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The original documents are located in Box 27, folder "Outer Continental Shelf Oil Leasing
- Publications (1)" of the John Marsh Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald R. Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Offshore
Revenue
Sharing
OFFSHORE REVENUE SHARING:
An
Analysis of Offshore Operations
on Coastal States
Prepared for
THE GOVERNOR'S OFFSHORE REVENUE SHARING
COMMITTEE
Prepared by
Gulf South Research Institute
Baton Rouge, Louisiana
(GSRI Project No. XS-614)
CONTENTS
List of Tables
iii
List of Illustrations
V
Introduction
1
Summary
3
The Outer Continental Shelf and Its Petroleum Potential
6
Definition of the Outer Continental Shelf
6
Delineation of the U.S. Outer Continental Shelf
8
Evaluation of the Mineral Potential of the
U.S. Outer Continental Shelf
11
The National Energy Crisis
17
Impact of Outer Continental Shelf Activities on
U.S. Coastal Regions
25
Introduction
25
Ecological Impact
25
Economic Impact
27
Economic Impact in Louisiana
29
Production
30
Employment
38
Taxes Foregone
42
Cost of Governmental Services
45
Implications for Other Coastal States
52
Mineral Leasing on Federal and Offshore Areas
58
Onshore Lands
58
Offshore Water Bottoms
58
Legal Status
58
Leasing Practices
61
Appendix A
NUMBER OF PERMITS GRANTED FOR GEOLOGICAL AND/OR
GEOPHYSICAL EXPLORATION
Appendix B
EMPLOYMENT AND GOVERNMENTAL EXPENDITURES
ASSOCIATED WITH OCS PETROLEUM PRODUCTION
ii
LIST OF TABLES
Table
I
U.S. OFFSHORE AREA BEYOND STATE BOUNDARIES
10
II
U.S. OIL-IN-PLACE RESOURCES, BY REGION (1971)
13
III
U.S. RECOVERABLE GAS SUPPLY, BY REGION (1971)
14
IV
PROJECTIONS OF U.S. ENERGY DEMAND BY MAJOR
CONSUMING SECTOR
23
V
LOUISIANA FISH CATCH COMPARED WITH THAT OF OTHER
GULF STATES AND THE UNITED STATES
26
VI
NUMBER OF PRODUCING OIL AND GAS WELLS IN
LOUISIANA (1950-1970)
30
VII
ANNUAL VOLUME OF PRODUCTION FROM OIL AND GAS WELLS
IN LOUISIANA (1950-1970)
31
VIII
STATE OFFSHORE AND FEDERAL OCS PRODUCTION OF OIL
AND GAS (AS PERCENT OF THE LOUISIANA TOTAL)
34
IX
TOTAL PRODUCTION OF GAS AND OIL AND CONDENSATE
IN LOUISIANA (STATE OFFSHORE AND FEDERAL OUTER
CONTINENTAL SHELF)
35
X
OCS PETROLEUM PRODUCTION (1971)
37
XI
VALUE OF PRODUCTION OF PETROLEUM FROM THE OUTER
CONTINENTAL SHELF BEYOND THE JURISDICTION OF LOUISIANA
AND CORRESPONDING ROYALTY PAYMENTS BY YEAR
37
XII
PERCENTAGE DISTRIBUTION OF LOUISIANA EMPLOYMENT,
BY PARISH (1971)
39
XIII
SELECTED TAXES COLLECTED FROM OFFSHORE AND FOREGONE
FROM OUTER CONTINENTAL SHELF (1965-1972)
44
XIV
COST OF GOVERNMENTAL SERVICES ARISING AS A
RESULT OF EMPLOYMENT ASSOCIATED WITH OCS ACTIVITY
46
XV
PROJECTED REGIONAL NON-ASSOCIATED GAS RESERVES
ADDED DURING THE PERIOD 1971-1985
53
XVI
PROJECTED REGIONAL CRUDE OIL RESERVE ADDITIONS
DURING THE PERIOD 1971-1985
54
XVII
ESTIMATED REGIONAL EMPLOYMENT ASSOCIATED WITH
THE DEVELOPMENT OF OFFSHORE OIL AND GAS
55
XVIII
IMPACT ON DEMAND FOR GOVERNMENTAL SERVICES
ASSOCIATED WITH DEVELOPMENT OF REGIONAL
OFFSHORE PETROLEUM
56
iii
Table
XIX
RECEIPTS UNDER THE MINERAL LEASING ACT,
FEBRUARY 25, 1920 - JUNE 30, 1972
59
XX
SUMMARY OF OUTER CONTINENTAL SHELF LEASE SALES,
BY STATE, BY PRODUCT (1954-1972)
62
XXI
SUMMARY OF OUTER CONTINENTAL SHELF ROYALTIES
FOR ALL PRODUCTS, BY ADJACENT STATES (1954-1972)
64
iv
LIST OF ILLUSTRATIONS
Fig. 1
DIAGRAMMATIC PROFILE OF CONTINENTAL MARGIN
7
Fig. 2
OUTER CONTINENTAL SHELF BOUNDARIES TO THE
200-METER DEPTH FOR THE CONTINENTIAL UNITED STATES,
EXCEPT ALASKA
9
Fig. 3
PROFILES OF THE U.S. CONTINENTAL MARGINS
9
Fig. 4
REMAINING DISCOVERABLE PETROLEUM RESOURCES,
OFFSHORE CONTINENTAL UNITED STATES, EXCLUDING ALASKA
15
Fig. 5
U.S. ENERGY CONSUMPTION, BY SOURCE (1971-2000)
