

allow revenue sharing of royalties from offshore Federal leases. 

7 

Virginia believes it is important to share revenues from oil and 

gas exploration with all coastal states in a similar way as is constructed in the Gulf. My written testimony can be summarized in 

four points: 

First, revenue sharing proves that energy development is a partnership between the states and the Federal Government. Development of our domestic oil and natural gas resources is critical to our 

nation’s secure energy future. States must be partners with the 

Federal Government in that development, and as partners the 

states should share in the revenues derived from OCS activity. 

Revenue sharing that benefits local and state governments helps 

to promote national economic interests and generates additional 

Federal revenue by increasing state and local participation in offshore projects. Local and state governments will be incentivized to 

assist in the offshore exploration process by creating necessary infrastructure or passing offshore exploration friendly legislation. 

Second, revenue sharing is not new. The precedent for royalty 

revenue sharing has already been set. Since the 1920s, the states 

have been collecting royalties from onshore Federal mineral leases. 

Since the 1950s, seven coastal states have been collecting royalties 

from offshore Federal leases within the three miles of their state 

waters. 

Since 2006, four coastal states have been collecting revenues 

from offshore leases in any Federal waters under GOMESA. Now 

is the time for Congress to act to provide all states, not just a select 

few, with royalty revenue sharing on offshore Federal leases. 

Third, revenue sharing is fair and equitable. States that choose 

to pursue offshore development should receive a deserved portion 

of its rewards. Revenue sharing provides the states with the economic ability to invest in local communities most affected by development risk. 

States are on the front lines of the effects of offshore leasing, not 

the Federal Government. Last year’s tragic offshore oil spill showed 

that such development can carry real consequences not for the inland states that ultimately use much of the energy being produced, 

but for the coastal states at water’s edge. 

And finally, revenue sharing provides the resources states need 

to develop and improve infrastructure. Returning a reasonable portion of the vast revenues from offshore generation and production 

to states will allow them to be far better prepared to mitigate the 

resulting risks and impacts. Revenue sharing provides the states 

with the ability to keep up with increasing industrial activity and 

ensure that we have world class safety and environmental safeguards. The states are first on the scene, and the states are the 

most directly affected. 

Our national energy needs are too great not to have revenue 

sharing. We are hopeful that this Committee and this Congress 

will allow revenue sharing to go forward, and the Commonwealth 

of Virginia stands ready to lend a hand in any way we can. 

Thank you, and I look forward to answering any questions you 

might have. 

[The prepared statement of Mr. Domenech follows:] 

8 

Statement of The Honorable Douglas W. Domenech, 

Secretary of Natural Resources, Commonwealth of Virginia 

Good morning Mr. Chairman and members of the Committee. I am Doug 

Domenech, Secretary of Natural Resources for the Commonwealth of Virginia. In my 

Secretariat, I oversee six state agencies; the Department of Environmental Quality, 

the Department of Conservation and Recreation, the Virginia Marine Resources 

Commission, the Department of Historic Resources, the Virginia Museum of Natural 

History, and the Department of Game and Inland Fisheries. In addition, my Secretariat works closely with the Department of Mines, Minerals and Energy located 

within the Secretariat of Commerce and Trade to implement the Commonwealth’s 

energy policy, and my Deputy, Maureen Matsen, serves as the Governor’s Senior 

Energy Advisor. 

Thank you for inviting Virginia to share our thoughts on the importance of revenue sharing as a critical part of the development of offshore oil and gas resources. 

Virginia Governor Bob McDonnell has been clear from the day that he took office 

in January 2010 that his goal is to make Virginia the energy capital of the East 

Coast. We have been hard at work expanding opportunities for both conventional 

and renewable energy development, on-shore and offshore, as part of an ‘‘all-of-theabove’’ strategy. It is our intention to lead the way to reduce our nation’s dependence of foreign sources of oil through new and innovative efforts to reduce the Commonwealth’s consumption of gasoline and expand alternative fuel markets, and by 

being the first state on the Atlantic to explore and develop offshore resources. 

As part of this strategy, the Governor has pushed hard for access to oil and gas 

resources off the Virginia coast. We enjoy the bi-partisan support of our General Assembly and our Congressional delegation in the United States Senate—Senators 

Warner and Webb—and a majority of Virginia’s delegation in the House of Representatives in our effort. 

Immediately after his election, the Governor expressed his desire to both Interior 

Secretary Salazar and President Obama that the Administration proceed with the 

previously scheduled Outer Continental Shelf (OCS) Lease Sale 220 off Virginia, 

and we were thrilled when, in March of last year, the President announced Lease 

Sale 220 would proceed. 

Unfortunately, on April 20, 2010 the Deepwater Horizon tragedy occurred and on 

May 7, 2010 the Interior Department indefinitely postponed environmental work for 

Lease Sale 220. 

Then on December 1, 2010, Secretary Salazar announced that scoping for the next 

5–Year leasing program 2012–2017 would not include any Mid-Atlantic leases effectively shutting out Virginia until at least 2017. 

We are grateful to House Natural Resources Chairman Hastings and this Committee for putting forward bills that passed the House of Representatives to both 

re-instate Lease Sale 220 and open up additional acreage in the Atlantic. Governor 

McDonnell supports your diligent efforts in making offshore exploration and development a priority for our nation and Virginia now asks for support of legislation 

to allow revenue sharing of royalties from offshore federal leases. 

Development of our domestic oil and natural gas resources is critical to our nation’s secure energy future. And the states must be partners with the federal government in that development. And as partners the states should share in the revenues derived from OCS activity. 

America needs the new energy sources that lie off Virginia’s coast. While we support new OCS activity off Virginia, it must be recognized that there will be significant costs borne by the state to bring that new energy onshore. Roads, bridges, terminals, ports and other related infrastructure will need to be expanded and maintained. 

While we look forward to the job creation, the ability to keep up with this increased activity and ensure we have a world class safety regime in place to protect 

our shoreline is essential to making sure everyone knows how serious we are about 

safety and the environment. 

Sharing revenues with states tells states the federal government is serious about 

partnering on both the costs and benefits of energy production. 

In 2006, Congress passed the Gulf of Mexico Energy Security Act of 2006 

(GOMESA). GOMESA created sharing of leasing revenues with oil producing states 

in the Gulf and the Land & Water Conservation Fund for coastal restoration 

projects. This legislation grants a share of revenues generated from leases in one 

leasing block between 2008 and 2015—and then from all Gulf of Mexico leasing 

from 2016 forward. Between fiscal years 2008–2010, it led to nearly $30 million in 

revenue sharing to those states and coastal political subdivisions and will generate 

significantly larger sums going forward. 

9 

Virginia believes it is important to share revenues from oil and gas exploration 

with all coastal states who allow leasing in a similar way as it is constructed in 

the Gulf. One recent study (Southeast Energy Alliance) concluded that revenue 

sharing could mean up to $250 million annually for Virginia if exploration and development moves forward in Virginia’s adjacent waters. 

Last week, Virginia’s Governor joined with the Governors of Alabama, Mississippi, 

Alaska, South Carolina and Louisiana in expressing their strong support for legislation in the Senate that would allow their states to receive a fair share of the revenues from energy generation and production in the Outer Continental Shelf (OCS). 

I would ask that a copy of that letter be entered into the record of this hearing. 

As these Governors stated, there is more than sufficient cause to justify energyrelated revenue sharing. Ocean energy development can place heightened demands 

on transportation services, the environment, ports, fuel supplies, pipeline and transmission corridors, public health and safety, and other infrastructural, social and 

natural resources. 

Last year’s tragic offshore oil spill also showed that such development can carry 

real consequences—not for the inland states that ultimately use much of the energy 

being produced, but for the coastal states at water’s edge. Returning a reasonable 

portion of the vast revenues from offshore generation and production to the states, 

will allow them to be far better prepared to mitigate the resulting risks and impacts. This is an equitable bargain, wherein the states that choose to pursue development receive a deserved portion of its rewards. 

States rights are equally important to that of the federal government. Sharing 

revenue with the states additionally affords opportunities for the states to dedicate 

funds for important projects that otherwise would not be possible. A current example of such programs can be seen in Louisiana where all money from offshore revenue sharing goes to coastal protection, wetland mitigation efforts, and hurricane 

protection. Without the offshore revenue sharing program, such funding would likely 

not be possible. 

As you are aware, under the Mineral Leasing Act, all states with energy production on federal lands are rightly entitled to roughly half of the associated revenues— 

and, like offshore oil and gas, these revenues are derived from resources which belong to the entire nation, not any one state. Thus, the same sort of revenue sharing 

should apply to states most affected by development of the OCS. 

The Mineral Leasing Act allows inland states with mineral leasing to received 50 

percent (with Alaska as the exception with 90 percent) of all revenues generated 

from royalties and bids for onshore oil and natural gas production with the federal 

government. From 1982 through 2002, royalties from onshore resource revenue 

sharing was over $11.1 billion, with Virginia receiving just $900,000 during that 

twenty year period. Providing for revenue sharing for coastal states in offshore development could provide a huge economic impact for states such as Virginia that 

have not had the benefits of inland oil production. 

Today in areas where offshore drilling occurs, coastal states collect 100 percent 

of the royalties from production in state waters. Under the Outer Continental Shelf 

Lands Act, seven coastal states, Alabama, Alaska, California, Florida, Louisiana, 

Mississippi, and Texas, are entitled to 27 percent of the revenue within three miles 

of their state waters. From 1982 through 2002, this 27 percent in revenue sharing 

has produced $3.08 billion for these seven states. This revenue sharing program was 

established to compensate these states for any damage to or drainage from natural 

gas and oil resources in State waters that are adjacent to Federal leases. The precedent for offshore revenue sharing of federal lease sales has already been set. 

As a result of the Gulf of Mexico Energy Security Act of 2006, from 2007 through 

2016, the Gulf States of Alabama, Louisiana, Mississippi, and Texas will share 37.5 

percent of revenues from new leases in the 0.5 million acres in the Eastern Gulf 

and the 5.8 million acres in the Central Gulf. After 2016, they will share 37.5 percent of revenues from all Gulf leases issued after December 2006. The Gulf States 

have seen significant income from offshore resource revenue sharing programs. Virginia and the other coastal states should be afforded similar opportunities for revenue sharing. 

As seen during the tragedy of Deepwater Horizon, states are on the front lines 

of the effects of offshore federal leases, not the federal government. Just as anticipated by the Outer Continental Shelf Lands Act in 1953, states bear the most burden of any damage or drainage from natural gas and oil disasters in federal waters. 

The states are the first on the scene and the states are the most directly affected. 

With the events of last summer, we have seen that the Congress of 1953 was correct 

in providing for revenue sharing to the seven Coastal States. Now is the time to 

provide for revenue sharing not just for these seven states and within the three mile 

marker, but for Virginia and any state with offshore federal leases. 

10 

Revenue sharing from offshore resources in federal waters is essential. Revenue 

sharing provides the states with the economic ability to invest in local communities 

most affected by development and risk. Benefiting local and state governments helps 

to promote national economic interests and generate additional federal revenue by 

increasing state and local participation in offshore projects. Revenue sharing also 

helps to foster a better working relationship between federal, state, and local agencies. Local and state governments will be incentivized to assist in the offshore exploration process by creating necessary infrastructure or passing offshore exploration 

friendly legislation. 

In a recent letter, Senator Jim Webb said, ‘‘Development of OCS energy resources, 

if accomplished with a fair and equitable formula for sharing of revenues between 

the federal and state government, will attract well-paying jobs and holds significant 

promise for boosting needed domestic energy production.’’ Governor McDonnell could 

not agree more. 

Again, the precedent for royalty revenue sharing has already been set. Since the 

1920’s the states have been collecting royalties from onshore federal mineral leases. 

Since the 1950’s seven coastal states have been collecting royalties from offshore 

federal leases within three miles of their state waters. Since 2006, four coastal 

states have been collecting royalties from offshore federal leases in any federal 

waters under GOMESA. Now is the time for Congress to act to provide for all states, 

not just a select few, with offshore federal leases to receive royalty revenue sharing. 

Revenue sharing with Virginia and other states can help the budgets of our states 

and foster stronger national economic interests. 

Our national energy needs are too great to not have revenue sharing. We are 

hopeful that this Committee and this Congress will allow revenue sharing to go forward and the Commonwealth of Virginia stands ready to lend a hand in any way 

we can. 

I look forward to answering any questions the Committee may have. 

The CHAIRMAN. Thank you very much, Mr. Secretary, and thank 

you for adhering to the time. 

Chairman Graves, you are recognized for five minutes. 

STATEMENT OF HON. GARRET GRAVES, CHAIRMAN, COASTAL 

PROTECTION AND RESTORATION AUTHORITY, OFFICE OF 

THE GOVERNOR, STATE OF LOUISIANA 

Mr. GRAVES. Thank you, Mr. Chairman, Ranking Member 

Markey and Congressmen Holt and Wittman. I appreciate you 

being here and appreciate the opportunity to speak today. 

