A new revenue-sharing bill – the FAIR Act – would enable coastal states to receive a share of offshore energy revenue and put onshore renewable energy on the same scale as onshore fossil energy to ensure equitable revenue-sharing to encourage clean energy efforts.

On March 20, Senators Mary Landrieu (D-La.) and Lisa Murkowski (R-Alaska) introduced the Fixing America’s Inequity with Revenues (FAIR) Act to provide states with a share of revenue from energy developed on federal land and waters. Under the FAIR Act, coastal states would be entitled to 27.5% of revenue from offshore energy developments, including fossil, wind, and wave energy, and an additional 10% if they establish funds to support clean energy and energy conservation programs. The federal government would receive the remaining 62.55% to address budget deficits.

Under current law, onshore energy-producing states get 50% of revenue from fossil energy developed on federal lands inside their borders, while coastal states receive less than 5% of federal offshore energy revenue. The bill’s main intention is to enable the major Gulf Coast energy-producing states – Texas, Louisiana, Mississippi and Alabama – to receive up to 37.5% of offshore energy revenue. Further, the bill would expand the existing onshore revenue-sharing program to renewable energy, putting fossil and renewable energy on the same scale. Therefore, interior states would be entitled to 50% of revenue from renewable energy production on federal lands within their borders.

The bill also calls for speedy implementation of the 2006 Gulf of Mexico Energy Security (GOMES) Act, enabling coastal states to begin receiving offshore energy revenues in 2013, instead of the previous 2017 target date. Under the GOMES Act, offshore drilling revenue sharing is subject to a mandatory annual cap of $500 million for the four coastal states. The FAIR Act would gradually phase out the cap to accelerate payment to coastal states.

Revenue sharing would provide significant benefits to states as the U.S. is under an energy renaissance that is attracting increased investments in oil and natural gas development. Further, it is considered crucial to address infrastructural needs and emergency response capabilities of coastal communities that are most impacted by offshore development. While the move would improve income for coastal states, sending more revenue to states would deplete federal revenues.

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