The state’s coastal restoration plan is funded mostly by oil spill settlements—not royalties from offshore drilling.
This story is the third in a series examining oil and gas industry efforts to undermine the transition away from fossil fuels in the Gulf of Mexico, published in partnership with WWNO. Read the first here and second here.
Louisiana politicians at the state and federal level are echoing a false oil and gas industry claim to support more offshore drilling in the Gulf of Mexico, saying that Louisiana will lose more land to the sea without offshore production royalties to pay for coastal restoration. However, the bulk of the state’s plan to build back storm-buffering wetlands and barrier islands—which have eroded in part due to oil and gas industry development—is funded by oil spill settlements. The plan was originally budgeted assuming the state would receive $176 million annually from royalties on offshore production by now, which is not the case. The state has gotten smaller payments due to less development in the Gulf than expected.
Louisiana’s congressional delegation haven’t petitioned for oil and gas companies to pay more—instead, they’ve asked for a larger share of the money collected by the federal government to go toward the Bayou State. That effort has not gained traction in Congress.
Combined, the list of flood protection and coastal restoration projects in the state’s Coastal Master Plan are expected to cost $91.7 billion when adjusted for future inflation, according to a report by the Tulane Institute on Water Resources Law and Policy. But the state has only secured about $21 billion. Most of that money—about $14.5 billion—went toward the system of floodwalls, floodgates, levees, barriers, and sector gates that serve to protect the greater New Orleans area from storm surge flooding.
Mark Davis, director of the Tulane Institute on Water Resources Law and Policy, said the Louisiana delegation has appeared more interested in letting the oil and gas industry off the hook than they have in finding revenue to pay to protect the coast.
“When you make it your business to not raise revenues it should not come as a surprise to anyone that you are short on funds,” he said.
As is, taxpayers aren’t getting a very good deal on oil production in federal waters. A 2019 U.S. Government Accountability Office report found that the agency charged with leasing federally owned water bottoms, the Bureau of Ocean Energy Management (BOEM), has allowed oil and gas companies to pay below market value for leases and, in some cases, waived royalties on initial volumes of production, missing out on about $18 billion in lost revenue through 2018.
“The American taxpayers aren’t receiving their fair share,” said Joanna Derman, a policy analyst for the Project On Government Oversight. “The oil and gas companies are exploiting the current laws, paying pennies to extract resources from public land.”
But taking a larger share of revenue on offshore development isn’t the solution, said Jenny Rowland-Shea, deputy director of public lands for the Center for American Progress. “Increasing offshore royalties could increase revenue towards Gulf states, but the bigger question is how sustainable that funding is long term given the trajectory that oil and gas drilling needs to head given the climate crisis,” she said.
Misinformation around offshore drilling
In mid-November, the federal government will auction off areas in the Gulf of Mexico to oil and gas developers for the first time under the Biden administration. It will be the largest in U.S. history based on the amount of seafloor offered: more than 80 million acres. The lease sale has the potential to increase greenhouse gas emissions by 723 million metric tons of CO2 over the lifetime of the leases, Rowland-Shea said. Last week, the Bureau of Land Management announced it will consider greenhouse gas emissions in its environmental assessments for federal leases to be sold in 2022.
President Joe Biden signed an executive order that paused the auctioning of new oil and gas leases for lands and sea bottoms owned by the federal government. The November 17 sale was scheduled after a federal judge ruled in favor of Louisiana Attorney General Jeff Landry and 12 other Republican attorneys general who sued to lift the moratorium. Attorneys general or governors of the states involved—plus Wyoming, which filed its own suit—received a combined $4.5 million in campaign funds from oil and gas interests, according to Center for American Progress.
The Republican Attorneys General Association (RAGA) praised the decision. Landry is the chairman for RAGA, which has come under fire for paying for a robocall that encouraged people to attend the rally that preceded the Jan. 6 attack on the U.S. Capitol.