My name is Garret Graves, and I serve as Chair of the Coastal 

Protection and Restoration Authority of Louisiana, the agency established after Hurricane Katrina to address coastal sustainability 

issues in the State of Louisiana. 

To give a quick background on offshore revenue and production 

revenues associated with offshore, this shows the various revenue 

streams that have been generated from offshore production over 

the last few years. You can see the bonus bids, which is the initial 

income stream during the auction process, the rental income, which 

is paid over a monthly process, and then the royalties are based 

upon the volume production. 

It is showing an extraordinary revenue stream. This is one of the 

largest revenue streams for the Federal Government on an annual 

basis. I would just make note. In 2008, $18 billion was generated 

from offshore production primarily in the Gulf of Mexico. 

There are five primary reasons why I have heard folks oppose 

the concept of doing revenue sharing, and they are listed out here. 

I am going to address the first two. The first two are bad policy 

precedent and it is a Federal resource and therefore should not be 

shared. 

11 

These are all the policies, all the existing laws that share revenues with states today, so in effect you can see under the Mineral 

Leasing Act, under the various other programs, virtually all public 

lands where energy production takes place, the revenues are 

shared with the states and it is not just at 27 percent, 37.5 percent. 

Up to 90 percent of the revenues are returned to the states or, as 

you can see in the column to the right, in some cases the counties. 

So in our research I am going to say it again. Every single program that exists today where revenues are produced from energy 

production on Federal lands, those revenues are shared back with 

the states. 

But make note at the bottom, the Outer Continental Shelf. Yes, 

the State of Louisiana and other coastal states do share in 27 percent of revenues from production in the three to six mile zone. 

However, that is explicitly provided for drainage of the common 

reservoir pool between state and Federal waters. That was for 

drainage. That is not revenue sharing and it is not impact assistance. 

The 37.5 percent from GOMESA, as Ranking Member Markey 

noted. I want to clarify something very quickly here. The State of 

Louisiana received a check for $222,000 this year. That $150 billion 

number that was used a few minutes ago, I have no idea where 

that is, but I think we need to do a quick investigation, and we 

would like the rest of the money we are owed. $220,000 is what we 

were paid based upon about $8 billion in production. About $6 billion of that was attributed to our state. $222,000 is how much we 

were paid. 

This shows the comparison of onshore versus offshore production. 

So under the Mineral Leasing Act, the State of Wyoming produced 

about $2.7 billion in revenue in 2008. They received a check for 

$1.2 billion. New Mexico on the bottom row there produced $1.4 billion and received a check for $600 million. Incredible disparity. In 2008, we produced again $14.5, or if you include the bonus bids and everything it was about $18 billion. We received a check 

for $6 million. That was the first year under GOMESA. $6 million 

that the State of Louisiana received. 

This would create an incentive to drill is certainly another concern that I have heard raised. Current Federal law in virtually 

every case shares 25 to 90 percent of the revenues. So where is the 

big problem with the incentive that is created in virtually every 

other public domain that exists today? 

In addition, I think it is important to look at states like Florida 

and California. The whole incentive argument obviously hasn’t resonated in those states as they have very much fought production 

in those areas. I think that there are other ways to mitigate the 

perception of incentives such as taking snapshot and other mechanisms that have been used in the past. 

It will harm the environment is another allegation that has been 

levied against offshore production. I think it is important to take 

a look at where we get our oil today, OK? We bring in oil from 

Mexico, from Nigeria, from Venezuela, from Algeria, from Angola, 

from Colombia. And you can see here Libya, Syria, China, Taiwan, 

North Korea. I would argue that the United States has far more 

stringent environmental standards. 

12 

If we are going to protect the environment, and we are concerned 

about the environment, I think we need to be concerned about the 

environment for the entire globe and not just the United States. 

These countries don’t hold a candle to our environmental standards, yet this is where we are bringing our energy in from today. 

So if we are environmentalists, let us be environmentalists for the 

globe because it certainly does have global consequences. 

And then budget consequences. I know some of you may be looking, as was noted earlier, saying what in the world are the states 

doing asking for revenue sharing today? Do you guys not get cable 

TV and not realize that we have a budget crisis and that there is 

a debt ceiling issue? 

Yes, we do get cable TV. That is the only way we can watch 

Swamp People. But I think it is important. You can’t afford to not 

share the revenues. Congress spent $150 billion responding to Hurricane Katrina. $150 billion. Just three years later, about $11 billion responding to Hurricanes Katrina and Ike. Billions of dollars 

have been authorized, about $15 billion authorized by Congress for 

ecosystem restoration projects, and much of that is tied back to 

some of the historic management principles of industrial activities 

on the Gulf coast. 

And then last, Louisiana’s coast between the States of Texas and 

Mississippi measure smoothly about 400 miles. As a result of the 

degradation of our ecosystem, if you measure all the nooks and 

crannies of that fragmented coast it is about 7,700 miles long. So 

instead of fighting the BP oil spill along 400 miles, we had to fight 

it along 7,700 miles of shoreline. 

So you are going to pay. I am going to say it again, and it has 

been said for decades. The Congress is going to pay for what is 

going on in coastal Louisiana. You can be proactive and you can 

pay a lesser amount, or you can be reactive and you can pay exponentially more because that is what is going to happen. 

I will stop there, Mr. Chairman. Thank you. 

[The prepared statement of Mr. Graves follows:] 

Statement of Garret Graves, Chair, 

Coastal Protection and Restoration Authority of Louisiana 

Chairman Hastings, Ranking Member Markey and Committee members, thank 

you for the opportunity to share aspects of Louisiana’s long offshore energy history 

with you. My name is Garret Graves and I serve as chairman of the Coastal Protection and Restoration Authority of Louisiana (CPRA). The CPRA was established 

after Hurricanes Katrina and Rita to serve as the single state agency responsible 

for hurricane protection, flood control, ecosystem restoration and coastal resiliency. 

Responsibilities associated with this position include the lead Natural Resource 

Damage Assessment trustee for the State of Louisiana. In that role and following 

the 2011 oil spill, I was appointed by the President to serve on the Gulf Coast Ecosystem Restoration Task Force. 

The State of Louisiana welcomes the opportunity to provide our perspective related to the development of comprehensive energy policy and how revenue sharing 

should be part of the larger energy policy of our nation. 

For decades, energy activities in coastal Louisiana and adjacent offshore waters 

have produced billions of barrels of oil and trillions of cubic feet of natural gas. This 

energy production serves as one of the largest sources of domestic energy in the 

United States and Louisiana has played a key role in powering this nation’s economy. Every barrel of oil and every cubic foot of gas produced in the Gulf of Mexico 

supplants the need for additional imported energy from foreign sources. At the same 

time, our coastal area has been cited as the most productive ecosystem on the continent by U.S. Fish and Wildlife Service. Commercial fishermen harvest over two 

billion pounds of fish and shellfish annually from the Gulf’s waters. Louisiana’s 

13 

unique coastal estuary serves as a nursing ground for 90 percent of these fisheries 

and supports the lifecycle for 98 percent of the commercially-harvested species in 

the Gulf of Mexico. 

Over 20 million Americans are employed in the Gulf of Mexico region. Many of 

these jobs are tied to the Gulf’s resources. For example, tourism and recreation provide over 620,000 employment opportunities, the seafood industry supports hundreds of thousands of jobs and gulf workers provide up to 27 percent of domestic 

oil production in the Gulf of Mexico. The waters in the coastal area of Louisiana 

produce or transport up to one-third of the oil and gas consumed in the United 

States. The production activities we host benefit the U.S. Treasury from $5 to14 billion annually. This revenue stream is one of the largest segments of annual deposits 

into the Treasury. 

Six of the nation’s top 10 ports are on the Gulf Coast. With the deepening of the 

Panama Canal allowing the transit of larger vessels from Pacific nations, we expect 

to see an increase in traffic. Louisiana is home to five of the top fifteen ports in 

the country and our ports and river system currently provide maritime commerce 

and export capabilities to 31 states. The Mississippi River is truly America’s Commerce Superhighway—supporting hundreds of billions of dollars in cargo annually 

with one of the most efficient transportation modes in the nation. 

According to the Bureau of Economic Analysis, the five Gulf States’ gross domestic 

product collectively approaches nearly $2.5 trillion. If the Gulf States’ constituted 

a country, this region would be the world’s seventh largest economy. 

This impressive economic and ecological activity has been challenged in recent 

years. Specifically, in Louisiana, we have been hit with Hurricanes Katrina, Rita, 

Gustav, and Ike in the last six years. In addition, the most recent record high water 

event on the Mississippi River system has caused a number of tense moments. It 

is important to note that 40 percent of the continental United States drains through 

our state. From Montana, to Minnesota to portions of New York—to two Canadian 

Provinces—the Mississippi River watershed is one of the world’s largest. 

Despite these extraordinary challenges, Louisiana was on an upward trajectory in 

recent years and our citizens were committed to a full recovery. Homes were being 

rebuilt, the economy was recovering and the state was making record investments 

to restore the ecosystem and improve the resiliency of our coastal communities. In 

fact, a United States Geological Survey report released just a few weeks ago indicated that our state may have actually grown by up to 200 square miles between 

2008 and part of 2010. This apparent coastal wetlands restoration, recovery and accretion follows decades of coastal wetlands loss. The same USGS report confirmed 

that while 1900 square miles of wetlands have eroded or were lost over the last 80 

years, our recent investments and coastal management improvements have contributed to a successful coastal strategy. 

The 1900 square miles of land loss is largely attributable to federal efforts to 

‘‘manage’’ the lower Mississippi River system. The channelization of the river system has converted a once growing deltaic plain to the greatest source of wetlands 

loss in the United States. Decades of historic mismanagement of this coastal region 

have also contributed to this loss. Much of this management was related to commercial development—including building access to energy resources in our coastal area 

and the construction of pipelines to bring these resources to market in the interest 

of providing energy to the nation. The wetland policies of the past, which did not 

benefit from the science we have today, were unsustainable and have been reversed. 

The State of Louisiana is working aggressively to battle the reality of a channelized 

river system and make sure that our policies are sustainable. As I pointed out, 

many of the issues we struggle to address were caused by Federal policies or to fulfill a national need have been stopped, but the scars remain and the damaging effects continue to be felt. Addressing these historic impacts while ensuring resilient 

domestic energy supplies can only be attained by revenue sharing. The federal government has profited from Louisiana’s loss for far too long. 

Today, many view the coastal challenges in Louisiana as a parochial issue resulting from local decisions. Nothing could be farther from the truth. The coastal loss 

our state has experienced for the last several decades is directly tied to federal actions and the entire country has paid the price for these decisions. 

After Hurricanes Katrina and Rita every taxpayer in the nation contributed to the 

$150 billion spent to date within appropriations and other measures put forward to 

address the nation’s worst natural and manmade disaster. Consumers around the 

country were also paying an extra 75 cents/gallon of gasoline as a result of the impact to energy infrastructure in our state from those hurricanes. In 2008, consumers 

were faced with the largest gasoline price spike since the Arab oil embargo—an increase of $1.40/gallon nationwide. 

14 

The impact to the nation did not stop there. The hurricanes also shut down river 

traffic where nearly 20 percent of the nation’s maritime commerce traverses through 

our state. The repercussions were far reaching. For example, up to two-thirds of the 

grains from Midwest farms were unable to get to market due to the storms’ impacts 

upon our coast. 

The Deepwater Horizon was yet another example of additional complexities and 

increased costs associated with coastal loss in Louisiana. As a result of the fragmented, eroded coastal conditions creating nooks and crannies along our coast, our 

oil spill battles were waged over 7700 miles of linear shoreline. Without the erosion 

and land loss that has occurred in our state, we may have been able to concentrate 

our efforts to less than 500 miles if our coasts were less porous and similar to the 

coasts of Mississippi and Texas. 

Mr. Chairman, Ranking Member, the disparity among federal revenue sharing 

programs must end now. Revenues from energy production on federal lands has continued for decades while virtually no funding has been shared with states for offshore production. Even under the Gulf of Mexico Energy Security Act of 2006, our 

state received $222,000 in the name of revenue sharing when the Treasury saw 

more than $5 billion in production revenues from offshore Louisiana. If federal law 

treated onshore and offshore resources equally, our state would have benefited from 

a more equitable process that would have provided approximately $2.5 billion and 

an additional $2 billion would have been sent back to our state for water-related 

projects. The difference we coastal states suffer from is the fact that under the Mineral Leasing Act, states share in 50 percent of all revenue generated from onshore 

mineral production on federal lands. And an additional 40 percent is placed into the 

Reclamation Fund for water projects in those same western states. Only 10 percent 

of onshore revenues are deposited into the Treasury. In 2009, the states of Wyoming 

and New Mexico alone shared in over $1.2 billion on $2.5 billion in energy revenues 

and were able to utilize those revenues in the way each state had decided. That 

same year, Louisiana received virtually nothing on nearly double the energy production. 