20
Fig. 6
EXPLORATORY DRILLING AND RESULTS IN THE UNITED STATES
(1946-1972)
22
Fig. 7
NUMBER AND GENERAL LOCATION OF PRODUCING OIL WELLS
IN LOUISIANA, 1970
32
Fig. 8
NUMBER AND GENERAL LOCATION OF PRODUCING GAS WELLS
IN LOUISIANA, 1970
33
Fig. 9
NUMBER OF BARRELS OF OIL AND CONDENSATE
PRODUCED IN LOUISIANA (1954-1971)
36
Fig. 10 PERCENTAGE MINING EMPLOYMENT OF TOTAL PARISH EMPLOYMENT. 40
Fig. 11 PERCENTAGE MINING EMPLOYMENT OF PARISH OF TOTAL STATE
MINING EMPLOYMENT
41
Fig. 12
LOUISIANA AIRPORTS AND HELIPORTS USED BY OFFSHORE
OPERATORS
49
Fig. 13
LOUISIANA HIGHWAYS USED BY OFFSHORE OPERATORS
50
Fig. 14 LOUISIANA PORTS AND WATERWAYS USED BY OFFSHORE
OPERATORS
51
V
INTRODUCTION
INTRODUCTION
Since the late 1940s, the development of petroleum resources
in the U.S. outer continental shelf (OCS) region has increased,
until today, this area accounts for more than 12 percent of
total U.S. petroleum production. The major portion of this development
and production has been offshore from Louisiana, although it
is believed that important supplies of petroleum are located
beneath the OCS regions adjacent to other states, as well. These
resources willbe developed as the demand for petroleum continues
to increase and as the need to develop new supplies in order to
maintain a domestic base for petroleum consumption becomes even more
pressing.
The development of petroleum resources from OCS regions produces
both economic benefits and costs for adjacent coastal states. One
of the major benefits is increased employment and associated incomes
for people in the region, while the primary cost of such development
stems from the increased demand for governmental facilities and
services. The development of these petroleum resources is of particular
concern because the activity is beyond the taxing authority of both
state and local governments. Although corporations engaged in OCS
activity must pay bonuses and royalties to the federal government,
these benefits are not automatically shared with that state where the
demand for state and local governmental service occurs. As a result,
the increased demand for governmental facilities and services from
local governments is made more severe by the inability to reach all
of those responsible for the increased costs.
This study evaluates the impact of OCS activity on state and local
governments in contiguous coastal states. The situation in Louisiana
is examined in detail in order to determine the cost of governmental
services associated with the large amount of activity in the OCS
region and to indicate what other coastal states might experience
1
as their OCS regions are developed. This is done in the context of
an understanding of the physical relationship of the OCS to the coastal
areas, the petroleum potential of various OCS regions, and the national
energy crisis.
2
SUMMARY
SUMMARY
It is believed that large amounts of oil and gas are available for
potential development in offshore regions of the United States. At
the present time, the United States has the right, according to
international guidelines, to mine resources from the outer continental
shelf (OCS) region out to the point where the water is approximately
200 meters deep. The distance from shore at which the 200-meter depth
is encountered varies from one coastal area of the United States to
another. In the case of the Gulf, Atlantic, and Alaskan coasts, it
extends far beyond the territorial boundaries of the nation. Although
most of the OCS petroleum production and development to date has been
in the OCS region offshore from Louisiana, Texas, and California, there
is an indication that significant reserves occur in other regions, as well.