The National Ocean Industries Association (NOIA), a nonprofit group that represents the offshore oil industry, said the lease sale is “welcome news for the American worker and our national security.” NOIA president Erik Milito stated in a press release that “offshore federal oil and gas leasing supports climate progress.” That claim is based on the assumption that producing oil and gas from the Gulf of Mexico has fewer emissions than onshore production, but does not account for emissions from burning the fuel.
Landry’s lawsuit claims that ending offshore drilling in the Gulf would lead to more coastal land loss because Louisiana would lose out on production royalties, which it uses to fund coastal restoration projects. While the state does receive a fraction of royalties, it only accounts for about 20% of the state’s projected funding for coastal restoration, according to Louisiana’s Coastal Protection and Restoration Authority. About 65% of the coastal restoration funding that the state expects to receive is from settlements from the 2010 Deepwater Horizon oil rig explosion, which killed 11 people and leaked about 134 million gallons of oil.
Nearly 700 miles of coastal wetland shoreline were polluted by the BP spill, according to the National Oceanic and Atmospheric Administration. Louisiana’s salt marshes were hit the hardest. The oil suffocated plants that held the soil intact, leading to further land loss. At least $588 million in taxpayer money has been spent to restore wetlands degraded by the oil and gas industry, according to a 2018 analysis of state records by The Times Picayune. Oil and gas companies have also abandoned thousands of miles of pipelines in the Gulf of Mexico, which become spill risks during hurricanes and are blocking access to sand deposits the state needs to rebuild its coast.
In August, the Department of Justice appealed the Louisiana judge’s decision to lift the drilling moratorium because of concerns over the climate and community impacts of drilling. Still, the Department of Interior is moving forward with the offshore lease auction. A group of environmental organizations sued the Department of Interior on the grounds that pumping more oil and gas out of the Gulf of Mexico will substantially increase greenhouse gas pollution, fueling climate change. The Gulf is estimated to hold about 48 billion barrels of untapped oil and 141 trillion cubic feet of gas.
“In the aftermath of Hurricane Ida, it is clear that we need to be doing everything we can to transition away from fossil fuels to reduce the impacts of climate change such as stronger, more frequent hurricanes,” said Cynthia Sarthou, executive director of Healthy Gulf, one of the groups suing. “Continuing to sell leases that allow business as usual is a bad decision.”
The decision to move forward with the lease sale was justified with yet another false industry claim—that not drilling on federal leases will lead to more greenhouse gas emissions, said Brettny Hardy, an attorney with Earthjustice who helped file the lawsuit. According to an environmental impact statement for the lease sale, BOEM assumes if drilling stopped in the Gulf it would increase somewhere else in the world and that oil would have added emissions from transportation.
But that logic doesn’t account for the fact that more drilling in the Gulf would increase the total global supply of oil, which would result in lower prices and higher consumption, Hardy said. The agency used the same logic in evaluating the environmental impact of a drilling project along the coast of Alaska in the Beaufort Sea and the 9th Circuit Court of Appeals found that math to be flawed.
Coastal communities bear the burden—and risks
State officials have claimed that offshore drilling is good for Louisiana workers, despite the fact that offshore jobs have drastically declined over the past decade. Southerly and WWNO found that more workers are also dying on the job. Oil spills put coastal economies at risk, too: More than 2,000 spills in state coastal waterways were reported in the wake of Hurricane Ida, according to the U.S. Coast Guard. When oil kills marsh it reduces the flood protection naturally provided by wetlands and endangers the livelihoods of commercial fishers.
If Louisiana can find the money to pay for all of the projects in its coastal master plan, it has the potential to build or hold onto about 800 square miles of land that might otherwise be lost to open water, said Bren Haase, the Executive Director of the Coastal Protection and Restoration Authority. The projects are estimated to reduce damages from storm surge flooding by $150 billion.
“That’s a big number,” Haase said. “That’s important for the communities along our coast to be sustainable and resilient.”