Responding to recent hurricanes, taxpayers have paid a significant price by not 

allowing coastal states to utilize these revenues to address the federal impacts. They 

will continue to pay exponentially more until Congress acts to address this revenue 

sharing disparity. Revenue sharing essentially boils down to be an issue of equal 

treatment, but in doing the proper thing Congress will empower states to take 

proactive steps to in order to improve the resiliency of our coastal communities and 

resources. 

Decades of inaction for an energy policy that includes revenue sharing has resulted in the loss of lives and increased our trade deficit. Our dependence upon foreign energy has added jobs and funding to the economies of Venezuela, Nigeria, Algeria, Iran, and many other nations that challenge American values. Our lack of an 

energy policy has also resulted in a net adverse impact to our global environment 

by increasing production in countries with less stringent environmental regulations 

and has increased unemployment in the United States. 

I urge you to not let another opportunity pass you by. Enact responsible revenue 

sharing legislation that will allow for coastal states hosting energy production to 

mitigate historic and prospective impacts from energy production and to make investments in the resiliency of these coastal resources. With adequate support our 

coastal communities have the potential to produce American energy for decades and 

play their proper role as part of a comprehensive energy policy. 

The CHAIRMAN. The time of the witness has expired. I thank the 

gentleman. 

The next witness is Ms. Alexander, the President of the 

Taxpayers for Common Sense. The gentlelady is recognized for five 

minutes. 

STATEMENT OF RYAN ALEXANDER, PRESIDENT, 

TAXPAYERS FOR COMMON SENSE 

Ms. ALEXANDER. Thank you. Good morning, Chairman Hastings, 

Ranking Member Markey and Members of the Committee. Thanks 

for the opportunity to testify today. 

Our mission at Taxpayers for Common Sense is to achieve a government that spends taxpayer dollars responsibly and operates 

15 

within its means. I should just note at the outset as an organization we don’t oppose offshore drilling or energy development domestically. That is not our position. We look out for the taxpayer and 

taxpayer dollars. 

For the past 15 years, TCS has actively worked to ensure that 

taxpayers receive a fair return on resources extracted from Federal 

lands and waters. As the rightful owners, taxpayers are entitled to 

fair market compensation for the resources extracted from our 

lands and waters, as would any private resource owner. 

Taxpayers for Common Sense is opposed to any measure that 

would reduce the Federal share of royalty payments—particularly 

at this moment as we face a burgeoning Federal debt crisis and 

enormous deficits, siphoning billions of dollars in valuable revenue 

from the general treasury is inappropriate. 

Furthermore, altering these shares would do nothing for the bottom line of the oil and gas, wind or other offshore developers. They 

would owe the same royalties, rents and fees at the end of the day 

either to the states or the Federal Government. 

Federal waters are administered, protected and managed by Federal, not state agencies, at a cost to Federal taxpayers, and the revenue derived from the sale of these resources should be returned 

to the Federal Treasury. Unlike onshore energy operations, offshore operations do not occur within state boundaries, and the impact for operations in Federal waters has national implications. 

The newly created Office of Natural Resource Revenue is responsible for royalties due on conventional and renewable ocean energy 

and mineral resources on 1.4 billion acres of U.S. Outer Continental Shelf, as well as onto our Federal and Indian lands. The 

agency is charged with ensuring fair collection, calculation and distribution of royalties on behalf of the American taxpayer. 

Revenues from the collection of royalties represent one of the 

largest non-tax income sources to the Federal Government. The 

ONRR collects nearly $10 billion in revenues annually in royalties, 

rent, bonuses and fees from resource extraction on Federal lands 

and waters. In Fiscal Year 2010, more than $3.8 billion of these 

revenues came from resource development in Federal waters. 

Offshore energy development is not managed by ONRR alone. 

Safety, leasing and environmental regulations on offshore development are carried out by the Bureau of Ocean Energy Management, 

Regulation and Enforcement. Substantial Federal funds are directed to both ONRR and BOEMRE, a bad acronym, annually. In 

fact, this week the House is considering the Department of the Interior, Environment and related agencies’ appropriations bills, 

which provide $138.6 million for ocean energy management under 

BOEMRE and $109 million for royalty management to the Office 

of the Secretary for ONRR. 

Finally, on top of the costs that fall to the taxpayer for BOEMRE 

and ONRR, the U.S. Coast Guard, not the states, inspects and regulates offshore drilling rigs, as well as performs vessel regulation, 

search and rescue, security and pollution response. 

To be clear, states do get money from state waters. All Americans get the revenue from Federal waters. Federal waters are more 

than six miles off the coast and nine miles in certain part in the 

16 

Gulf of Mexico. State waters are within three miles of their respective shorelines. 

The coastal states where offshore drilling takes place already receive significant revenue from royalty payments. States receive 100 

percent of the revenue generated within state waters. Additionally, 

under Section 8[g] of the Outer Continental Shelf Lands Act they 

receive 27 percent of the royalty payments for development in 

waters within three to six miles of their coast, about a quarter of 

a billion dollars in Fiscal Year 2010. For the remaining exclusive 

economic zone out to 200 miles, the royalty revenue is returned to 

the rightful resource owner, the Federal taxpayer. 

Federal taxpayers have already lost significant income from Federal resources in the Gulf of Mexico. In 2006, the Gulf of Mexico 

GOMESA, as we have been talking about, gave the Gulf states 37.5 

percent of the royalty income for certain newly opened areas of the 

Federal waters of the Gulf, and beginning in 2016 they will receive 

37.5 percent of royalties from new leases throughout the Gulf’s 

Federal waters up to $500 million annually. 

Royalties collected from offshore drilling in Federal waters 

should be returned to the rightful resource center, the Federal taxpayer. The Federal Government manages and secures operations 

off our coast, and the taxpayers bear the cost of these service. The 

impacts of drilling in Federal waters have national implications. 

Costs and benefits should be carried out in the interest of all Americans, not a handful of coastal states. 

The country is now facing $14.3 trillion in debt and an annual 

deficit of more than $1.4 trillion. Many, many things need to be 

done to resolve our fiscal woes, not the least of which is ensuring 

that Federal taxpayers get the revenue they deserve from the resources that they own. 

[The prepared statement of Ms. Alexander follows:] 

Statement of Ms. Ryan Alexander, PresidentTaxpayers for Common Sense 

Good morning Chairman Hastings, Ranking Member Markey and distinguished 

members of the committee. Thank you for the opportunity to testify today. My name 

is Ryan Alexander and I am President of Taxpayers for Common Sense (TCS), a national, non-partisan budget watchdog organization. Taxpayers for Common Sense’s 

mission is to achieve a government that spends taxpayer dollars responsibly and operates within its means. 

Over the last fifteen years, TCS has actively worked to ensure that taxpayers receive a fair return on resources extracted from federal lands and waters. Royalties 

and fees collected from resource development represent a valuable source of income 

for the federal government and should be managed and accounted for in a fair and 

accurate manner. As the rightful owners, taxpayers have the right to fair market 

compensation for the resources extracted from our lands and waters, as would any 

private landowner. 

Taxpayers for Common Sense is opposed to any legislative measure that would 

alter the existing federal-state revenue sharing provisions for royalty payments. For 

many reasons that I will explain, this is an irresponsible action. However, in the 

face of a burgeoning federal debt crisis, siphoning billions of dollars in valuable revenue from the general treasury is downright foolish. Furthermore, altering these 

shares would do nothing for the bottom line of the oil and gas, wind, or other offshore developers—they would owe the same royalties, rents and fees at the end of 

the day either to the states or to the federal government. 

As you know, oil and gas companies that drill on federal and Indian lands or offshore pay royalties for the oil, gas, and other minerals they remove. Generally, this 

payment is a percentage of the total value of the minerals extracted. More recently 

other energy resources, such as wind, are also being leased on federal lands and 

waters and royalties paid to federal taxpayers. 

17 

1http://www.oilspillcommission.gov/sites/default/files/documents/A%20Brief%20History%20of 

%20Offshore%20Drilling%20Working%20Paper%208%2023%2010.pdf 2http://www.oilspillcommission.gov/sites/default/files/documents/A%20Brief%20History%20of 

%20Offshore%20Drilling%20Working%20Paper%208%2023%2010.pdf 3http://www.dtdeal.com/pdf/chronology-valuation_royalty_relief1980–2008.pdf 

Federal waters are administered, protected, and managed by federal—not state— 

agencies at a cost to federal taxpayers, and the revenue derived from sale of these 

resources should be returned to the federal treasury. Unlike onshore energy operations, offshore energy operations do not occur in a state and the impact for operations beyond state waters reaches well beyond any one state and has national implications. 

History of Offshore Energy Production and Royalties 

In the early 20th century oil and gas operators successfully extracted oil and gas 

from underneath our nation’s waters. The first successful underwater well was just 

offshore near Santa Barbara, California.1 Oil was extracted there through the creation of a long pier—using this method operations were never much further than 

a 1,000 feet off the shore. But by the late 1940s oil and gas development had moved 

to offshore platforms. 

From its beginning, offshore revenues were an important source of federal dollars. 

Shortly after the success of the first barge and platform system, roughly 10.5 miles 

from the Louisiana coast and operated by Kerr-McGee, the offshore oil and gas industry experienced rapid growth.2

By the 1950s production was rising so high that offshore operations became a significant revenue generator for the country. Disputes over water rights and leasing 

became a problem and the Outer Continental Shelf Lands Act (OCSLA) of 1953 was 

enacted to manage the operations beyond state waters. 

The federal government was also charged with collecting royalties for extracted 

resources from publically owned lands and waters. This responsibility fell to the Department of the Interior (DOI). After there were problems with fiscal accountability 

of resource operations, President Reagan created the Linowes Commission to review 

the process and investigate the underpayment of royalties.3 Shortly thereafter the 

Minerals Management Service was created within DOI to manage offshore operations and collect royalties. From 1982-2010 the Minerals Management Service 

oversaw offshore energy production and collected and distributed royalties for minerals extracted from federal and tribal lands and waters. 

Federal Waters are Federally Managed and Taxpayer Funded 

Formerly the responsibility of the Minerals Management Service, the recovery of 

royalties for resource development in federal waters now falls to the newly created 

Office of Natural Resource Revenue (ONRR) housed within the Secretary’s office in 

the Department of the Interior. ONRR is responsible for royalties due on conventional and renewable ocean energy and mineral resources on 1.7 billion acres of the 

U.S. Outer Continental Shelf (OCS) as well as onshore federal and Indian lands. 

This new agency is charged with ensuring fair collection, calculation, and distribution of royalties on behalf of the American taxpayer.Revenues from the collection of 

royalties represent one of the largest non-tax income sources for the federal government. The majority of this revenue comes from offshore natural gas production— 

approximately 60% of royalty revenue comes from natural gas. The ONRR collects 

nearly $10 billion in revenues annually in royalties, rents, bonuses and fees from 

resource extraction on federal lands and waters. In fiscal year 2010, more than $3.8 

billion in these revenues came from resource development in federal waters offshore. 

In addition to directing money to the federal treasury, under federal law ONRR also 

distributes this money to states, American Indian Tribes, Land and Water Conservation Fund, the Reclamation Fund and the Historic Preservation Fund. 

Offshore energy development is not managed by ONRR alone. Although originally 

tasked fully to MMS, in the recently created system, safety and environmental regulations on offshore development are carried out by the Bureau of Ocean Energy 

Management, Regulation and Enforcement (BOEMRE). 

Substantial federal funds are directed to both the ONRR and the BOEMRE annually. In fact, this week the House is considering the Department of the Interior, Environment, and Related Agencies Appropriations Act for fiscal year 2012, which provides funding for both the ONRR and BOEMRE. This year’s Interior bill includes 

an appropriation of $138,605,000 for ocean energy management under BOEMRE. It 

also provides $109,364,000 for royalty management to the Office of the Secretary 

for the ONRR. 

18 

Finally, on top of the costs that fall to the federal taxpayer for BOEMRE and the 

ONRR, the U.S. Coast Guard, not the states, inspects and regulates the off-shore 

drilling rigs as well as performs vessel regulation, search and rescue, security and 

pollution response. 

Coastal States Royalties from Offshore Drilling 

To be clear, states get the money from waters dedicated to the states under federal law. All Americans get the revenue from federal waters. These waters are more 

than six miles from the coast, and nine miles in parts of the Gulf of Mexico. State 

waters are within three miles of their respective shoreline. 

The coastal states where offshore drilling takes place already receive significant 

revenue from royalty payments. States receive all the revenue generated within 

three miles of their shoreline. Additionally, under section 8(g) of the Outer Continental Shelf Lands Act, states receive 27% of royalty payments for development in 

waters within three to six miles of their coasts—about a quarter billion dollars in 

FY2010. For the remaining exclusive economic zone—out to 200 miles—the royalty 

revenue is returned to the rightful resource owner, the federal taxpayer. 

