Energy & Environment

Troubled Waters

Offshore oil drilling sounds like a bonanza to some state interests-- and a nightmare to others.
by | November 2006

Jonathan Walters

A Senior Editor of Governing, Jonathan has been covering state and local public policy and administration for more than 30 years.

To drill or not to drill? Federal, state and local officials are battling it out over that question right now, as the whole issue of offshore oil exploration has made a strong comeback in Congress--and in at least one state legislature. If certain issues make for strange bedfellows, this one has interests that usually line up as allies kicking the sheets off each other. For now at least, the cross- pressures seem too intense for legislation at any level to become law.

For the past 25 years, there has been a moratorium on drilling within 100 miles of U.S. coastlines (with certain exceptions in the Gulf of Mexico and Alaska). The moratorium was a response to environmental concerns related both to potential spills and to the environmental impact of the drilling itself. For states whose economies are particularly dependent on fishing and tourism, such as California and the Carolinas, the ban is a matter of faith.

But inspired by rising gas and oil prices, increased volatility in the Middle East, less-than-friendly relations with such suppliers as Venezuela and a demand for fuel that shows no sign of abating, the U.S. House voted in June to end the moratorium, marking a shift in congressional sentiment that was due in no small part to some key concessions to state interests.

Under the House bill, states could decide individually whether or not to continue the moratorium, and also how far into the water it might extend. The bill is generous to states when it comes to leases and royalties, shifting to state treasuries considerable revenue that under current policy goes to the federal government.

But as with most things congressional, the Senate had a different idea. In August, it passed its own version of the moratorium repeal, a more limited version that would open to drilling millions of acres in the Gulf of Mexico but also create a "zone of protection" ranging from 125 to 300 miles off the Florida coast.

While all this was being discussed, the General Assembly in Virginia voted to support lifting the moratorium off that state's coast. The bill was vetoed by Democratic Governor Tim Kaine, but it sparked disagreement between the Virginia and North Carolina congressional delegations. Virginia's two U.S. senators, Republicans John Warner and George Allen, see a potential offshore energy gold mine. North Carolina Republican Senator Elizabeth Dole says her state can't afford to lift the moratorium because drilling presents too much of a risk to Outer Banks fishing and tourism.

It's an issue that divides not only neighboring states but also regions within the states. Local governments along the North Carolina coast generally agree with Dole and oppose lifting the ban, but communities in the interior of the state seem more interested in the economic potential of offshore oil. In Florida, regional pressures have made it difficult for GOP Governor Jeb Bush to take any position at all. Bush, caught between filial loyalties and the promise of oil royalties, on the one hand, and his state's huge dependence on swimmable coastline, on the other, seems genuinely uncertain about which way to go.

The only thing states and their representatives agree on at this point is that if drilling does occur, state governments ought to be allowed to cash in on leases and royalties. The National Conference of State Legislatures has approved a resolution to that effect. But even the most solid consensus on distribution of the proceeds does nothing to resolve the environmental issues that underlie the dispute.

And so, as Congress adjourned last month for the campaign season, the whole moratorium issue was in limbo, with support and opposition breaking along completely unpredictable lines--state versus state, local versus local, local versus state, states versus feds, feds versus local, Republicans versus Republicans, Democrats versus Democrats and Democrats versus Republicans. It's possible that some movement toward a deal might emerge in a post-election lame-duck session, if there is one. But barring that, it's a certainty that the offshore drilling issue will be back in the next Congress, a source of frustration for nearly everyone involved but a great case study in the wonderful messiness of federalism.


More from Energy & Environment