Virginia’s offshore potential: whose coffers will it fill?
- April 5, 2010
Virginia politicians’ promises of thousands of jobs and millions of dollars make offshore drilling sound like a cash cow for the state, but Virginia certainly hasn’t struck gold yet.
President Barack Obama announced last week that exploration of offshore drilling for natural gas and oil will be allowed on the Outer Continental Shelf of the Atlantic Coast — starting with Virginia. After studies are completed, the federal government could lease the area to companies for development by late 2011 or 2012.
But many questions remain. One of the key questions is whether Virginia will get a share of the royalties.
Virginia Gov. Bob McDonnell and the General Assembly already have announced what the state would do with the money: feed its cash-starved transportation system (with 80 percent of the royalties) and fund new renewable energy projects.
But Congress must first agree to give up its share of the pie.
Under current law, all royalties would go to the federal government. A change would require a new law by Congress. Rep. Bob Goodlatte, R-6th, has introduced legislation proposing a 50-50 split between the federal and state governments. Sens. Mark Warner and Jim Webb have said they also are working on a bill proposing revenue sharing.
But there’s a possibility that revenue-sharing agreements with Atlantic states might be wrapped up in Obama’s broader and politically contentious energy and climate-change bill. In addition, politicians from the rest of the country could be reluctant to give up federal government revenues when its facing a historic deficit.
Currently, the four states on the Gulf of Mexico receive 37.5 percent of oil royalties from development off of their coast. It took years of lobbying for the revenue share, which was granted primarily as a way to clean up damage after Hurricane Katrina.
Money isn’t the only issue. U.S. Secretary of the Interior Ken Salazar was cautious about the coast’s potential during a Richmond visit last week. He points out that studies of the continental shelf’s natural gas and oil prospects are decades old.
There’s also a question of the environmental safety. Environmentalists have opposed Obama’s decision, saying any economic benefit would be wiped out by a potential oil spill.
There are also significant concerns from the U.S. Navy and NASA about how oil rigs would affect their work in the Hampton Roads region. Political leaders have promised to discuss concerns with them.
McDonnell has promised that natural gas exploration would produce 2,600 jobs and $271 million in local and state tax revenue. He says oil drilling would create more.
That’s a lot of jobs and money for a state that was forced to cut billions from its state budget and six-year transportation fund.
It’s just not time to celebrate yet.