Additionally, states benefit from offshore operations in direct and indirect jobs 

such as service operations supporting offshore development, and more directly affiliated jobs such as commercial industries in gas processing and oil refining. Without 

directing the royalty payments to the states from federal waters there is still benefit 

to coastal states that pursue offshore drilling. 

Gulf of Mexico Energy Security Act Already Siphons Taxpayer Dollars 

Federal taxpayers have already lost significant income from federal resources in 

the Gulf of Mexico. The Gulf of Mexico Energy Security Act (GOMESA) in 2006 gave 

the Gulf states an even larger share of federal revenues. They receive 37.5% of the 

royalty income from certain newly opened areas in federal waters of the Gulf, and 

beginning in 2016 they will receive 37.5% of royalties from new leases throughout 

the Gulf’s federal waters, up to $500 million annually. 

GOMESA’s large payments to the Gulf states were justified as mitigation for damage to Gulf coastal wetlands and environment due to past impacts of oil and gas 

development. In fact, the law restricts the states to use the money only for a range 

of purposes affecting these coastal areas, in order to meet a specific federal purpose 

for coastal wetland restoration. Whether or not this is a reasonable expenditure of 

federal money, it is directed at addressing a kind of damage that modern coastal 

and wetlands regulation should prevent. Revenues from any increase in oil and gas 

development off other states will not need to be directed to such mitigating for past 

harms, and there is no justification for simply giving the states a blank check from 

the taxpayers’ money. 

Directing Royalties to States in Federal Waters Poses an Enormous 

Political and Logistical Challenge 

Beyond the limited state waters designated in federal law (extending 3 to 6 miles 

from shore), there are simply no state boundaries in federal waters. Drawing boundaries for states and determining the recipient for the increased state revenues for 

waters so far offshore would be a legal and technical nightmare. The division of revenue among the states in the GOMESA legislation represented a political compromise that would be indefinitely more complicated along other U.S. coasts. 

For example, states with concave or convex of the coastlines may have difficulty 

determining boundaries or agreeing on where their state’s interests lie. The proposal 

for leasing wind offshore Rhode Island and Massachusetts was delayed nearly a 

year by negotiations between the states. 

Offshore Drilling in Federal Waters is Important Revenue 

At a time when the country faces a $14 trillion debt discussing the prospects of 

diverting federal royalties to the states would only put more financial stress on the 

already pressed federal coffers. It is clear the federal government needs this valuable source of revenue that is rightfully due to all Americans now more than ever. 

As required by the 2005 Energy Bill, in 2006 the DOI completed an inventory of 

existing oil and gas offshore reserves. They estimated 8.5 billion barrels of oil and 

29.3 trillion cubic feet (tcf) of natural gas. Nearly all of this lies in federal waterssiphoning this money to a few states could cost taxpayers billions annually in rightfully owed revenue. 

Federal Waters Belong to All U.S. Taxpayers 

Royalties collected from offshore drilling in federal waters should be returned to 

the rightful resource owner the federal taxpayer. States receive revenue from royalties collected within state waters and the transitional area between state and fedVerDate Nov 24 2008 10:34 Jul 24, 2012 Jkt 000000 PO 00000 Frm 00022 Fmt 6633 Sfmt 6621 L:\DOCS\67650.TXT Hresour1 PsN: KATHY
19 

eral waters (3–6 miles from shore). Furthermore, the federal government manages 

and secures operations off our coasts and the taxpayer bears the cost of these services. The impacts of drilling in federal waters have national implications. Costs and 

benefits should be carried out in the interest of all Americans, not a handful of 

coastal states. 

The country is now facing a $14 trillion debt and an annual deficit of more than 

$1 trillion dollars. Many things need to be done to resolve the nation’s fiscal woes. 

Not the least of which is ensuring federal taxpayers get the revenue they deserve 

for the resources they own. 

The CHAIRMAN. I thank the witnesses for their testimony. 

Let me start the questioning first. I will just make an observation that I think needs to be made, and that is simply if we are 

not drilling offshore there is no revenue coming in, but if we start 

drilling and we share it there still is revenue coming in to the Federal Government. So to suggest that this is a cost associated, I really have sometimes a tough time understanding that argument. 

Secretary Domenech, my first question is to you. You noted in 

your testimony that Virginia was the first on the Atlantic Coast to 

have a potential lease sale. That of course has since been postponed to a minimum of 2017. You also testified that Virginians by 

and large through the public comment period support this very, 

very much. 

You are not entitled under current law to the same revenue sharing under GOMESA as the other Gulf states, but yet you say this 

is an incentive. Could you explain probably in more detail how this 

incentive of revenue sharing would enhance and be accepted by 

Virginians off the coast? 

Mr. DOMENECH. Thank you, Mr. Chairman, for that question. 

You are correct. Virginians and, as I mentioned, our delegation 

here in Congress has been very supportive of pursuing offshore development, primarily through Lease Sale 220. 

Our General Assembly has identified several ways they would 

like to spend the money that would come in from such an effort, 

but primarily these funds will allow us to develop the sort of safety 

infrastructure we need for this development to go forward, and the 

way we see it right now the Federal Government shares revenue 

with inland states off of lands owned by the Federal Government, 

so that is happening already the same way the Outer Continental 

Shelf development revenue should be shared with coastal states. So 

it does give us an opportunity and incentive to pursue additional 

efforts to develop offshore Virginia. 

The CHAIRMAN. Good. I appreciate that, and I also note too that 

I know Mr. Wittman and I have had a number of conversations 

about this, but I also note that both the Senators from the Commonwealth are very supportive of this, which I think probably reflects a view of most Virginians. 

Mr. DOMENECH. That is correct. 

The CHAIRMAN. Chairman Graves, you spoke about the need of 

revenue sharing to mitigate certain obvious energy production on 

the states, and you noted, as Secretary Domenech did, that states 

also share revenue. 

As we move forward on this, do you have any feedback on how 

the formula of GOMESA should be addressed perhaps differently? 

The graph you put up there was rather stark. Would you have 

20 

some comments on the formula as we move forward with revenue 

sharing? 

Mr. GRAVES. Absolutely. Mr. Chairman, I think it is important 

to recognize the fact that coastal Louisiana has a long history in 

energy production and literally fueling this nation’s economy. 

Last time I added it up I think offshore our state alone, we had generated about $150 billion for the United States Treasury with 

no revenue sharing and so I think that it is important that as formulas be developed that, first of all, there be some recognition for 

the areas that were the guinea pig for offshore energy production 

and, to be candid, did experience some impacts as we have gone 

through and improved technology. 

So I think that is an important component. Another one is I 

think production volumes, current production volumes. I think that 

as GOMESA has included items like the length of the shoreline 

and the coastal population, I think they are relevant, but I think 

the key items are historical production and current production 

rates. 

The CHAIRMAN. Let me just try to expand that because in your 

testimony you mentioned that Wyoming and New Mexico used 

their revenues in a way. Do you think that there should be more 

flexibility for states receiving revenue sharing? 

Mr. GRAVES. I do think that it should be a state’s decision to determine how the impact should be addressed, how those funds 

should be used. In the Mineral Leasing Act, as you know, there are 

absolutely no conditions on the use of those funds. 

I know in the past, particularly under the Coastal Impact Assistance Program (CIAP), we have run into extraordinary challenges 

with Interior approving some of the coastal uses that we believe 

are very clear. 

The CHAIRMAN. Good. Well, I look forward to pursuing this as we 

move forward after the August recess. My time has expired, and 

I recognize the gentleman from Massachusetts, the Ranking Member. 

Mr. MARKEY. Thank you very much. Mr. Graves, I do agree with 

you that the Gulf states have been used as guinea pigs, and we 

saw a tremendous—maybe the worst—environmental disaster of all 

time last summer. 

There has not been yet any legislation produced in this Congress 

that would implement the safety recommendations from the blue 

ribbon BP Spill Commission. Would you support putting those recommendations on the books so that we implement the safety lessons from that Spill Commission? 

It is a guinea pig, yes, but we learned the lessons and now we 

are going to put the safety measures in place. 

Mr. GRAVES. Congressman, I think that I did read the report 

months ago when it came out. I do recall there being some very appropriate recommendations in that report and attempts to improve 

safety; improve industry I think in addition to looking at some of 

the efforts that the industry has undertaken. 

Mr. MARKEY. But none of the recommendations of the BP Spill 

Commission have been put on the books yet, so would you support 

us adopting legislation to accomplish that goal so that the guinea 

pig doesn’t have a successor incident? 

21 

Mr. GRAVES. Congressman, I will say two things in response. 

First of all, I think that there were a number of very appropriate 

recommendations that were included in that report, and I would be 

happy to go through and—— 

Mr. MARKEY. Would you support—— 

Mr. GRAVES. Not all the safety recommendations. No, sir. I would 

be happy to go through. 

Mr. MARKEY. OK. Do you want those recommendations put on 

the books or not? 

Mr. GRAVES. Again, Congressman, in total, no. I think that there 

were some very valid recommendations. 

Mr. MARKEY. Do you think we should raise the liability cap from 

$75 million for the oil industry—— 

Mr. GRAVES. I do. 

Mr. MARKEY.—so that they should be responsible for the unlimited damages which they cause? Do you agree with that? 

Mr. GRAVES. I do. I do. And to be clear, Congressman, I agree 

with you that I do not believe that current law was appropriate or 

was sufficient in responding to the BP oil spill. 

Mr. MARKEY. Yes. I think that might be a good subject for us to 

twin here as well as we are moving forward so that we understand 

that this isn’t just going to be a one-way street, that it is just anything the oil and gas industry wants, but that we have the concomitant safety recommendations put on the books as well. 

Ms. Alexander, I know you haven’t had a chance to review the 

legislation which Mr. Holt and I are going to introduce to take back 

that $150 billion which in retrospect we couldn’t afford in the end 

of 2006. Would you be supportive of ending those kind of giveaways 

of Federal money to the states, given what we realize is a fiscal calamity that we are facing as a country? 

Ms. ALEXANDER. You know, I should say I haven’t reviewed the 

legislation. We would have to take a look at it, but since in general 

we do think that revenues from Federal waters should go back to 

the Federal taxpayers, we would obviously be inclined to look favorably on legislation that would reverse that. 

Mr. MARKEY. So you see this bill as well or the potential proposal 

which will emanate from the hearings which we are having today. 

How do you view that in terms of the potential harm to the Federal 

taxpayers and the bond rating of our country, which obviously is 

very fragile? 

Ms. ALEXANDER. Well, I think that at this moment when there 

is clearly very little appetite if you look at the entire Congress for 

raising taxes and there is a need for revenue; there is still some 

appetite for some services from government, although obviously a 

lot of controversy about what those should be, I think it is just the 

wrong time to take revenues away from the Federal coffers. 

These are Federal waters. They are six miles or nine miles or 

more off the shores of states. It would be difficult to map them. You 

know the consequences, as Mr. Garret said. The consequences are 

going to be paid for by the Federal Government. They are. So I 

think taking the revenue away from the Federal taxpayers is the 

wrong thing to do. 

Mr. MARKEY. Now, in April, May and June of 2010, BP, because 

of their negligence off of the coast of Louisiana, created the worst 

22 

environmental disaster in history. In April, May and June of 2011, 

they have just reported $5.6 billion worth of profits, but the Majority is insisting that notwithstanding those historic profits that they 

continue to keep tax breaks, which obviously are not needed to get 

them to go out there and to drill. 

Do you think it is a good idea for us as part of any grand bargain to reclaim those $4 billion a year in tax breaks which we give to 

big oil to drill where they are going to drill anyway because they 

are like fish swimming and birds flying? The oil company is drilling, and they are making huge profits. 

Ms. ALEXANDER. You know, we have been on record for a long 

time for repealing the vast majority of oil and gas tax breaks, so 

I think this is an industry that has ample market incentives to encourage production to keep going. The market should be sufficient 

to encourage the kind of production that we need to maintain our 

energy needs. 

I think the more our position as an organization is that the 

energy sector needs to kind of come back from the Federal subsidies and get a more level playing field by reducing the oldest and 

biggest subsidies first. You know, some of the oil and gas subsidies 

have been on the books for 100 years. It is hard to say that they 

are getting off the ground. 

Mr. MARKEY. Thank you, Ms. Alexander. 

The CHAIRMAN. The time of the gentleman has expired. The gentleman from Virginia, Mr. Wittman? 

Mr. WITTMAN. Thank you, Mr. Chairman. I would like to thank 

the members of the panel for joining us today. 

Secretary Domenech, let me begin with you and ask this just in 

general. When Virginia gets the opportunity to produce energy offshore, can you give me some indication about how many jobs that 

would relate to for Virginia? 

Mr. DOMENECH. Thank you very much for the question. There 

have been several studies estimating the numbers of jobs and so 

it fluctuates somewhat, but it is roughly between 5,000 and 15,000 

jobs associated, depending on what you include, so an enormous job 

creation machine. 

Mr. WITTMAN. And under that scenario, do you believe that there 

should be a revenue sharing structure similar to that for the Gulf 

states? 

Mr. DOMENECH. We do. 

