Oil: a Fair Share

Since 1978 coastal states and the federal government have argued over what would constitute a fair and equitable division of offshore oil and gas receipts. In the absence of agreement, nearly $6 billion has piled up in an escrow account. It is time to distribute the money. Key committees in both the House and the Senate have approved legislation that would facilitate an equitable sharing in spite of some disagreement from the Administration.

The legislation provides that the seven states involved, including California, would receive 27% of the offshore oil lease bonuses, rents and royalties from the oil produced. Such an apportionment would give California $375 million from the escrow account and an estimated $1 billion over the coming 30 years.

The funds involve oil production in the first three miles of the federally controlled outer continental shelf abutting the three-mile strip that comes under state jurisdiction. One justification for the sharing is that drilling and production from the federal wells is likely to drain some oil pools that lie mostly within state waters. The Administration had agreed to the 27% state share of leases and rents, but objected to the states sharing the production royalties as well. The logic of that objection is obscure at best.

Appearing before the Senate Energy and Natural Resources Committee, Interior Secretary Donald P. Hodel opposed the plan as “a huge giveaway of federal revenue.” Texas Gov. Mark White noted that the states already had reduced their demand from an original request for 50%. The Administration’s idea of a fair sharing was to take all the money, he said.

There is justification for the states getting part of the production royalties beyond the recognition that federal area drilling can tap oil pools within state jurisdictions. The federal oil presence, including onshore production and processing facilities, causes considerable financial and social effects on coastal areas. And the Administration has diminished the role of the federal coastal zone management apparatus that is supposed to assist the states in coping with such activities. Part of California’s share of $375 million has been designated by the state Legislature for coastal zone protection--an appropriate use of the funds.

The Reagan Administration’s hunger for cash in the face of its staggering deficit is understandable, but it does not justify a breach of equity. Texas Gov. White was on the mark when he 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.”