Money Spied Off a Vanishing Coastline

Desperate to fund programs that could rescue the disappearing Louisiana coast, Gov. Kathleen Babineaux Blanco will attempt to force the federal government to share the money it gets from energy companies that drill in the Gulf of Mexico.

Energy companies pay more than $5 billion annually to the U.S. government for the right to mine the gulf for oil and natural gas. Louisiana’s campaign, if successful, would be likely to send more than half a billion dollars each year to gulf states, which include some of the poorest in the nation.

Louisiana has tried repeatedly to win a share of lease payments and royalties. This time the stakes are higher.

If Blanco’s proposal falls on deaf ears in Washington -- she hopes to discuss it with President Bush in February -- her aides say the state is prepared to begin rejecting new requests for drilling licenses. Blanco, a Democrat who took office in January, has urged other oil- and gas-producing states to join forces on the issue.

It is a hardball tactic that would land with a thud in the energy industry at a time when Bush is pushing to reduce the nation’s dependence on foreign sources of oil by increasing domestic production. Louisiana is critical to that effort; a third of the oil and natural gas consumed in the U.S. comes ashore here.

Phil Flynn, an energy analyst at Alaron Trading Corp. in Chicago, said the gulf was an important source of fuel, particularly natural gas. If Louisiana makes good on its threat, Flynn said, it could curtail domestic production -- increasing prices and, potentially, driving businesses overseas, where gas would be cheaper and more abundant.

“These people could hold the nation hostage,” Flynn said. “Basically, I think it would be a very wise thing to give them their way.”

The White House Council on Environmental Quality and the Energy Department referred calls to the Minerals Management Service, which oversees offshore oil and gas production. Gary Strasburg, a service spokesman, said he would not “speculate about anything that might happen in the future.”

Blanco’s proposal calls for the four states that line the central gulf -- Texas, Louisiana, Mississippi and Alabama -- to earn a greater share of royalties and lease payments. Blanco recently sent letters to the governors of those states, but they have not decided whether to join her campaign. She has also asked Alaska, which could make money based on a similar profit-sharing measure there, to join in the effort.

Interior states receive about half of the money that energy companies pay to drill on their land. The payments are intended to compensate those states for the damage that drilling can cause. Waterfront states historically have been paid only a tiny slice of the money generated by offshore drilling.

In an interview, Blanco said she had no plans to demand that waterfront states receive the same portion given to interior states. But she said Louisiana and its neighbors on the gulf were entitled to 10% of the money that energy companies paid.

Louisiana officials want to use the money for repairs to the state’s fragile shoreline.

The equivalent of a football field’s worth of marshland is lost to open water every 38 minutes here, according to the state Department of Natural Resources, and scientists say another 500 square miles will be lost in the next 50 years if nothing is done.

Industries are threatened by the land loss. More than a billion pounds of seafood are caught here each year, for instance, but fisheries are evaporating as erosion destroys the balance of saltwater and freshwater. In many places, the state’s natural protection from storms has also vanished.

Scientists who are studying the problem -- some affiliated with the state, others with local universities and industries -- point to a host of potential causes. For decades, the state allowed ranchers, industries and others to dig navigation canals through marshy areas, only to realize in recent years that lasting damage had been done. Global warming, most scientists agree, is causing sea levels to rise, which also has contributed to the problem.

Much of the damage, however, can be tied directly to the energy industry. Scores of canals have been dug to make room for pipelines. Others, some of them 100 feet wide, were built to accommodate barges needed to steer drilling platforms into open water.

Because of the loss of marshes, numerous pipelines that were once protected by silt and vegetation -- and were not built for open-water conditions -- are now exposed, resting like spaghetti on the seabed in shallow water.

When Hurricane Ivan swept across the Gulf of Mexico in September, energy companies reported more than 30 spills amid the maze of pipelines, said James R. Hanchey, deputy secretary of the Louisiana Department of Natural Resources. Ivan blew one piece of pipe several miles across the gulf, and a drilling platform was found 70 miles from where it was when the storm hit.

The infrastructure that is used to move oil and gas to shore is also threatened by the loss of land. For example, Port Fourchon, an important energy hub on the gulf that houses 150 companies, is connected to the mainland by one road -- a 17-mile stretch of Louisiana Highway 1. Pieces of the road are frequently washed out by storms, and scientists say a significant stretch will be underwater permanently within eight years.

Louisiana officials say $14 billion or more will be needed over the next 30 years to stem the loss of land on the coast. So far, the White House has promised $1.9 billion over 10 years.

“We have accepted the role of providing oil and gas energy to the nation. It is our historic responsibility,” Blanco said. “But this is years and years of public policy gone awry.... We are asking the federal government to take a look at the burden we bear.”

The federal government is the primary regulator of oil and gas operations in the gulf, particularly beyond the three-mile boundary of Louisiana state waters. However, state officials said that even for deep-water drilling, the state must issue what is known as a “consistency declaration” before a new lease is granted. The declaration essentially means that the state agrees that a new lease is “consistent” with Louisiana’s environmental and economic needs.

For several years, the state has laid the groundwork for Blanco’s campaign by reminding energy companies that the state suffers damage every time a new lease is granted.

“We have stopped just short of saying that we are not going to accept the lease,” said Sidney Coffee, Blanco’s executive assistant for coastal activities. “That option is available to us.”

If Louisiana began to deny leases, a move that state officials consider a last resort, it would be likely to spark heated debate about whether the federal government could overrule the decision. Strasburg, the Minerals Management spokesman, said that Interior Secretary Gale A. Norton had the right to balance “national interest and the well-being of the citizens of the state.”

Blanco also said Louisiana might consider suing the federal government for a greater share of the money.

“I would hate for it to come to that,” Blanco said. “But if push comes to shove, we could be forced to do it. There is a clear inequity and a clear need.”