Mr. WITTMAN. Can you give us a little idea about under that 

structure then what Virginia would like to, first of all, do with 

those revenues? You spoke a little bit about the General Assembly 

having some plans for those revenues. I would like for you to go 

ahead and let us know a little more about that. 

And then do you believe that the state, when given that possibility of those revenues, should have the flexibility as to how to 

spend those revenues? So I guess it is a two-part question. One is 

where would the proposed revenues go, and how would you like the 

flexibility to be able to spend those revenues? 

Mr. DOMENECH. Well, I think answering the second one first, 

flexibility is always a good thing because you never really know 

where you might need the money, but in general our General Assembly has said that we would like to target transportation infraVerDate Nov 24 2008 10:34 Jul 24, 2012 Jkt 000000 PO 00000 Frm 00026 Fmt 6633 Sfmt 6602 L:\DOCS\67650.TXT Hresour1 PsN: KATHY
23 

structure in the state. We want to target green energy incentives 

in the state. 

Third, we want to make sure that those funds go to build the 

kind of safety infrastructure that is needed to protect our coast 

with the most up-to-date, state-of-the-art environmental safeguards 

that can respond to a potential spill. 

Mr. WITTMAN. Let me ask this too. Do you see the potential there 

also with this? Obviously there is a military element to this with 

the potential impact on military operations there. I think many of 

those things we have been led to believe can be worked out, but 

do you believe also that those revenues might have an applicability 

to military families? 

And then we had heard about concerns about coastal communities, both from yourself and Chairman Graves. Do you also believe that there is an element there that Virginia could consider as 

far as impact of those funds to assist coastal communities? 

Mr. DOMENECH. Well, yes. A vast majority of the funds would 

stay in the coast area. That is going to benefit all the economy and 

the coast. 

I was at a DOD conference in Nashville just yesterday speaking 

with a number of the folks who are involved in siting that lease 

sale, and they are very open to the idea of moving lease blocks 

around our offshore area to accommodate their training concerns. 

Mr. WITTMAN. Very good. I know in my conversations with them 

they have expressed that same flexibility to make sure that obviously we are keeping in mind their needs, but also them keeping 

in mind the needs for energy development here in the United 

States, so that is a great point. 

I want to go to Chairman Graves and ask a question. I serve on 

the Migratory Bird Commission, and we talk a lot about the revenues that come in and how it goes to protect wetlands and specifically migratory bird habitat. Can you give me a little insight as to 

how revenue sharing for Louisiana has been used to restore and 

protect migratory bird habitat? 

I know with the spill there was a lot of concern about the habitat 

there and the impact on especially early migrating ducks like teal, 

but anyway I just wanted to get your perspective on that. 

Mr. GRAVES. Yes, sir. Thank you. Congressman, coastal Louisiana is the largest wintering habitat for waterfowl and migratory 

species in the United States. Literally tens of millions of birds winter in South Louisiana and the coastal area. 

Under our Constitution—in fact, there is a constitutional amendment that passed with the highest margin of any constitutional 

amendment in our state’s history—all funds from GOMESA, from 

Coastal Impact Assistance, are dedicated to improving the resiliency of the Gulf coast. 

So the majority of those funds have actually been spent on ecosystem restoration, trying to re-establish, trying to improve the resiliency of habitat for many of those migratory bird and waterfowl. 

Mr. WITTMAN. Thank you, Mr. Chairman. With that, I yield 

back. 

The CHAIRMAN. I thank the gentleman and recognize the gentleman from New Jersey, Mr. Holt. 

24 

Mr. HOLT. Thank you, Mr. Chairman. Thank you. Thank you to 

the witnesses. 

I have a couple of questions about Virginia, if I may, Mr. 

Domenech. Do you know how much revenue Virginia has received 

over the life of the Land and Water Conservation Fund? 

Mr. DOMENECH. I am afraid I do not. 

Mr. HOLT. Do you have any idea? 

Mr. DOMENECH. I don’t. 

Mr. HOLT. Do you think it is in the hundreds of thousands or the 

tens of millions? 

Mr. DOMENECH. My guess would be tens of millions. 

Mr. HOLT. Yes. OK. 

Mr. DOMENECH. Would I be right? 

Mr. HOLT. I think that would be right. You know, we are now 

celebrating or recognizing an anniversary of a period of time difficulty, some minor disagreements in this country that happened in 

the early 1860s, in the mid-1860s, and at that time there was a 

change that took place in the United States. We stopped talking 

about the United States as a plural, the United States are, and we 

began talking about the United States is. 

About a hundred years later when this Congress, a Congress, 

passed the Land and Water Conservation Fund, it was recognized 

that depleted resources offshore should somehow be balanced with 

acquisition of resources on land. The revenues that came from the 

Gulf or California or other places benefitted Virginia and North 

Carolina with a very clear recognition that these were resources 

that belonged to the United States singular. 

Now, I know you say you would like to use the revenues from 

offshore drilling which might start coming in sometime after 2017 

or some decades after 2017 to improve your ability to respond and 

have good environmental protection and so forth. 

So does that mean that you would be willing or your Governor 

would be willing to sign a statement binding the state to not use 

the resources in the event of a spill maybe on the scale of what we 

saw in the Gulf, not using the resources of the United States Coast 

Guard or not using the resources of other agencies, EPA or NOAA, 

or that you would only sue in state court to recover from the guilty 

parties’ damages, or that you wouldn’t ask for a Federal disaster 

declaration in the event of one of those environmental catastrophes? 

Mr. GRAVES. I assume it is a rhetorical question. 

Mr. HOLT. Well, it is an actual question. Would you say that you 

wouldn’t be looking for the resources of the United States of America, that they are Virginia’s resources, Virginia should get the revenue, Virginia should have the responsibility for any cleanup? 

Mr. GRAVES. Well, I would respond to that as saying we don’t 

think of them as Virginia resources. We recognize that out three 

miles beyond our state waters it is Federal resources. 

Just like on land the Federal Government drills oil and gas resources off of BLM land or other lands that belong to the Federal 

Government and they share the revenue and royalty resource with 

the state onshore, we feel the same should apply offshore. 

Mr. HOLT. Well, Mr. Chairman, let me just finish by saying that 

as we debate on the Floor a piece of legislation that has been charVerDate Nov 24 2008 10:34 Jul 24, 2012 Jkt 000000 PO 00000 Frm 00028 Fmt 6633 Sfmt 6602 L:\DOCS\67650.TXT Hresour1 PsN: KATHY
25 

acterized as the worst environmental legislation in the history of 

the U.S. Congress, which is probably a little bit of hyperbole, but 

an appropriations bill that clearly is from my perspective bad for 

the environment in a number of ways, that we should be using revenues, at least the full share of the 12.5 percent I guess it is, from 

offshore drilling for the Land and Water Conservation Fund and 

for other environmental protection and not to return to the general 

fund of any governmental organization. Thank you. 

The CHAIRMAN. The time of the gentleman has expired. Of 

course, we are talking about revenue sharing, but since you 

brought up the Interior bill obviously beauty is in the eyes of the 

beholder. 

The gentleman and I have a different view on that. I think 

Chairman Simpson has brought forward a very responsible bill, 

given the fact that we have a $14.3 trillion deficit, as only one 

issue. 

With that I recognize the gentleman from Ohio, Mr. Johnson. 

Mr. JOHNSON. Thank you, Mr. Chairman. I could not agree with 

your comments more. Right on target. Thank you for holding this 

hearing. 

You know, the current status quo for revenue sharing is unbalanced and provides disincentive to the majority of coastal states to 

push forward and allow offshore exploration and development. 

Now, I represent Eastern and Southeastern Ohio, so my state isn’t 

directly affected by this unbalanced plan. However, my constituents have made it clear that they want to see America produce 

more of its own energy, and that comes from tapping into our own 

natural resources. 

In this time of crisis over our out-of-control Federal deficit, there 

is a concern that now is not the time for the Federal Government 

to further engage in offshore revenue sharing. Now, I find it ironic 

that the other side of the aisle seems to have suddenly found religion on addressing our nation’s debt, and I have two suggestions 

that I think might address some of their concerns. 

First of all, they should support the Republican deficit reduction 

plan tomorrow that will cut at least a trillion dollars of discretionary spending over the next 10 years, while also setting up a bipartisan commission to address mandatory spending. But, second, 

they should support more offshore energy production of all kinds. 

If the other side of the aisle is truly worried about a loss of taxpayer dollars through revenue sharing, there is a simple solution 

to this issue, and that is to produce more. There is no secret equation here. More energy production on Federal offshore lands means 

more Federal revenue. This Committee and the full House passed 

three offshore energy bills that would cut through the red tape currently holding them back and allow the American people to unleash—to begin to unleash—our own natural resources. 

Just a couple of questions to start out with. Ms. Alexander, do 

you believe that we should repeal onshore revenue sharing? You 

have testified that you think we should not do offshore revenue 

sharing and you are opposed to that for oil and gas. What about 

onshore revenue sharing? Do you think we should repeal that too? 

Ms. ALEXANDER. We would look at any proposal to do that. I 

think that onshore is different from offshore. I think that Federal 

26 

lands within state boundaries are different than Federal waters in 

three miles out. 

Mr. JOHNSON. How so? 

Ms. ALEXANDER. I think they are within state boundaries. Federal waters are six miles offshore. 

Mr. JOHNSON. But they are still Federal lands. They are resources that belong to the American people. 

Ms. ALEXANDER. That is right. And as I say, we would look at 

them. We might welcome them. 

Mr. JOHNSON. Do you believe we should prohibit sharing of revenue from wind and tidal energy? 

Ms. ALEXANDER. Yes. 

Mr. JOHNSON. They are offshore. 

Ms. ALEXANDER. Yes. 

Mr. JOHNSON. OK. So what is the distinction? Because there is 

a dichotomy here that I don’t understand. You are opposed to revenue sharing for oil and gas. 

Ms. ALEXANDER. And we are opposed to revenue sharing for wind 

and tidal. 

Mr. JOHNSON. You are opposed to revenue sharing—— 

Ms. ALEXANDER. Yes. 

Mr. JOHNSON.—for wind and tidal? 

Ms. ALEXANDER. Yes. Yes. We don’t have a distinction there. 

Mr. JOHNSON. So you are basically opposed to any offshore revenue sharing. 

Ms. ALEXANDER. For Federal waters, yes, right now. 

Mr. JOHNSON. OK. That is very interesting. I don’t understand 

the distinction between Federal lands that are onshore and offshore, and certainly the American people I believe share that concern, again back to the Chairman’s comments, about having a 

$14.3 trillion national debt. We are in the middle of debt crisis. We 

are trying to put Americans back to work. This seems to be an illadvised strategy. 

Secretary Domenech, in your testimony you described how the 

local infrastructure will need to be expanded and maintained 

should offshore drilling take place off the coast of Virginia. Can you 

give an estimate of what this cost would potentially be for the state 

and for the local governments along the coast? 

Mr. DOMENECH. Thank you for the question. Unfortunately, we 

don’t have an estimate that I can give you at this time. We are primarily looking at our sister states like Louisiana that have recovered from or are in the process of recovering from the Deepwater 

spill to learn the lessons there so we can apply new lessons to Virginia. 

And of course Secretary Salazar and Director Bromwich have announced a new lease sale in the Gulf at the end of the year, so we 

are confident that the kind of safety regimes that they have identified are good to go at this point, so we are trusting that. 

Mr. JOHNSON. OK. Mr. Chairman, I am going to yield back with 

a closing comment here. You know, this seems to be further indicative. Ms. Alexander’s testimony and the answers to her questions 

here seem to confirm my concern that this is the Administration 

of ‘‘No.’’ No to putting America back to work. No to tapping into 

27 

America’s natural resources. No to establishing a national energy 

policy. And with that I yield back. 

The CHAIRMAN. I thank the gentleman, and his time has expired. 

I recognize the gentlelady from California. 

Mrs. NAPOLITANO. Thank you, Mr. Chair. I have a couple questions for Mr. Domenech. 

Last week, and I have a copy of the Washington Post item, 

Moody’s Investor Service said that if the United States loses its top 

credit rating as failing to raise the limit on Federal borrowing, 

Maryland and Virginia could also be downgraded because their 

economies are so dependent on Federal spending. 

Do you support repealing the giveaway to these four Gulf states 

to help reduce the deficit and avoid a default, which could be a disaster to the State of Virginia? And while you may not be getting 

a lot of money now, 2018 will be a windfall. 

The followup question to that would be to ask if you understand. 

I understand why Mr. Graves is supporting the $150 billion giveaway to the Gulf states because his state benefits from that giveaway. Mr. Graves’ state and three other Gulf states have really put 

one over the other 46 with that law and absolutely be up there defending it, but the money that could and should be used to help the 

residents of your State of Virginia is important also. 

That should be used to help reduce our deficit, and I can’t understand why you should support diverting money away from the residents of your State of Virginia to help the people of Louisiana. 

Would you explain that? 