The continued development of domestic petroleum resources both
inland and offshore is made especially critical by the fact that
the nation is now facing an energy crisis which already has required
the importation of large amounts of petroleum from foreign countries.
Since these importations and continued U.S. dependency on foreign
sources have grave implications in terms of the U.S. balance of
payments and national security, increased emphasis will undoubtedly
be placed on future development of the OCS region, as well as inland
sites. This new emphasis was expressed in the President's Special
Energy Message in the spring of 1973.
The development of offshore petroleum resources is beneficial to
adjacent states and local governments in that it increases the number
and types of jobs and leads to higher income levels. This benefit
is offset, to a degree, by the costs of increased governmental facilities
and services brought about by the influx of population and industry.
Although environmental considerations are of importance in this matter,
this report does not include these considerations, since it is believed
that they can be handled better by one of the several federal governmental
agencies specifically concerned with such matters. New techniques,
3
surveillance, and regulation standards have substantially reduced the
potential of environmental damage. Furthermore, the artificial reef
effect of offshore platforms appears to have contributed favorably
to commercial and recreational fishing activities.
The costs imposed on state and local governments as a result
of OCS activities is of special concern since these governments are
prohibited from taxing those activities which occur more than three
nautical miles from the coast. The only exceptions are in the case
of Texas and Florida, where the boundary is defined as being three
leagues from shore (approximately 10.5 nautical miles). In the case of
Louisiana, more than $267 million in income, sales, use, ad valorem,
and severance taxes were foregone in 1972 because of this lack of
taxing authority.
The cost of governmental services can be related to employment
and population associated with OCS development. In Louisiana, for
example, OCS production directly induces employment in the areas of
mining, manufacturing, construction, chemicals production, and refining.
These employees, in turn, induce employment in a wide range of service
and trade industries. In all, it is estimated that the total employ-
ment impact of OCS activities in Louisiana is approximately 124,400
employees. When the families of these workers are included, the
population impact is estimated to be approximately 391,000. In
order to cover the increased governmental expenditures stemming from
this additional population, the state and the local governments
involved would have to collect more than $265 million in taxes from
these individuals and the firms for which they work.
At the present time, the only taxes available to pay for these
governmental services are collected by the state from inland operations
and employees. Although the companies directly involved in OCS
production pay large sums to the federal government in the form
of bonuses and royalties, these are not shared with the states
providing the services and facilities used. There is presently no
equivalent sharing of revenues from federal OCS activities as the
37-1/2 percent shared from mining operations on federal lands within
4
state boundaries. In 1972 approximately $336 million in royalties
was paid to the federal government by firms operating beyond the
three-mile boundary offshore Louisiana.
This report supports the contention that some of the revenues
collected by the federal government from OCS activities need to
be shared with contiguous coastal states to compensate state and
local governments for services provided to offshore operators and
to encourage coastal states to provide for the orderly development
of the OCS.
5
THE OUTER CONTINENTAL SHELF
AND ITS PETROLEUM POTENTIAL
THE OUTER CONTINENTAL SHELF AND ITS PETROLEUM POTENTIAL
As a first step in considering the impact of the development of
the outer continental shelf, it is necessary to understand the location
and general boundaries of this region and its petroleum potential.
Both of these aspects are discussed in this section.
Definition of the Outer Continental Shelf
The problems associated with defining the various subparts of
offshore areas are rooted in the politico-economic problems associated
with the use of the resources that can be exploited, the distribution
of the revenue obtained by the development of these resources, and the
impact of the development on other activities involving the sea, the
land beneath it, and the air above it.
Geographically, the outer continental shelf is a subpart of the
continental margin, a zone separating the submerged part of the
continent from the deep-sea bottom. The other subparts are the
continental slope and the continental rise. The continental shelf
is the area between the mean low water line and the change in the inclination
of the ocean floor, from out one eighth of one degree to more than three
degrees, that marks the beginning of the continental slope. This occurs
at various depths, usually between 130 and 200 meters, but it can
occur as shallow as 50 meters and as deep as 500 meters. The continental
shelf ranges in width from zero to 1500 km. 1
For purposes of defining the area where nation-states have the
right to explore for and exploit natural resources, the 1958 Geneva
Convention on the Continental Shelf defined continental shelf as
referring
1
International Law Association, The Hague Conference (1970),
Deep-Sea Mining, Report of the Committee, Annex A, Geological Aspects
and Technical Developments, as appearing in the Outer Continental Shelf
Report by the Subcommittee on Outer Continental Shelf to the Committee
on Interior and Insular Affairs, United States Senate, December 21, 1970,
p. 137.