A 2006 federal law, the Gulf of Mexico Energy Security Act (GOMESA), mandated four Gulf states—Louisiana, Texas, Mississippi, and Alabama—and their local governments receive a portion of revenues generated from offshore production. Florida does not participate in the program because it does not allow drilling off its coast. Funds Louisiana receives from GOMESA go exclusively to coastal restoration and protection. The Bayou State has received about $280 million from GOMESA over the past 12 years, far short of what was expected.
The Louisiana delegation has pushed for a larger share of offshore royalties for more than 20 years. U.S. Rep. Garret Graves is among those who have advocated for a bigger cut. From 2006 to 2017, the amount of revenue sharing that Gulf states received was less than half of 1% of the revenue produced offshore, he said in 2018.
For areas in the Gulf of Mexico with water depths below 200 meters, the government receives 12.5% on production. For leases in deeper water, the royalty rate is 18.75%. Between 2006 and 2018, the federal government collected nearly $90 billion in offshore oil and gas revenue. Under GOMESA, Gulf states receive 37.5% of the royalties collected by the government. This year, U.S. Sen. Bill Cassidy introduced a bill that would increase the percentage of royalties shared with states to 50%.
As much as 30% to 59% of the state’s land loss was caused by oil and gas companies when they dug canals through the wetlands to transport equipment and lay pipelines, according to a Interior Department report. “We have lost 2,000 square miles of the coast of Louisiana, where the majority of these funds have come from,” Graves said while talking about a similar bill he introduced in 2017. “This area is not sustainable and some of this has to do with the historic energy production activities in this very area.”
But the political effort to get a higher percentage of offshore royalties hasn’t worked. “I think that the issue is that some believe if you increase royalties you’re going to further incentivize offshore energy production,” Graves said to WWNO and Southerly.
Revenue that isn’t directed toward Gulf states goes to the General Fund of the U.S. Treasury and federal conservation programs. While Louisiana lawmakers have lobbied for a larger share of offshore royalties for their state, environmentalists have lobbied for a bigger piece of the pie to go toward conservation programs that are dispersed nationwide. Graves said that “bothered” him because the greatest conservation need is arguably in coastal Louisiana.
The debate over how to fund coastal restoration
The state has delayed coastal projects because offshore royalty payments fell short. Still, Cassidy and Louisiana Gov. John Bel Edwards, a Democrat, continue to claim offshore drilling is essential to the state’s climate plan. Edwards wrote in a letter to Biden that oil and gas production helps “improve our structural resilience to catastrophic weather events, combat coastal land loss, and reduce our carbon footprint.” Before heading to the United Nations climate change conference this week, Edwards repeated misleading claims that drilling in the Gulf produces fewer carbon emissions to the The Times-Picayune | New Orleans Advocate.
Graves still insists that offshore revenue is necessary for the coastal plan. “The concern I have is that some of the actions of the Biden administration are really trying to put the nail in the coffin of the industry, which cuts off the revenue stream which has been one of the more important ones we’ve had for decades now,” he said.
Parish lawsuits against oil and gas companies for destroying wetlands and putting communities further at risk to climate change could help fund coastal restoration. Louisiana’s attorney general Landry, signed on to a $100 million settlement in March with Freeport-McMoran, the first company to reach a settlement. More than 200 companies have been implicated.
But Landry has long held that the lawsuits against oil and gas companies are likely to be unsuccessful and could push jobs out of state. Graves said he also doesn’t think litigation against oil and gas companies is the right avenue for finding funding for coastal restoration. “My preference is to find ways to be less adversarial,” he said.
But as the system is, the bulk of funds from the energy industry have come from oil spill settlements. “When your revenues depend on catastrophe is it really okay?” Davis asked. “Does a murder victim’s family owe the killer thanks for the life insurance proceeds they get? Not in my family.”
Sara Sneath is an award-winning environmental reporter based in New Orleans. Email her tips at email@example.com and follow her on Twitter @sarasneath. The series is supported by a grant from the Fund for Investigative Journalism.