Mr. DOMENECH. Well, I don’t know if it is me or my colleague 

here from Louisiana, but from our perspective we would not support repealing the revenue sharing provisions that are in 

GOMESA, as well as all of the other ones that were detailed earlier 

from payment in lieu of taxes to onshore royalty relief. Congressman Holt mentioned Land and Water Conservation Fund, which of 

course is a mutually beneficial program for the entire nation. 

So their energy provides lots of incentive, a lot of power for the 

country. We think that America needs energy. The best way to 

incentivize states to participate in energy production is to allow 

revenue sharing. It gives us the ability to put in place the type of 

safety and infrastructure we need to do it safely. 

Mrs. NAPOLITANO. Yes, sir? 

Mr. GRAVES. Yes, ma’am. I just want to clarify that this $150 billion, that is a pipedream. We got a check for $222,000 this year, 

so there were several zeroes missing from our check if we were 

supposed to get—— 

Mrs. NAPOLITANO. No. That is not until 2018 when the windfall 

kicks in. 

Mr. GRAVES. Congresswoman, with all due respect, there is not 

a chance that the Gulf states are going to share anything close to 

$150 billion. 

Mrs. NAPOLITANO. Well, that is what the Department of the Interior is telling us. 

Mr. GRAVES. I assure you—I am one of the guys who wrote the 

bill—it is not happening. That is just inaccurate. If we want to deal 

with facts, we can deal with facts. 

28 

I think it is important to look at things like the Deepwater Royalty Relief Act that was passed in 1996 looking at the projections 

from the Department of the Interior and the revenue that was coming in at that time versus what happened, the huge spike in revenue, the additional revenue to the United States Treasury and the 

benefit to the Treasury that I know TCS, for example, is concerned 

about. So there is a major dynamic scoring issue that I think is important to look at. 

Mrs. NAPOLITANO. We need to take a further look at it then. 

Mr. GRAVES. Yes, ma’am. 

Mrs. NAPOLITANO. Ms. Alexander? 

Ms. ALEXANDER. I just want to clarify one thing for the Members 

of the Committee that are still here. Our organization doesn’t oppose additional development in offshore waters or on land. We 

don’t oppose additional development. 

Mrs. NAPOLITANO. I understand. 

Ms. ALEXANDER. We want Congress to treat our Federal waters 

and our Federal lands as if they had a fiduciary duty to the taxpayer and make sure that as owners of those resources we are getting the revenues we deserve. 

Mrs. NAPOLITANO. OK. Thank you. To both Mr. Domenech and 

Mr. Graves, I would like to ask who is responsible for bearing the 

cost of administering the Outer Continental Shelf? 

Is it correct that the Federal Government and specifically the 

Coast Guard is responsible for all maritime safety and security 

search and rescue operations, ensuring offshore aid to navigation 

are maintained and maintaining intracoastal waterways? Is it also 

correct that the Federal National Marine Fisheries Service has responsibility for managing all fisheries found in Federal waters? 

So given this, in administering the Outer Continental Shelf why 

shouldn’t revenue derived from these resources on the Outer Continental Shelf be returned to the Federal Treasury to help offset the 

cost of all the activities? 

Mr. DOMENECH. The Federal Government can spend its portion 

of the revenue in supporting those activities. The state has costs 

of our own to support those activities and so we just see it as an 

equitable arrangement. 

Mrs. NAPOLITANO. Equitable in terms of percentages. Can you 

tell me how it is split? 

Mr. DOMENECH. Well, of course, we don’t have a program now. 

In GOMESA I think it is 37.5 percent goes to the state and the rest 

of it goes to the Federal Government. That is my understanding. 

Mr. GRAVES. Congresswoman, I think it is important to draw the 

analogy here looking at, for example, BLM land where the Federal 

Government is responsible for maintaining and patrolling those 

lands. They receive 10 percent of the revenue from mineral production on BLM land. Ten percent. Ninety percent goes to the reclamation fund. 

Mrs. NAPOLITANO. But is that enough? 

Mr. GRAVES. Is 10 percent enough? 

Mrs. NAPOLITANO. Is that enough to do the maintaining? 

Mr. GRAVES. I am talking about on Federal lands. 

Mrs. NAPOLITANO. Right. 

29 

Mr. GRAVES. That they receive 10 percent right now. And so for 

offshore waters the Federal Government currently retains virtually 

100 percent of the revenues. 

And I also want to clarify that our Department of Wildlife and 

Fisheries responds to search and rescue, does patrol offshore 

waters and are very involved in rescue operations. I think the issue 

here, and this goes back to a question that was asked earlier by 

Mr. Holt, Congressman Holt. It is important to recognize, and he 

asked whether we would take over the offshore production platform, oil spill response and things like that. 

The Federal Government is responsible for doing that today, and 

in the case of the Deepwater Horizon spill in my opinion I think 

that it was not done properly. The states have to pay the price. 

Ninety-two percent of that oil, heavily and moderately oil true 

lines, are in the State of Louisiana. 

That is what I have been doing for the last year. And so as a 

result of largely, in my opinion, oversight issues and I think gross 

negligence, we have to respond to that disaster. The Federal Government, to be candid, did not do a very good job. 

Mrs. NAPOLITANO. Thank you, Mr. Chairman. I appreciate your 

indulgence. 

The CHAIRMAN. Yes. I did want to thank the gentlelady. I did 

want the gentleman to respond. The gentleman from Colorado, Mr. 

Tipton, is recognized. 

Mr. TIPTON. Thank you, Mr. Chairman. I would like to thank our 

panel for being here. I have a couple of questions. 

Mr. Domenech and Mr. Graves, in the State of Louisiana and 

State of Virginia do you feel any Federal impacts, any costs in your 

communities, in your businesses, in your state, from regulations 

coming down out of the Federal Government? 

Mr. DOMENECH. Yes. 

Mr. TIPTON. Mr. Graves? 

Mr. GRAVES. Congressman, when the Corps of Engineers leveed 

the Mississippi River we lost nearly 2,000 square miles of our 

coastal area as a result of those Federal actions and so I would say 

without question. 

Mr. TIPTON. Great. So the Federal Government mandates. 

States—Virginia, Louisiana—pay. If it is offshore, the Federal Government doesn’t want to be able to give anything back to the states 

is essentially what we are seeing with this offshore. Is that correct? 

Mr. GRAVES. Yes, sir. 

Mr. TIPTON. I think, Mr. Chairman, we see something really 

pretty clear. Our Democrat colleagues are opposed really to revenue sharing not because those revenues could be used to pay 

down the debt in this country or to be able to meet our Federal obligations. Their opposition seems to be simply to any kind of development that is going on in our coastal states. 

But because we know revenue sharing does make sense for these 

states and will lead to new development and new jobs, I think our 

Democrat colleagues’ position is bad for America, is bad for our 

states and bad for addressing some of the challenges that we really 

face. 

Gentleman, I would like to ask you. Could you use a billion dollars in your state? 

30 

Mr. DOMENECH. Sure. 

Mr. TIPTON. Were you a little distressed when we saw the President of the United States, given what our Democrat colleagues 

have been pointing out, what the Chairman has pointed out, that 

we have $14.4 trillion in debt in this country, taking a billion 

American dollars, which we don’t have, and encouraging offshore 

drilling off the coast of Brazil? 

Mr. GRAVES. I think it could have been better invested in Virginia. 

Mr. TIPTON. How is your job climate? Do you have 100 percent 

employment? 

Mr. DOMENECH. We do not. We are about 6 percent, so we are 

not as bad as some other states. 

Mr. TIPTON. Nationwide, right. The economy is really robust? Everything is swell? 

Mr. DOMENECH. It could be improved. 

Mr. TIPTON. It could be improved. So maybe it is important to 

be able to get Americans back to work, to be able to create those 

jobs, to be able to develop resources here in America, to be able to 

lower costs for Americans who are struggling with gasoline prices 

and being able to pay their bills. Would that be sensible? 

Mr. DOMENECH. It would. 

Mr. TIPTON. It would be sensible. I tend to agree with you. You 

know, I come from a western state, a landlocked state, and we have 

that common sense at least in the west, and we see it reflected in 

at least some of the Federal policy, to be able to get some of those 

revenues back. 

Just in terms of who can best address some of those problems, 

when you are looking at your children, education, do you think 

those decisions are better made here in Washington or better made 

at the local level? 

Mr. DOMENECH. Local level. 

Mr. TIPTON. Probably at the local level. Do you think somebody 

in Washington knows that you have potholes in your street, or do 

you know that you have potholes in your street when you were 

talking about getting money for infrastructure? You probably know 

that better. 

Mr. DOMENECH. Yes. 

Mr. TIPTON. But you need the resources to be able to do that. 

That, Mr. Chairman, is something that I think that this Congress—and I applaud this piece of legislation. Recognizing that 

there seems to be a real mentality inside this Beltway that Washington needs money more than our states, than our communities, 

than our individuals, to be able to fill Washington’s coffers and be 

able to meet Washington’s needs. 

It seems to me that the more sensible approach to this is to be 

able to empower those local communities, to be able to empower individuals with those resources. We really need to be having a more 

balanced approach in terms of dealing with our states and truly 

recognizing many of the challenges that you face. 

Mr. Graves, when you were talking about the deplorable job that 

the Federal Government did when it came to the cleanup, there 

were many of us that were wondering as we heard your state stand 

31 

up and say let us get involved. Let us be able to participate. You 

were handcuffed by Federal regulations. 

We are spending in this country $1.75 trillion a year on regs. 

Those are the real costs. We continue to see, as you have reflected 

here today, unemployment. We have seen revenues not increasing, 

but decreasing. If we are able to get our people back to work, we 

are able to get our people employed in this country, we support not 

foreign industry, but American industry for a change, I think that 

will be a more sensible approach and something I can certainly be 

behind, Mr. Chairman. Thank you, and I yield back. 

The CHAIRMAN. I thank the gentleman. His time has expired. 

The gentleman from New Mexico, Mr. Luja ́n. 

Mr. LUJA ́. Mr. Chairman, thank you very much. Mrs. Alexander, 

why is your organization opposed to legislative measures that 

would alter the existing Federal/state revenue share provisions for 

royalty payments? 

Ms. ALEXANDER. Our position is essentially these are Federal resources, and the Federal taxpayers should get the revenue. It is not 

about whether or not states should get aid for other things. It is 

not about the overall balance between state and Federal Government. These are resources owned by the Federal taxpayers, and 

they should get the revenue. 

Mr. LUJA ́. I appreciate the honesty in the answer that it is not 

about picking winners or losers. These are Federal resources that 

should go to Federal taxpayers, and that is the position of the Taxpayers for Common Sense. We have talked a little bit about common sense, but you represent the organization called Taxpayers for 

Common Sense. 

Ms. ALEXANDER. That is our position, and we have a long history 

where I am sure we would agree with Mr. Graves on many things 

about criticizing the Army Corps of Engineers and criticizing the 

execution across Administrations at the Department of the Interior 

in terms of their management of both lands and waters. 

We want excellence from the Federal Government. You know, we 

are not saying that everybody is doing a great job already, but 

these are Federal resources. Federal taxpayers own them and Federal taxpayers should get the revenues. 

Mr. LUJA ́. Ms. Alexander, why would someone advocate then for 

taking money from the Treasury to put into the state budgets? 

What in the opinion of Taxpayers for Common Sense is the right 

approach in this front when we are talking about these Federal resources? 

Ms. ALEXANDER. I mean, I think that the representatives from 

the states are in the best position to argue why the states want it, 

but I think that at the root level I think the question for us, from 

the Taxpayers for Common Sense point of view, is we are not saying that there shouldn’t be incentives for increased production. 

I just don’t think shifting the revenue from one place to the other 

means that it is an incentive for the developer. They still have to 

pay royalties. They still have to pay rents. They still have to pay 

bonuses and fees. So I think we think it comes down to a very simple point. They are Federal resources, and Federal taxpayers 

should get the revenue. 

32 

Mr. LUJA ́. So, Ms. Alexander, at a time when we are taking on 

these Federal deficits and getting our fiscal house in order with low 

Federal revenues, what would be the value to American taxpayers 

of a proposal to take money away from the American Federal taxpayers paid by these offshore royalties? 

Ms. ALEXANDER. Taking away non-tax Federal revenue at this moment when we have a $14.3 trillion debt, which is something 

that my organization has been concerned about for many, many 

years. We have been on the record for a long time about being concerned about our growing debt and about our deficits and about our 

inability to bring our budget closer into balance. 

You know, this is Congress’ job. You guys have a fiduciary responsibility to the taxpayers to make sure you are not wasting our 

money and making sure that the Administration is doing a good job 

of administering the programs, but also that you are managing the 

assets that are owned by the taxpayers in a way that is for longterm value and that returns revenue to us. 

Mr. LUJA ́. And last, Mrs. Alexander, you state in your testimony 

that altering these royalty distributions would do nothing for the 

bottom line of the oil and gas, wind or other offshore developers, 

so doesn’t it make sense if these penalties are going to be paid either way that the American taxpayer deserves a return on their 

use of public waters for offshore drilling? 

