Income

Inflation Reduction Act promises to maintain oil royalties for Louisiana, but will also drive prices up – The Observer

The IRA includes provisions requiring four sales of oil and gas leases in the Gulf of Mexico that could generate millions in revenue for states through the Gulf of Mexico Energy Security Act, which was created by Congress in 2006 to share rental revenue with Alabama, Louisiana, Mississippi and Texas for coastal conservation, restoration and hurricane protection.

The development comes as the Interior Department considers a draft plan to sell proposed Outer Continental Shelf leases for the next five years, which will replace an Obama-era plan that was implemented in 2017 and expired in July.

The proposed plan raises concerns among lawmakers and coastal communities that depend on GOMESA funds, as it stipulates “no more than 10 potential sales in the Gulf of Mexico” which could be “further refined and targeted, based on contributions and audience analytics” for “include fewer rental sales, including no rental sales. Public comments on the proposal will continue until October 6.

The possibility of ending offshore drilling is in line with President Biden’s campaign promises and the delay in renewing the five-year plan means that no new lease would be possible without congressional action until it is finalized. , said Gifford Briggs, director of the Gulf Coast region for the American Petroleum Institute. .

“A lot of these projects in the Gulf of Mexico have been in the works for 5 to 7 years,” he said, meaning that without new leases, GOMESA’s revenue would start to die out around 2027 or 2028. .

Briggs noted that “there are also a lot of jobs from a Louisiana perspective that are tied into this 7-year window” that would disappear without a new plan that includes new leases.

The latest 2022 GOMESA disbursements from the Office of Natural Resource Revenue included nearly $34.8 million for Alabama, $111.8 million for Louisiana, $36.7 million for Mississippi, and $68.8 million. million dollars for Texas. While most of the funding goes to the states, significant sums are also distributed directly to parishes or coastal counties.

In 2022, Terrebonne Parish received $1.6 million, an amount that Terrebonne Coastal Restoration Director Mart Black says is used to repay a bond that funded critical shoreline preservation and restoration work. community hurricane protection.

Combined with funds from a BP oil spill settlement, the funding went towards essential work to preserve coastal wetlands, rebuild barrier islands, build seawalls and construct checkpoints water to prevent saltwater intrusion that is killing freshwater bayous, he said.

“These coastal restoration projects cost millions of dollars, hundreds of millions to rebuild islands,” Black said.

With funding for the oil spill phasing out in the coming years, funding for GOMESA will become even more important, he said.

“A decade from now, if there are no more leases for offshore drilling, things could be a little rough,” Black said, adding that pending legislation in Congress could add revenue. wind energy in GOMESA and lift the cap on revenue sharing with the States. “We want to increase this income, it is important for us.”

While the IRA could help with that end after being approved by the House as it currently stands, it would come with $739 billion in taxes that will ultimately increase Americans’ spending, according to the API.

The bill includes a tax of 16.4 cents for each barrel of crude oil and petroleum imported, a new minimum tax of 15% on billionaire companies, new taxes on American oil and gas companies, an increase in fees rental fees for onshore leases and electric vehicle tax credits, all of which will have a cost to taxpayers.

“The IRA could open the door to more onshore and offshore federal lease sales and expand carbon capture credits, which is encouraging for the oil and natural gas industry,” wrote Lem Smith, vice -president of API for Federal Regulation, in an analysis this week. .

But “IRA policies that raise taxes and discourage continued investment in US oil and natural gas are misguided,” he wrote. “In the midst of a global energy crisis, too many provisions don’t answer the questions many American families have.”