Critics Target Drilling Provision

Posted May 17, 2005 at 6:53pm

A multibillion-dollar entitlement program included in the House-passed energy bill has caused belated alarm among budget hawks and now threatens to be a lightning rod during House-Senate conference negotiations.

Budget watchdog groups, joined by select members of the conservative House Republican Study Committee and the centrist GOP Tuesday Group, say they are committed to fighting the creation of the mandatory program, which would benefit a handful of states that play host to off-shore oil and natural gas drilling.

“I’m certainly willing to do whatever we can to slow this dog down,” said Rep. Jeff Flake (R-Ariz.), a vocal member of the RSC.

Another Republican House Member, who asked for anonymity for fear of retaliation from GOP leaders, agreed that if and when a House-Senate conference convenes on the energy bill, House GOP centrists and conservatives would band together to stop the plan from being included in any bill that makes it to the president’s desk.

“Our majority should be about limiting entitlement programs and never creating a new one. And this runs against that sentiment,” the Member said.

The proposed creation of a new spending program that would be funded automatically comes at a time when many GOP conservatives and some centrists in Congress have been battling for deeper cuts to other entitlement spending programs, such as Medicaid, Medicare, Social Security and food stamps.

And it follows an unsuccessful attempt earlier this year by members of both the RSC and the Tuesday Group to win the ability, through a procedural point of order, to strike down new entitlement spending and other potential budget busters in authorizing bills. Ultimately, they did win the right to object to those items in appropriations bills, but such legislation makes up only about one-third of the entire $2.6 trillion federal budget.

“To outright put money in a new and additional federal fund when Congress is trying to reduce spending and eliminate other spending programs is something that should be actively protested by conservative Members,” said Alison Fraser, director of economic policy studies at the conservative Heritage Foundation. “To do this under mandatory spending is just added insult.”

Flake agreed. “It’s tough to make the case that we’re very coherent when it comes to fiscal discipline,” said Flake, who voted against the House energy bill because he believes it provides “corporate welfare” to energy companies.

Flake said he along with other centrists and conservatives would likely circulate letters to other RSC and Tuesday Group members about the provision, as well as write to House-Senate conferees and possibly even sponsor a motion on the House floor to instruct conferees. Motions to instruct are nonbinding but go a long way toward establishing the House’s support or opposition to provisions in some bills.

In addition, some environmental groups have also complained that the promise of automatic funding for coastal restoration could serve as an incentive to states that currently bar offshore drilling, such as Florida and California, to end their moratoria.

Ironically, it is freshman Rep. Bobby Jindal (R-La.), a self-described budget hawk and member of the RSC, who authored the provision, which is expected to benefit his home state most of all.

The provision, known as the Secure Energy Reinvestment Fund would siphon off about 25 percent of the billions of dollars in royalties that offshore energy companies currently pay to the federal treasury and place it in a fund for states whose coastlines are dotted with off-shore drilling rigs. The money would be intended for use to restore eroded shorelines and repair and replace infrastructure, such as roads and pipelines that have been damaged by coastal erosion.

Related plans have been pushed in past Congresses by nearly the entire Louisiana Congressional delegation, but Jindal, as a member of the House Resources Committee, took the lead this year. A similar provision, authored by Sen. Mary Landrieu (D-La.), is likely to be included in the Senate’s version of the energy bill, which is being marked up by the Energy and Natural Resources Committee this week.

Jindal defended the program, which would provide his home state with more than $350 million a year for the next 10 years and more than $1 billion every year thereafter, according to a Jindal press release.

“I certainly agree with the need to control government spending, but I look at this as a part of our national energy policy,” Jindal said in a recent interview.

Five states — Louisiana, Texas, Alaska, Alabama and Mississippi — would be the primary beneficiaries of the fund, but if other states open their border waters to drilling, they would also become eligible. As the producer of as much as 80 percent of the nation’s offshore drilling revenues, Louisiana would be the biggest winner. Funds for the first 10 years would be subject to appropriations, but in 2016 the program would be put on automatic pilot.

In its April 20 review of the House energy bill, a House Budget Committee report noted that “the bill creates a new entitlement program in 2016.”

Taxpayers for Common Sense, a budget watchdog group, named the SERF program one of the “Top 25 Worst Provisions in the Energy Bill” this year.

“To create a long-term entitlement from a short-term energy bill is bad policy,” said Keith Ashdown, the group’s vice president of policy and communications.

Ashdown added that the push for SERF is part of plan by Louisiana in particular to get around federal laws requiring states to match federal funding for coastal restoration. Because the money from SERF would not be subject to appropriations, Louisiana lawmakers believe they could use it as federal matching funds, even though federal money generally cannot be used as matching funds for more federal money.

“This is to guarantee that Louisiana wins over every other state,” Ashdown said.

Jindal said the program is needed to help Louisiana and other states repair their coastlines in order to continue “encouraging the production that goes into the federal treasury. If the coast continues to erode, we’ll lose more of our ability to drill in the gulf off of Louisiana.”

Just as tax cuts sometimes bring in more revenue to the federal government, taking money out of Outer Continental Shelf royalties would “actually generate profit for the federal government,” Jindal said.

Jindal said he would have championed the provision with or without the budget point of order against new entitlements or other budget busters that RSC and Tuesday Group members had requested.

“I’m as conservative as anybody,” Jindal said. “I would have been able to defend this on the merits … if those rules had been in place.”

But Jindal need not have worried about a budget point of order being brought against his provision. He, or someone on his staff, was smart enough to delay the start of the mandatory program until 2016, a year for which no budget has been written which makes it largely immune from budget points of order.

Jindal acknowledged that there may be other ways to solve his state’s problem. Already, states with off-shore drilling get 27 percent of the royalties from drilling within their water boundaries, while land-locked states get nearly 50 percent of the royalties from mining on public lands, a Jindal spokesman said. Currently, Louisiana only gets money for drilling within 3 miles of its boundaries. But bills to extend the water boundaries of Louisiana, Alabama, Mississippi, California, Texas and Florida would allow those states to receive more money from royalties. It is unclear, however, whether that legislation would bring in more or less money for Louisiana than the SERF provision.

Louisiana already gets $30 million to $40 million a year for coastline conservation, under a law pushed by former Sen. John Breaux (D-La.).

But Louisiana state lawmakers say they deserve to get more, given Congress’ previous willingness to help restore fragile ecosystems like the Everglades swamp in Florida and the Chesapeake Bay in Maryland and Virginia.

“There is the fundamental question of fairness,” said Adam Sharp, spokesman for Landrieu. “These coastal states are carrying the burden to support our national security by carrying the burden” of the environmental damage caused by offshore drilling.

CORRECTION: The May 18 article “Critics Target Drilling Provision” misstated the amount of money Louisiana would receive in the first 10 years of an entitlement program included in the House-passed energy policy bill. Louisiana would receive $350 million over 10 years, or approximately $35 million each year, until 2016 when the state would receive more than $1 billion per year.