Ms. ALEXANDER. Again, it comes back to the same point. These 

are Federal resources. The revenues should go back to the Federal 

taxpayer. It shouldn’t make a difference for the bottom line for any 

offshore developer. If they are developing energy in Federal waters, 

they are paying those royalties no matter what. 

Mr. LUJA ́. Appreciate that. Thanks very much, Ms. Alexander. 

Mr. Chairman, I yield back. 

The CHAIRMAN. Would the gentleman yield before he yields back? 

Mr. LUJA ́. Cautiously, Mr. Chairman, I would yield. 

The CHAIRMAN. Well, the gentleman’s line of questioning was 

very, very specific in the specificity of that to the gentlelady, and 

her position was it is Federal lands so the Federal Government 

should get the receipts from that. 

I would just ask the gentleman from New Mexico. Does anybody 

in your state, where there is a lot of Federal land, get PIL payments and does he agree that PIL payments maybe should be 

treated the same way as offshore revenues? 

Mr. LUJA ́. We appreciate, Mr. Chairman, very much that rural 

schools, as well as some of our Federal lands with our local counties, receive PIL payments. That is something I very much support 

and am concerned with some of the opposition from our colleagues 

in those areas. 

But when we are talking about the treatment of what is happening with these resources and bringing them right back into the 

states, there is a difference when these programs were shut up as 

opposed to some of these other Federal programs. 

The CHAIRMAN. Well, in both cases, if the gentleman would yield 

to me, in both cases we are talking about Federal lands. I am just 

simply pointing out the line of the gentleman’s questioning was 

Federal lands, and the response was Federal lands or Federal ownership should receive the receipts. 

33 

Now, you are making an exception. By the way, I agree with you. 

I think PIL payments are a payment in lieu of taxes. I would rather have, frankly, individuals own that land, but I just think there 

is a distinction here, and that is the reason I ask that because it 

is not as black and white as one would assume. I just wanted to 

ask the gentleman, and I thank him for yielding. 

Mr. LUJA ́. I appreciate that, Mr. Chairman. Again, I cautioned 

the yield, and I yield back the balance of my time. Thank you, Mr. 

Chairman. 

The CHAIRMAN. OK. The gentleman’s time has expired. The gentleman from Colorado, Mr. Lamborn? 

Mr. LAMBORN. Thank you, Mr. Chairman. 

Ms. Alexander, I would like to discuss a couple of underlying 

issues that we are talking about here today, so can you give me a 

yes or no answer to several questions? One is do you support offshore drilling under any conditions in new areas off the Atlantic 

coast? 

Ms. ALEXANDER. Yes. We have no position one way or the other. 

We are not against development. Yes. 

Mr. LAMBORN. OK. And would the same hold true for the Pacific, 

new areas off the Pacific coast? 

Ms. ALEXANDER. Again, no position so yes. 

Mr. LAMBORN. And finally, would that hold true for new areas 

off the coast of Alaska? 

Ms. ALEXANDER. Yes. 

Mr. LAMBORN. OK. Let me make a side comment here. I am glad 

to see a witness put forward by the Minority side that acknowledges that there is an important role for new energy production in 

this country. 

But to be more specific, do you believe that states that have 

shorelines adjacent or next to offshore drilling, should this materialize in the future in the Atlantic, the Pacific or Alaska, do they 

have a stake in the outcome that is any different than states farther away? 

For instance, the consequences of an oil spill that would affect 

tourism or fishing. Do these states have a stake in the outcome 

that is different than the other states, the other 49 states? 

Ms. ALEXANDER. Well, I think the three mile of state waters, 

clearly they have a different stake in that and a transitional stake. 

We have recognized that they have a different stake. 

But I think if you take Virginia, for example, it is possible that 

a spill in Virginia could affect North Carolina or New Jersey or 

Delaware. I think that the farther out you get, the impacts become 

a little more diffuse. 

Obviously the states where they are close to offshore drilling in 

Federal waters may have a disproportionate impact, but they are 

going to get disproportionate Federal aid if, God forbid, there were 

an accident, and they get the ancillary job benefits, which are considerable. 

Mr. LAMBORN. So you can see that it is a reasonable position for 

people to take to say hey, that state has a potentially bigger impact 

because they are right next to it so they should share some of the 

revenues. 

34 

Ms. ALEXANDER. But they also get proportionate Federal assistance. And again we all hope there are no disasters, but they would 

get Federal assistance no matter what the share of the royalties 

would be. They would get a disproportion of Federal assistance. 

And we don’t know where those impacts would all be. It is not as 

clear when the—— 

Mr. LAMBORN. I think this is a very reasonable position and 

should be the position we take as a country. 

Mr. Graves, you have heard the testimony from Ms. Alexander, 

and we just went into it a little bit in detail. Can you give us some 

thoughts on the State of Louisiana and the role that they play 

using state money for the cleanup efforts after the disaster a year 

ago? 

Mr. GRAVES. Thank you, Congressman. Without question, the 

State of Louisiana spent extraordinary dollars. 

In fact, we are still trying to quantify it, but tens of millions of 

dollars of our money responding to the oil spill as a result of the 

void in the response, seeing resources that weren’t properly placed, 

seeing a lack of resources. We had literally thousands of state employees out there patrolling the waters, cleaning up the waters, 

providing security and many, many other efforts trying to protect 

our natural resources where those voids existed. 

In addition to that, as I noted earlier, historically production conducted in less environmentally sensitive ways did take a toll on our 

coastal area, and that is another area where we are spending recently over $1 billion trying to restore our coastal area with state 

funds. 

Mr. LAMBORN. OK. Thank you. Mr. Domenech, have the people 

of Virginia or the government of Virginia thought about how you 

could use the additional—you have maybe touched on this already, 

but I missed some of the earlier questions and answers. Would you 

use additional revenues should this materialize as we are discussing here today? 

Mr. DOMENECH. Yes. Our General Assembly has passed legislation that says if we get royalty sharing, royalties from any future 

offshore development, that we would spend those on a couple of 

areas—green energy incentives and research, transportation needs, 

infrastructure, as well as putting in place the state-of-the-art safety 

regime that is needed, because where this energy is coming onshore we have different sorts of needs and requirements than other 

states that is not doing the offshore development. So that is the 

three areas where we would put our funding. 

Mr. LAMBORN. OK. Thank you. It is hard to see anybody objecting to that. I want to thank you all for being here today. I yield 

back. 

The CHAIRMAN. I thank the gentleman. Time has expired. The 

gentleman from Arizona, Mr. Grijalva? 

Mr. GRIJALVA. Appreciate it. Ms. Alexander, now that Secretary 

Salazar, due to all the obvious problems that were there, has created the new Office of Natural Resource Revenue and the Bureau 

of Ocean Energy Management, Regulation and Enforcement to improve the management of royalties, the collection of royalties on onshore and offshore Federal property, what recommendations do you 

35 

have to improve the management of that part of the Gulf coastal 

areas? Do you have any suggestions? 

Ms. ALEXANDER. You know, certainly I can get back to you with 

more specific recommendations. It is not something that I was prepared to discuss today. 

We were long-time critics of the Minerals Management Service. 

I testified before this Committee—— 

Mr. GRIJALVA. Yes. 

Ms. ALEXANDER.—on the problems with that. We have been 

watching this reorganization very closely, and we are looking at it 

with a skeptical eye. So far it looks like there is improvement, but 

we are definitely not letting people off the hook yet. 

Mr. GRIJALVA. OK. 

Ms. ALEXANDER. So we will be watching. 

Mr. GRIJALVA. You also mentioned in your testimony that one 

state cannot meet the impact of operations beyond state waters and 

that it has national implications. 

Could you elaborate further on why it is important for revenues 

to remain the way they are, and what would occur to our Federal 

waters if changes were made, the question being, the underlying 

question, would there be state accountability in this whole process? 

Ms. ALEXANDER. I think for Federal waters, for waters six or 

nine miles offshore, the kind of consequences of any disasters— 

again, hopefully we don’t have them, but the consequences of those 

disasters are more difficult to predict in terms of where things 

might create an impact. The states closest are obviously going to 

have significant impacts, and they will get significant Federal assistance in terms of disaster assistance. 

It is absolutely the case that there has to be Federal accountability on the performance of that disaster assistance, and that has 

been lacking in the past, but I don’t think that doing revenue sharing increases the likelihood that that is not going to improve Federal disaster assistance. We need to make sure that that gets improved on its own. And I don’t think it creates more accountability 

for the states either. 

Mr. GRIJALVA. Thank you. Mr. Chairman, if I may? Mr. Graves, 

earlier you said that you had no idea where the $150 billion projected cost to the Federal Government, where it was coming from. 

It comes from, and I will be glad to share this with you, it comes 

from the Department of the Interior where over the next 60 years 

up to $150 billion is going to be sent to the states, and over the 

next 88 years $254 billion will be diverted to the states under the 

2006 law. 

I wanted to make sure, Mr. Chairman, that there is no objection 

to entering this into the record and provide the witness with a copy 

of that. 

The CHAIRMAN. Without objection. 

Mr. GRIJALVA. Thank you. 

[The ‘‘Estimates of Phase II GOMESA’’ submitted by Mr. 

Grijalva follows:] 

36 


67650.006.eps 67650.007.eps
37 

Mr. GRIJALVA. Mr. Graves, on Governor Jindal’s website it states, 

‘‘Graves helped to draft offshore oil and gas revenue sharing bills, 

including the Gulf of Mexico Energy Security Act of 2006,’’ continuing ‘‘providing billions to Louisiana and other Gulf states.’’ 

I mention those two to clarify where the money came from and 

your participation in that revenue sharing and the original law. 

Mr. GRAVES. May I respond? 

Mr. GRIJALVA. Yes, of course. 

Mr. GRAVES. Thank you. Congressman, the legislation ultimately 

will provide billions of dollars. You just laid out a 60 and 88 year 

timeframe. 

First of all, under Senate rules when that bill was drafted there 

was a cap on the amount of any legislation that could pass the Senate that limited it to $5 billion over any decade. The way that was 

addressed is that provisions were put in limiting the amount of expenditures to $500 million in any given year. 

In addition, as a result of the moratorium, and keep in mind 

GOMESA shares only prospective revenues. Because of the moratorium, we have been unable to or we are actually delaying what is 

currently that 2017 date, and I think it is actually going to be closer to 2019 or 2020 before we see those revenues. 

The last point is that—— 


67650.008.eps
38 

Mr. GRIJALVA. But we are talking about production, aren’t we, 

and not drilling at this point? 

Mr. GRAVES. We are talking about production. Right. 

Mr. GRIJALVA. Yes. OK. 

Mr. GRAVES. But production has to start with the exploration activities, which have been restricted. 

Mr. GRIJALVA. Right. 

Mr. GRAVES. So I don’t think we are going to see the surge in 

2017’s projections. 

Mr. GRIJALVA. Reclaiming my time if I may, Mr. Graves, right 

now as we sit here talking about revenue sharing and to other 

states beyond the 2006 law, we are also in the process of imploding 

on the Majority’s budget to try to deal with the debt ceiling, and 

it is imploding as we speak. 

And yet we are having this really kind of dual universe discussion where we are talking about sending billions of dollars back to 

the states at a time when this government needs its resources and 

its revenue to try to balance what is a very difficult and delicate 

situation in terms of our own debt ceiling discussions. Would you 

agree with me that this is a wonderful time to be having this discussion? 

Mr. GRAVES. Congressman, I would say that I think that with a 

small degree of research it would be proven based upon history 

that this is the fiscally conservative approach. 

The CHAIRMAN. The time of the gentleman has expired. 

Mr. GRIJALVA. Tell that to somebody on Medicare. Anyway, 

thank you. 

The CHAIRMAN. The gentleman from South Carolina, Mr. Duncan? 

Mr. DUNCAN FROM SOUTH CAROLINA. Thank you, Mr. Chairman. 

Let me just say that in 2008 I served on the South Carolina Offshore Drilling Study Committee, and South Carolina wants to see 

offshore drilling in our state and we want to see the revenue sharing that has gone on forever. 

In 1787, states freely joined this union known as the United 

States of America, and at that time they gave up rights to anything 

off their shore. But they also expect something in return when the 

Nation harvests those resources and so this really gets down to the 

root of the union and the states’ rights to some degree. 

So the gentleman from Louisiana has an extraordinary and huge 

amount of experience in this area so, Mr. Chairman, I would like 

to yield the balance of my time to Mr. Landry from Louisiana. 

The CHAIRMAN. The gentleman is recognized. 

Mr. LANDRY. Thank you, Mr. Chairman. I thank the gentleman 

from South Carolina. I am going to have to make him an honorary 

citizen of Louisiana because I think this is important not only to 

Louisiana, but all of not only the Gulf coast, but any states that 

have a coastline on it and natural resources out there. 

