MICHIGAN BY THE SEA
Jul 5, 1999, Vol. 4, No. 40 • By ROBERT H. NELSON
IN THE 1980s AND '90s, large federal deficits put a damper on new spending. But now that an era of surpluses is here, some members of Congress are acting like alcoholics on a binge.
The new spirit of "bipartisanship" in the Congress is turning out to be grounded in the much older spirit of greed. One of the most unusual alliances across party lines unites two House members who seldom agreed before, the former Democratic chairman of the Commerce Committee, John Dingell of Michigan, and the chairman of the Resources Committee, Republican Don Young of Alaska. In February, Dingell and Young introduced a bill to commit $ 1.2 billion per year to compensate "coastal states" for the effects of oil and gas development on the outer continental shelf, which is owned by the federal government. In the Senate, similar legislation is co-sponsored by Democrat Mary Landrieu of Louisiana and Republican Frank Murkowski of Alaska, chairman of the Senate Energy and Natural Resources Committee.
In the House, in order to win Dingell's support, Young had to define Michigan and other Great Lakes states as "coastal." Not only is Michigan far from the outer continental shelf, but no federal oil or gas lease has ever been offered for sale on the Great Lakes. Nevertheless, the Resources Committee projects that the bill would give Michigan $ 22 million per year in "coastal" impact aid, Illinois $ 15 million, Ohio $ 7.5 million, and other Great Lakes states their own pieces of the pie. To pay for all this, the legislation would tap federal oil and gas royalties, now about $ 4 billion per year (and virtually the only federal program that has made real money for taxpayers).
Young calls this Conservation and Reinvestment Act -- which also provides an additional $ 900 million per year for federal and state land acquisition -- his top legislative priority this year.
As chairman, Young has certain prerogatives. He has seen to it that his state would be among the biggest winners under the bill, gaining $ 111 million per year. Alaska does have an extremely long coastline, but unfortunately, leasing and exploration have so far revealed almost no exploitable offshore oil and gas. The huge Prudhoe Bay oil field is inland. Resistance from environmentalists has severely restricted past and prospective oil and gas leasing off Alaska. Simply put, the bill would give Alaska hundreds of millions of dollars over the next few years to ameliorate coastal impacts that do not exist.
California is so big that it has to be included in any congressional deal making. Although no outer-continental-shelf oil and gas lease sale has been held there since the mid 1980s, the state would receive $ 85 million a year. Thus would the ecology-conscious land of gas-guzzling sport-utility vehicles be rewarded for its intransigence on offshore drilling.
The only real action these days in new federal oil and gas development is in the Gulf of Mexico, where computer-exploration methods and deep-drilling technologies have yielded major discoveries and a spurt of new offshore production. Under the bill, Louisiana would receive a real bounty, $ 348 million per year. Not surprisingly, Louisiana Republicans Billy Tauzin and Richard Baker have joined with Louisiana Democrat Chris John as co-sponsors. Giving away the Treasury has always brought people together across party lines.
Many students of the outer-continental-shelf leasing program have argued that federal revenues from offshore oil and gas should be shared with adjacent states. The idea is that this would increase state political support for federal oil and gas exploration and development. What is difficult to justify, however, is the sharing of revenues where there have been neither leases nor production nor negative impacts on coastal communities.
The truth of the matter is that the Young-Dingell bill is about distributing free money. Seeking to head off potential opposition from environmentalists, Young and Dingell in a letter to House colleagues bluntly declare that the legislation is intended to provide "no incentives for new offshore drilling."
Most federal outer-continental-shelf oil and gas leases are sold to oil companies and then returned to the government without any exploration ever taking place. Despite considerable federal leasing in the Atlantic in the '70s and '80s, for example, little drilling took place, and today there are no producing wells off the Atlantic states. Yet, the Young-Dingell bill would distribute almost $ 200 million per year to New York, New Jersey, Virginia, and other East Coast states to mitigate nonexistent oil and gas "impacts." The Young-Dingell bill would allocate one quarter of the coastal funds on the basis simply of "shoreline miles" and another quarter on the basis of "coastal population," irrespective of any past or future federal oil and gas leasing activity.
Young has contrived an outer-continental-shelf impact-aid formula based on a series of heroic fictions. The result is not really coastal-impact aid at all but a new form of federal revenue sharing based on a very peculiar distribution formula, one designed simply to maximize support in Congress.
In the new era of budget surpluses, the only way to remove the apparently irresistible temptation to squander federal resources is to send them back to the taxpayers. Otherwise, expect to see lots more exercises of congressional imagination like declaring Lake Michigan part of the outer continental shelf.
Robert H. Nelson is a professor at the School of Public Affairs at the University of Maryland and senior fellow of the Competitive Enterprise Institute.