“The existing cap arbitrarily siphons money away from conservation in oil-producing states. This cap isn’t smart, sustainable or fair. The commonsense solution here is eliminating the cap on oil revenues for Gulf states.”

WASHINGTON—Sen. John Kennedy (R-La.), has introduced the Offshore Cap Parity Act to eliminate the arbitrary, misguided cap on the amount of revenue Gulf states can receive from oil and gas drilling off their coasts.

The states direct much of this revenue to coastal conservation and restoration efforts. Currently, the Gulf of Mexico Energy Security Act (GOMESA) limits the dollar amount of revenue that Louisiana, Texas, Mississippi and Alabama can collectively receive to $375 million per year, though total revenues for the Gulf topped $5 billion in 2019.

“Louisianians have tirelessly supported America’s path to energy independence, and we depend on GOMESA funds to conserve and restore our storm-battered coastline.

“The existing cap arbitrarily siphons money away from conservation in oil-producing states. This cap isn’t smart, sustainable or fair. The commonsense solution here is eliminating the cap on oil revenues for Gulf states,” said Kennedy.

Text of the Offshore Cap Parity Act is available here.

Background:

Under GOMESA, federal revenues from the offshore energy production of Gulf states are divided into three portions. The federal government returns 37.5 percent of this revenue to Louisiana, Texas, Mississippi and Alabama. The Land and Water Conservation Fund receives 12.5 percent of offshore revenue and directs most of that money to landlocked states. The final 50 percent of Gulf oil and gas revenue goes to the U.S. Treasury.

The GOMESA cap limits the dollar value of Gulf states’ 37.5 percent revenue share to $375 million, meaning the states receive no benefit when the energy sector peaks and revenues surpass the cap. Conversely, the Mineral Leasing Act ensures that states with onshore drilling operations receive 50 percent of their revenues, while there is no cap on how much money that share includes.

States with onshore energy production typically aren’t required to spend that money on environmental priorities. Louisiana constitutionally dedicates revenues from offshore energy production to pay for its coastal conservation and restoration projects.