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Hopes rise for deal that would direct billions in federal oil dollars to Alaska

Alex DeMarban
A deal in Congress could mean billions of federal oil dollars diverted to Alaska. Aaron Jansen illustration

Alaska senators say the chances of landing a massive cut of the Arctic Ocean's drilling riches for the 49th state are rising, now that a key opponent has left the U.S. Senate.

The new opening comes in the wake of the recent retirement by Sen. Jeff Bingaman, D-N.M., who as chair of the Senate's Energy and Natural Resources Committee blocked such revenue-sharing measures for fear of worsening the nation's debt crisis.

With Bingaman gone, Republican Lisa Murkowski and Democrat Mark Begich have introduced separate legislation to give Alaska up to 37.5 percent of the bonus bids and royalties from oil and gas development in U.S. waters of the Arctic Ocean.

If Royal Dutch Shell and other explorers find the elephant fields they're hunting for -- and experts believe the region contains around 26 billion barrels of oil -- the measure could be worth hundreds of millions of dollars annually for Alaska.

Make that billions, said Begich.

And that could prove critical for a state whose economic prospects are dimming as its lifeblood wanes -- the oil flow through the trans-Alaska pipeline that has declined for more than two decades.

Will cost federal government

If Congress fails to share federal revenues from offshore oil development with Alaska, the state should count on limited income from such offshore projects because drilling would happen primarily in federal waters, far from the state's jurisdiction.

Critics of revenue sharing say it will cost the federal government hundreds of billions of dollars in the coming decades, and that federal offshore waters are a national resource whose benefit shouldn't be limited to certain states. Fortunately for Alaska, Sen. Ron Wyden, D-Oregon, has slid into Bingaman's old seat at the head of the Energy Committee, bringing a more open-minded approach to the idea, the senators said.

"Wyden is taking a much more holistic view of revenue sharing," said Murkowski, the committee's ranking Republican.

Two Alaska senators, two approaches

The two Alaska senators are taking different approaches on their bills. Begich is calling for what he says is the novel idea of sharing 10 percent of Alaska's portion with tribal governments. Native corporations and local governments would split another 50 percent. The state would collect the remaining 40 percent.

Begich's proposal, introduced last week, addresses only Alaska, not other coastal states. It includes a requirement that any oil discovered move across Alaska through a pipeline, rather than by tankers that collect the oil at sea. The lack of such a requirement has been a sticking point for some Alaska Natives, such as former North Slope Borough Mayor Edward Itta, who helped shape Arctic exploration in its current form by demanding such concessions as a halt to drilling during the bowhead whale migration.

Shell has said it plans to rely on pipelines instead of at-sea tankers, and has already begun studying routes. But requiring it would guarantee hundreds of miles of pipeline would be constructed across Alaska, creating jobs and property tax income for local governments and the state.

Murkowski's bill, expected to be introduced soon, will take a broader approach that includes other coastal states in addition to Alaska. It will also add revenue sharing for other projects beyond oil and gas, such as renewable energy projects including offshore wind, wave and tidal power.

"We recognized if you take a one-state focus you won't gather the support you need. You gotta have 60 in the senate," Murkowski said. Murkowski's proposal could expand even further. She's also been talking with Wyden about applying federal revenue sharing to renewable energy projects on land as well, she said. Such discussions weren't possible when Bingaman was committee chair, "so to talk about what we might be able to build is pretty encouraging," Murkowski said.

Winning states: Louisiana, Texas, Alabama, Mississippi

Sen. Mary Landrieu, D-La., is another ally working on the measure, Murkowski's office said. Her state, along with Texas, Alabama and Mississippi, scored a 37.5 percent cut of revenue from federal oil and gas offshore projects in 2006, under the Gulf of Mexico Energy Security Act.

At the time, Sen. Ted Stevens' powerful eight-year reign atop the Senate Appropriations Committee had just ended, and Alaska was suffering political backlash for all the billions he'd steered to the Far North. With Arctic Ocean exploration still years away, Alaska was largely left out of revenue sharing.

That cost the state close to a billion dollars from bonus bids sold by the federal government in 2008, Begich said. That year, in an offshore lease sale that shocked industry observers, the Interior Department sold leases totaling $2.7 billion to Shell and others.

Money's already spent?

Murkowski's proposal, specifically, would direct 27.5 percent of federal revenues to offshore energy producing states and borough. The states could receive another 10 percent if they establish a fund supporting such things as energy research and development, renewable energy and conservation.

Even with strong allies on her side, Murkowski acknowledged a revenue-sharing deal for Alaska won't be easy, what with the nation's $16 trillion debt continuing to rise.

"Let's be honest, were at a pretty difficult place financially as a country," she said. "So when you suggest that you have an opportunity to gain revenues coming into the federal treasury, you'll have resistance from some who already spent that money before it's even reached the treasury. So it's not a slam-dunk."

Why aren't Alaska's senators submitting one piece of legislation? Begich said he wanted to introduce his unique concepts early -- such as revenue sharing with tribes and the pipeline requirement -- to help influence the debate.

"We wanted to put a marker down on what's important," he said.

Contact Alex DeMarban at alex@alaskadispatch.com.