Oil Revenue Sharing Plan Gains : 7 States Would Get Part of Income From Offshore Drilling

In a defeat for the Reagan Administration, a Senate committee Tuesday approved a plan to share billions of dollars in offshore oil revenue with California and other Pacific and Gulf Coast states.

The plan, approved 11 to 7 by the Senate Energy and Natural Resources Committee, calls for dividing $5.8 billion among seven states and the federal government, including $375 million for California. The states would get a total of 27%, with the rest going to the federal government.

The plan, which is far more generous than the Administration wanted, also calls for providing states with full shares of royalties on oil and gas developed in tracts that straddle federal-state boundaries.

Similar legislation was approved on a 21-17 vote last week in the House Interior Committee, and opponents in both chambers promise tough floor battles.

The committee vote Tuesday came after an appearance by Energy Secretary Donald P. Hodel, who reiterated the Administration’s opposition to the plan, calling it “the worst of all approaches” and “a huge giveaway of federal revenue.”

But coastal representatives in Congress have pressed hard for the plan, and several hailed the Senate committee action. James T. Burroughs, legislative assistant to Sen. Pete Wilson (R-Calif.), said the senator was “very, very happy” about the committee vote.

“It’s important to California and to all coastal states,” Burroughs said.

The legislation is another step in the effort to resolve a seven-year dispute over how much revenue the states should get from federal leases bordering on state waters. Jurisdictions of the states extend three miles from shore, with jurisdiction farther out belonging to the federal government. The dispute centers on the first three miles of the federal zone.

The states have contended that they should get a 27% share that includes full royalties derived from drillings in federal waters, but the Administration wanted to limit royalties to leases that actually drain oil and gas from under state waters.

Oil and gas companies pay the government to lease tracts in federal waters, and royalties are from profits earned from production of oil and gas.

While the dispute continued, $5.8 billion in oil revenues accumulated and was set aside. The Administration agreed to give the seven coastal states 27% of that--minus royalties. The two committees, however, included royalties in the states’ shares, meaning their share would amount to $1.6 billion, compared to the Administration’s proposal of $1.4 billion.

Cost to U.S. Cited

Arguing against the committee plan, proposed by Sens. J. Bennett Johnston (D-La.) and Frank H. Murkowski (R-Alaska), Hodel said it would cost the federal government an extra $4 billion to $6 billion over the next 30 years. California’s share of the royalties during that period would be $1 billion, he said, calling the congressional plan “unconscionable and overreaching.”

But Texas Gov. Mark White, who also testified before the committee, noted that he had sought 50% of the royalties for states.

“Certainly, the states feel they are entitled to more than 27%,” White said. “I appreciate the federal need for those revenues, but the states need their fair share as well, and the need is just as real.”

Besides California, the other states are Louisiana, Texas, Alabama, Alaska, Mississippi and Florida.