6
(a) to the sea bed and subsoil of the submarine
adjacent to the coast but outside the area of
the territorial sea, to a depth of 200 meters
or, beyond that limit, to where the depth of
the superadjacent waters admits of the exploitation
of the natural resources of the said areas;
(b) to the sea bed and subsoil of similar
areas adjacent to the coasts of islands.²
This definition is imprecise, however, because of the "exploitability"
clause. As a consequence, there is no precise legal definition of
the boundary of the outer continental shelf from an international point
of view. 3 Fig. 1 is a diagrammatic profile of the continental margin.
SHELF EDGE
LAND
OCEAN
AVERAGE DEPTH,200 METERS
CONTINENTAL SHELF
SLOPE
DEPTH, 1,400-3,200 METERS
DEPTH, 4,000 METERS
CONTINENTAL TERRACE
CONTINENTAL RISE
DEEP SEA BED
CONTINENTAL MARGIN
Fig. 1 DIAGRAMMATIC PROFILE OF CONTINENTAL MARGIN
2 Ibid. (but not in Annex), p. 109.
3 Ibid.
7
This problem is lessened for purposes of this report since the
focus of the report is on the impact of the development of resources
from the outer continental shelf to which the United States has a
right. Attention is focused on the impact that this development has
or will have on coastal states of the United States. This is not to
imply that the problem of international agreement is unimportant to
the states. On the contrary, there will be both direct and indirect
impact on the well-being of all in the United States associated with
such agreement.
For purposes of this report, the outer continental shelf is
defined as that area off the coast beyond the three-nautical mile
territorial limit boundary and seaward to wherever the internationally
agreed boundary shall be. In the special cases of Texas and the Gulf
side of Florida, the territorial boundary has been established at three
leagues (approximately 10.5 nautical miles), rather than three nautical
miles.
This definition does not automatically resolve all problems.
There may be disagreements between state governments and the federal
government concerning the location of the three-nautical-mile line
separating the territorial water from the outer continental shelf.
This is currently the situation with respect to Louisiana and the
federal government. Other boundary disputes exist between the federal
government and the states of Maine, New Hampshire, Massachusetts,
Rhode Island, New York, New Jersey, Delaware, Maryland, Virginia,
North Carolina, South Carolina, Georgia, Florida, California, and
Alaska.
Delineation of the U.S. Outer Continental Shelf
Figure 2 shows the boundaries of the continental shelf for the continental
United States, except Alaska, to the 200-meter depth. Figure 3 shows the
profiles of the U.S. continental margin offshore of various cities.
Table I shows the area of parts of the continental margin offshore the
United States. As can be seen in these figures, there are large areas
that are accessible for exploration and potential production of petroleum
resources.
8
200 METERS
200
MI
Fig. 2
OUTER CONTINENTAL SHELF BOUNDARIES TO THE 200-METER
DEPTH FOR THE CONTINENTAL UNITED STATES, EXCEPT ALASKA
Feet
LONG BEACH
COOK INLET
CAPE KENNEDY
NEW YORK
Meters
0
NEW ORLEANS
-1000
-5,000
-2000
-10,000
3000
-4000
-15,000
-5000
0
50
100
150
200
250
300
350
400
450
Mautical Miles
Fig. 3
PROFILES OF U.S. CONTINENTAL MARGINS
9
Table I
U.S. OFFSHORE AREA BEYOND STATE BOUNDARIES
Number of Square
Number of Square
Miles Between
Miles Between
State or Area
3.5 Statute-Mile
200 Meter and
Limit and 200-
2500 Meter Contours
Meter Contour*
Hawaii
400
3,600
Alaska
560,000
212,200
Washington,
Oregon, and
California
coast
15,400
76,200
Gulf coast
107,500
84,200
Atlantic coast
122,000
102,500
Total
805,300
478,700
*10.5 nautical miles for Texas and Florida.
