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Outer Continental Shelf: Debate Over Oil and Gas Leasing and Revenue Sharing

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Publication Date: October 2005

Publisher(s): Library of Congress. Congressional Research Service

Series: IB10149

Topic: Energy (Petroleum industry)
Energy (Natural gas industry)

Abstract:

Budget reconciliation provisions approved by the House Resources Committee October 26, 2005, would allow states to opt out of longstanding moratoria on oil and gas leasing on the outer continental shelf (OCS). States that agreed to allow such leasing would receive a larger share of royalty revenues.

The OCS moratoria, which prohibit leasing on most federal offshore lands, have been an important issue in the debate over energy security and the potential availability of additional domestic oil and gas resources. Congress has enacted the moratoria for each of fiscal years 1982-2006 in the annual Interior Appropriations bill. Proponents of the moratoria contend that offshore drilling would pose unacceptable environmental risks and threaten coastal tourism industries.

President George H.W. Bush, in 1990, responding to pressure from the states of Florida and California, and others concerned about protecting the ocean and coastal environments, issued a Presidential Directive ordering the Department of the Interior not to conduct offshore leasing or preleasing activity in places other than Texas, Louisiana, Alabama, and parts of Alaska -- areas covered by the annual legislative moratoria -- until 2000. In 1998 President Clinton extended the prohibition until 2012.

The Outer Continental Shelf Lands Act (OCSLA) of 1953, as amended, provides for oil and gas leasing of OCS lands in a manner that protects the environment and returns revenues to the federal government in the way of bonus bids, rents, and royalties. OCSLA requires the Secretary of the Interior to submit five-year leasing programs that specify the time, location, and size of the leases to be offered. The outer continental shelf is defined as submerged lands, subsoil, and seabed between the seaward extent of states' jurisdiction and the seaward extent of federal jurisdiction.

States with offshore energy development have been seeking to receive a direct share of the federal revenues generated by those activities. Currently, the affected states receive revenue indirectly from offshore oil and gas leases in federal waters. This is in contrast to states with onshore leases on federal lands, which receive a direct share of the oil and gas leasing revenues. The state share of OCS revenues would be increased by a bill introduced by Senator Landrieu on September 22, 2005 (S. 1765).

The possibility of oil and gas production in offshore areas covered by the moratoria has sparked sharp debate in Congress. A proposal to require the Department of the Interior to conduct a comprehensive inventory of OCS oil and natural gas resources drew heated opposition, although it was ultimately included in the Energy Policy Act of 2005 (P.L. 109-58, Section 357). Opponents of the OCS inventory saw it as a first step toward lifting the OCS leasing moratoria. The House Resources budget reconciliation package would also repeal the inventory requirement.

Even if more of the OCS is opened to oil and gas leasing, there may be constraints to development, such as the availability of offshore drilling rigs and production platforms.