Mr. Graves, I understand before I arrived the Ranking Member, 

Mr. Markey, mentioned that he would be soon introducing legislation with Mr. Holt to repeal the existing GOMESA revenue sharing 

with Gulf states. 

Mr. Chairman, I would submit for the record he used some figures as to how much it was going to be costing the Federal GovernVerDate Nov 24 2008 10:34 Jul 24, 2012 Jkt 000000 PO 00000 Frm 00042 Fmt 6633 Sfmt 6602 L:\DOCS\67650.TXT Hresour1 PsN: KATHY
39 

ment, and I would like to submit for the record factual information 

today about the cost of GOMESA to the American people. 

As scored by the CBO at the time of passage, it was estimated 

it would cost less than $1 billion over 10 years. It would not cost 

more than $5 billion in spending in any of the next four 10-year 

periods after 2015. That means under CBO scoring over 50 years 

that this program would not have cost the Federal Government 

more than $20 billion. 

There have been accusations, as I said, today by Members of the 

Minority that somehow this program cost the Federal Government 

$150 billion, and I submit for the record here today that the official 

CBO score for GOMESA does not reflect that. 

The CHAIRMAN. Without objection, it will be part of the record. 

Mr. LANDRY. Thank you. 

[The CBO letter submitted for the record by Mr. Landry follows:] 

40 


67650.003.eps
41 


67650.004.eps
42 

Mr. LANDRY. You know, I also find it just remarkable that the 

other side will sit here today and talk about a hole in the Federal 

budget that they created and then we spend four months giving 

them an opportunity, passing legislation through this Committee 

that is sitting idle on the Senate Floor which in the opinion of 

many others would create $1.7 billion a year more in Federal revenue for the Treasury, but yet they don’t want to pass it. 

They object to that legislation, and then they would sit here 

today and tell Mr. Graves to tell that to someone on Medicare. I 

find that somewhat disheartening. 

Mr. Graves, thank you for making yourself available today. I will 

tell any Member of Congress who has a coastline that this gentleman right here probably knows more about coastlines than anyone else when it comes to protecting the environment. 

Ms. Alexander, have you ever lived on the coast? 

Ms. ALEXANDER. No. 

Mr. LANDRY. OK. 

Ms. ALEXANDER. Close, but not on. 

Mr. LANDRY. Close? How close? 

Ms. ALEXANDER. Ten miles. 

Mr. LANDRY. Ten miles. That is pretty close. On a coastline that 

is prone to hurricanes? 

Ms. ALEXANDER. Yes. 

Mr. LANDRY. OK. All right. Have you ever had to sit through 

one? 

Ms. ALEXANDER. The only time I have been in hurricanes I was 

pretty far inland, so it is not—— 

Mr. LANDRY. You were pretty far inland. Well, my house sits 

about 15 miles from the coastline, and I sat through Rita, Gustav, 

Ike, Lily, Andrew. 

It has been proven that when we repair Louisiana’s coastline it 

helps to protect Louisiana’s citizens and infrastructure. That infraVerDate Nov 24 2008 10:34 Jul 24, 2012 Jkt 000000 PO 00000 Frm 00046 Fmt 6633 Sfmt 6602 L:\DOCS\67650.TXT Hresour1 PsN: KATHY

67650.005.eps
43 

structure is not only important to Louisianians. It is important to 

you because if you flew here they had to fill that plane with hydrocarbons, with diesel jet fuel most likely refined out of Louisiana refineries that are protected by Louisiana’s coast. 

This is an environmental bill. Revenue sharing protects the environment. It does not just protect Louisiana. It does not just protect 

Alabama or Mississippi or Florida or any of the other states. 

Mr. GOHMERT. Texas. 

Mr. LANDRY. I can’t forget Texas. I am sorry. It protects Americans because there is infrastructure that those states—Texas is 

well documented, the refineries on the coast. 

Why is it so unfair when other states in this country have been 

receiving 50 percent of oil and gas royalties for their drilling that 

we shouldn’t receive any as well? Do you know what? The Members 

on the other side have never proposed repealing that to fill their 

thirst for spending in this country, but yet today we are going to 

talk about repealing revenue sharing and how it is not fair. 

Mr. Chairman, I know I am out of my time. 

The CHAIRMAN. The gentleman now is recognized for five minutes if he would yield just for a moment. 

Mr. LANDRY. Yes, sir. 

The CHAIRMAN. We are not talking about repealing revenue sharing. We are talking about enhancing revenue sharing that is the 

subject of this Committee. Now, others may be talking about that, 

but the Chairman isn’t. 

The gentleman is recognized. 

Mr. LANDRY. Right. Mr. Chair, I do recognize that, but the problem is that there are some at the witness table who would like to 

see it repealed, who have said that it is unfair. My point to them 

is how is it unfair? It needs to be enhanced. 

Look, I think that every state that has natural resources off of 

its coast has the right to participate in the activity not only from 

a purely economical standpoint, but because those natural resources really, as the gentleman from South Carolina noted, belonged to those states before they entered the Union. 

Ms. ALEXANDER. I think we are just going to have to agree to disagree here. I think in the first three miles absolutely the states 

benefit from that activity in the transitional zone. They benefit 

from the activity. 

We are saying that in Federal waters six or nine miles off the 

coast of the states those are Federal waters, and we think the revenue should be Federal. I don’t begrudge folks from coastal states 

making those arguments. We look out for the Federal taxpayer 

across the country, and we think that for Federal waters six or 

nine miles off the coast it is appropriate for those revenues to stay 

Federal. 

Mr. LANDRY. Mr. Graves, maybe you answered this question, but 

could you tell us if Louisiana put an aggressive coastal restoration 

plan in place what is the total amount dollar-wise of infrastructure 

that we are protecting? Do you happen to know? 

Mr. GRAVES. I don’t remember the number right off, but I know 

it is several hundred billion dollars at a minimum. 

Mr. LANDRY. And wouldn’t you agree that putting in place sound 

coastal restoration management practices protects us from storms? 

44 

Mr. GRAVES. Without question. As a matter of fact, I think it is 

noteworthy, Congressman, that, as you know, under Louisiana’s 

Constitution that 100 percent of these revenues are dedicated to 

mitigating the impact of OCS activities and in repairing the ecosystem, which is degraded as a result of Federal activities. 

Mr. LANDRY. Mr. Graves, is it not correct, and I know that Louisiana certainly sometimes in its past colorful history has been 

known to maybe waste money. Of course, they are kind of guilty 

of that up here. 

But isn’t it true that the people of the great State of Louisiana 

passed a constitutional amendment to ensure that any revenue 

sharing would be spent solely on coastal restoration and hurricane 

protection projects? 

Mr. GRAVES. Yes, sir, and mitigating impact of OCS activities. 

That is correct. 

Mr. LANDRY. And wouldn’t you say that those projects are 

classified as environmentally sound projects? 

Mr. GRAVES. We work very closely with the environmental community. They have endorsed our plans in absolutely helping to restore the environment. 

Mr. LANDRY. And so if Members on the other side, who I respect, 

have such a keen interest in protecting the environment and wanting to protect species out in Louisiana—we had a discussion here 

about turtles yesterday—wouldn’t you say that every dollar spent 

on the coast protects that environment again? 

Mr. GRAVES. Not only does it protect the environment, but it improves the resiliency of those communities that FEMA has come in 

and paid exponentially more dollars for. 

I mean, Congressman, looking at Hurricane Katrina as an example, we had to sacrifice 1,200 lives and we had to sacrifice hundreds of thousands of businesses and homes in order to get the 

Federal Government to do what they should have been doing ahead 

of time and, by the way, could have spent 8 to 10 percent of that 

$150 billion taking proactive actions and preventing those losses. 

The policy is backwards. 

Mr. LANDRY. And so you would say that any Member who voted 

against revenue sharing would basically be voting against the environment? 

Mr. GRAVES. It is without question. We are investing funds in 

improving and restoring the environment, improving the ecosystem 

services that our costal area provides. 

Mr. LANDRY. Thank you, Mr. Chairman. I yield back the balance 

of my time. 

The CHAIRMAN. I appreciate the gentleman for yielding back. The 

Chair recognizes the gentleman from Texas, Mr. Gohmert. 

Mr. GOHMERT. Thank you, Mr. Chairman. I do appreciate the effort it takes to get here and be a witness. I know you don’t get compensated for it, so it truly is an act on each of your parts of trying 

to do what you believe is the right thing for the country. 

Does anybody know what the position of those who oppose revenue sharing on oil and gas is on whether or not there should be 

shared revenue from solar or wind energy? Any of you all know? 

Ms. ALEXANDER. I mean, speaking for Taxpayers for Common 

Sense, we treat all energy sources equally so offshore in Federal 

45 

waters, if there is development of wind or tidal or anything in Federal waters, we believe that revenue should be Federal. 

Mr. GOHMERT. So you are against all the Democrats that want 

to share revenue from solar and wind? You depart with those folks 

on that? 

Ms. ALEXANDER. In Federal waters, Your Honor. 

Mr. GOHMERT. OK. Thank you. Well, because that is what we 

have been hearing; if it is solar or wind, gee, that revenue should 

be shared, so I appreciate hearing that is your position at least, 

Ms. Alexander. That is nice to know. It is also interesting to note 

that people, at least some, that are leading the charge against revenue sharing are absolutely steadfastly against drilling off of their 

state’s coast. 

It is just amazing to me to have that kind of dichotomy in thinking we are going to demand to drill off your coast because we want 

your energy and we want to fly in our jets and we want to leave 

the Suburbans running so they are cool when we come back from 

our speeches, but we don’t want it coming from our state because 

it is so much work to keep it clean. It is work to keep energy production clean and it does make sense for those states who are willing to do it that revenue should be shared. 

I am still aghast that people would be so opposed to drilling off 

their own coast and yet they want to take all of the revenue from 

those states that are willing to do what it takes to have drilling 

and try to keep their states clean on top of that. We have seen 

what this complete anti-fossil fuel effort has produced. It always 

produced hurt to the economy. 

And what some folks on the left don’t appreciate about those of 

us on the right, we want an environment that is every bit as clean 

as what anybody else on the left wants. We want that. We want 

clean drinking water. I don’t want dirty water. I don’t want water 

that smells like oil and gas. 

The trouble is when an economy is suffering you find more and 

more people who are more concerned about getting a job, about 

being able to afford gasoline that would get them to their job, and 

they quit caring about how clean the environment is, which is one 

of the reasons you see it so nasty in places around the world, 

whether it is India or China or whatever, where you just can hardly breathe over there. 

We have done a good job, but when the economy suffers the environment suffers more. It is only a vibrant economy that allows an 

effort to keep the environment clean and to get it cleaner. I have 

seen the struggling in Texas. I have seen the struggling in East 

Texas, and to have a lady in her eighties say I came into this world 

into a home with no power other than an electric stove and it looks 

like because of what you guys are allowing to happen, because we 

won’t even use our own energy resources, I am going to leave this 

world the same way, that is just not right. 

We have been blessed with more energy resources than any nation anywhere when you use them all, and if we use them and we 

share the revenue and we can use those revenues both at the state 

level and the Federal Government level to keep the environment 

clean and to also pursue environmental alternatives we are going 

to have a vibrant economy and we are going to be the greatest 

46 

economy in the world instead of heading down to the dust bin as 

we keep doing with these. 

I know nobody wants to go there but that is where we are headed when we keep trying to punish people who want to provide us 

energy. I yield back. 

The CHAIRMAN. The time of the gentleman has expired. I want 

to thank the Members and I want to thank the witnesses for their 

testimony. As I mentioned from the outset, it is the intention after 

we come back from the August district work period to work on this 

bill and hopefully mark it up. 

I just want to make a point that wasn’t made probably as much 

as it should have been, and that is that the reason for this bill is 

to provide incentives so that America can become less dependent 

on foreign energy. The gentleman from Texas alluded to that. 

I recognize the principles stand that the gentlelady from the taxpayers organization takes. That is a very defendable position, but 

there is an issue at least beyond what she was arguing, and that 

is my friends on the Democrat side were suggesting that all this 

revenue is the Federal Government’s revenue. Well, if you are not 

drilling you are not getting any revenue. One hundred percent of 

zero is still zero. 

What we are attempting to do is add incentives for states to be 

part of this. Certainly there is a cost. We heard that in the testimony today. At the end of the day, not only do the states benefit; 

we hope we become less energy dependent because of the activity 

of that, jobs are created, and, lo and behold, the Federal Government benefits also. 

That is the intent of where we are going with this legislation, 

and hopefully we can work on this and make that part of what our 

agenda has been here, a part of the American energy initiative that 

all of us have worked very hard on. 

So with that I want to thank very much the witnesses for their 

presence here and the Members for participating. If there is no further business to come before the Committee, the Committee stands 

adjourned. 

[Whereupon, at 11:44 a.m. the Committee was adjourned.] 

[Additional material submitted for the record follows:] 

47 

[A letter from The Honorable Sean Parnell, Governor, State of 

Alaska, follows:] 


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