Source: McKelvey, et al., writing for U.S. Geological Survey, Department
of Interior, Potential Mineral Resources of the U.S. Outer
Continental Shelf. (March 11, 1968). Printed in Appendix 1
of Hearings, Pursuant to S. Res. 45 Part I, p. 174.
McKelvey, et al., points out that there is mineral potential
beyond the 200-meter contour and that successful experimental drilling
has occurred at a depth of 11,700 feet. Thus, they show the area to
the 2500-meter contour, saying that
For practical purposes in the waters bordering
the United States, the continental shelves as they
would be defined bathymetrically lie largely
within the 2500-meter contour and conversely not
much of the ocean floor and continental rise extend
coastward beyond this same contour.4
4
McKelvey, et al., writing for U.S. Geological Survey, Department
of Interior, Potential Mineral Resources of the U.S. Outer Continental
Shelf. (March 11, 1968). Printed in Appendix 1 of Hearings, Pursuant
to S. Res. 45 Part I, p. 174.
10
Evaluation of the Mineral Potential of the U.S. Outer Continental Shelf
The mineral potential of the U.S. outer continental shelf cannot be
estimated with precision. Considerably less is known about mineral
potential in this area than inland areas because in most cases there
has been only limited exploration or production in the outer continental
shelf areas. (See Appendix A.) Estimates that are available, therefore,
are based largely on knowledge about past production and on the
geological characteristics of submerged lands.
Perhaps because of the speculative nature of forming estimates of
outer continental shelf resources potentials, there has not been an
abundance of these estimates, and in the estimates that are available,
there is a wide range of values. Most attention has been focused on the
availability of petroleum resources from these areas, although other
minerals may be present which can someday be recovered. Writing in
1968, McKelvey et al. said:
Oil, natural gas, and natural gas liquids are
by far the most valuable resources now produced
from the continental shelves, and they are the
resources that have the greatest prospective
value for the future as well.
5
At that time, the production of petroleum from the outer continental
shelf beyond that over which the states have jurisdiction had
occurred only in the Gulf of Mexico. Since then, production has
occurred off the California coast on federally leased offshore lands.
The appraisal of the potential of the shelves by McKelvey et al. was
that
5 Ibid., p. 187.
11
Although petroleum from the outer shelves has
only been produced thus far from the Gulf of Mexico,
each of the other shelves, except the Hawaiian
shelf, has extensive areas that are broadly
favorable for petroleum. Parts of the Arctic Ocean,
Bering Sea, and Pacific Ocean shelves of Alaska,
for example, are contiguous with known
petroliferous areas; seismic surveys already
have identified extensive areas broadly favorable
for petroleum in each of them, and the rich
discoveries already made on state lands in
Cook Inlet support the speculation that offshore
Alaska has a large petroleum potential. Onshore
production and preliminary exploration on state
and federal leases offshore Washington and Oregon
are not so encouraging but large broadly favorable
areas identified from seismic surveys remain to be
tested
[Several areas offshore California have promising
potential for petroleum.
]
The production already coming from the Gulf OCS
speaks for its potential
As yet there has been no production on the Atlantic
coastal plain, but offshore seismic studies and
drilling indicate a thicker sedimentary section
[than the Gulf OCS] and several major structures
that are favorable for the occurrence of petroleum
in several large areas between southern Florida and
Georges Bank
In short, the favorable area
for the presence of petroleum on the U.S. shelves
is large. In fact, it appears to be nearly 55
percent as large as the area of favorable ground
on land and to contain a volume of sediments that
is about 90 percent as large as that in which
petroleum occurs on land. 6
A recent report of the Committee on U.S. Energy Outlook of the
National Petroleum Council also suggests that there are substantial
petroleum resources in offshore areas. Table II indicates the oil-
in-place resources, as presented in the committee's report.
Table III shows the recoverable gas supply for the United States,
as presented in the same report, and Fig. 4 shows the geographic location
of these resources for the continental United States, excluding Alaska.
