Those Elusive Oil Royalties
It’s far too early to get pumped up about the dubious rewards of offshore drilling.
Before even taking the oath of office, governor-elect Bob McDonnell is asking — indeed, imploring — U.S. Secretary of the Interior Ken Salazar to hurry up a lease sale that would permit exploration and drilling for oil and gas off Virginia’s coast.
The incoming governor’s sense of urgency is easily understood. Candidate McDonnell told voters that royalties on whatever fossil fuels might be recovered offshore would help replenish the state’s dwindling transportation fund before it runs dry.
No need, in other words, to raise any kind of tax or rescind any tax break for any favored group of Virginians. Just drill, baby, drill, and Virginia can build the transportation infrastructure it has been neglecting. Beyond that, offshore drilling would create probably thousands of jobs to develop the on-shore infrastructure it needs.
Inarguably, Virginians need the work.
McDonnell’s vision of reaping a quick, painless bounty from untapped riches of natural gas and oil has always been a bit of a con, though. No doubt, as promised, offshore drilling will be a priority of his administration — but one over which it has no control beyond a Republican governor’s powers of persuasion over a Democratic administration in Washington.
Virginia lawmakers got the word from the chief of the U.S. Minerals Management Service this past summer that a scheduled 2011 lease sale is fading into the future. Scientists say production of any gas or oil would be five or 10 years out from that point.
Further, if drilling ever begins, Virginia has no rights to royalty payments, as the law now stands. While the Gulf states get a hefty portion of the royalties companies pay the government for the oil they extract there, Congress hasn’t extended that deal to states along the Atlantic seabord.
Of course, that can change. It should change, if drilling ever occurs off of Virginia.
Figuring the royalties into the commonwealth’s transportation planning next year, or the year after, or the year after that, though, would be premature.
So what’s next? Interstate tolls? Now how does that work, again?
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