6 Ibid., PP. 187, 189.
12
Table II
U.S. OIL-IN-PLACE RESOURCES, BY REGION
(1971)
Ultimate
Oil-in-Place
Remaining Discoverable*
Discoverable*
Discovered
Oil-in-Place
Region
Oil-in-Place
to 1/1/71
Billion
Percent of
(Billion
(Billion
Barrels
Ultimate
Barrels)
Barrels)
Lower 48 States--Onshore
2
Pacific Coast
101.9
80.0
21.9
21.5
3
Western Rocky
Mountains
43.6
5.8
37.8
86.7
4
Eastern Rocky
Mountains
52.4
23.9
28.5
54.3
5
West Texas Area
151.6
106.4
45.2
29.8
6
Western Gulf Coast
Basin
109.0
79.7
29.3
26.9
7
Midcontinent
63.0
58.4
4.6
7.3
8-10
Michigan, Eastern
Interior, and
Appalachians
36.5
30.5
6.0
16.4
11
Atlantic Coast
3.8
0.2
3.6
94.7
Total
561.8
384.9
176.9
31.5
Offshore and South
Alaska
1
South Alaska
including
offshore
26.0
2.9
23.1
88.8
2A
Pacific Ocean
49.6
1.9
47.7
96.2
6A
Gulf of Mexico
38.6
11.5
27.1
70.0
11A
Atlantic Ocean
14.4
0.0
14.4
100.0
Total
128.6
16.3
112.3
87.3
Total United States
(Excluding North
Slope)
690.4
401.2
289.2
41.9
Alaskan North Slope
Onshore
72.1
24.0
48.1
66.7
Offshore
47.9
0.0
47.9
100.0
Total
120.0
24.0
96.0
80.0
Total United States
810.4
425.2
385.2
47.5
*The term "ultimate discoverable" means the amount of resource before any
was extracted, and "remaining discoverable" equals ultimate discoverable
less the amount extracted.
Source: U.S. Energy Outlook, A Report of the National Petroleum Council's
Committee on U.S. Energy Outlook, December 1972, p. 72.
13
Table III
U.S. RECOVERABLE GAS SUPPLY, BY REGION
(1971)
Ultimate
Gas
Remaining Discoverable*
Discoverable*
Discovered
Trillion
Percent of
Region
Gas
to 1/1/71
Cubic
Ultimate
Trillion
Trillion
Feet
Cubic Feet
Cubic Feet
Non-Associated
Lower 48 States--Onshore
2
Pacific Coast
25.7
8.1
17.6
68.5
3
Western Rocky Mountains
50.1
17.9
32.2
64.3
4
Eastern Rocky Mountains
51.6
10.0
41.6
80.6
5
West Texas Area
101.5
27.2
74.3
73.2
6
Western Gulf Coast
Basin
397.9
211.7
186.2
46.8
7
Midcontinent
223.3
104.8
118.5
53.1
8-9
Michigan, Eastern
Interior
12.5
0.4
12.1
96.8
10
Appalachians
95.9
33.0
62.9
65.6
11
Atlantic Coast
4.6
0.01
4.6
99.8
Total
963.1
413.1
550.0
57.1
Lower 48 States--Offshore
2A
Pacific Ocean
3.8
0.5
3.3
86.8
6A
Gulf of Mexico
201.8
45.4
156.4
77.5
11A
Atlantic Ocean
54.5
--
54.5
100.0
Total
260.1
45.9
214.2
82.4
Total United States
(Excluding Alaska)
1,223.2
459.0
764.2
62.5
Alaska
277.4
5.1
272.3
98.2
Total United States
1,500.6
464.1
1,036.5
69.1
Associated-Dissolved
Total United States
356.7
215.2
141.5
39.7
Non-Associated and Associated Dissolved
Total United States
1,857.3
679.3
1,178.0
63.4
*The term "ultimate discoverable" means the amount of resource before any
was extracted, and the "remaining discoverable" equals ultimate discoverable
less the amount extracted.
Source: U.S. Energy Outlook, A Report of the National Petroleum Council's
Committee on U.S. Energy Outlook, December 1972, p. 91.
14
3.3
14.4
47.7
54.5
200 METERS
5
27.1
156.4
200 METERS
Oil-in-Place |Billion Barrels
Gas |Trillion Cubic Feet|
Fig. 4 REMAINING DISCOVERABLE PETROLEUM RESOURCES, OFFSHORE
CONTINENTAL UNITED STATES, EXCLUDING ALASKA
The relative importance of offshore areas for potential petroleum
production is made evident by examining some relationships in
tables II and III. For example, the offshore areas are relatively
less developed than the onshore areas: about 87 percent of the
ultimate discoverable oil-in-place is in the remaining discoverable
category for the offshore areas, and about 82 percent of the ultimate
discoverable gas is in the remaining discoverable category. In contrast,
the onshore relationships for the lower 48 states are about 32 percent
and 57 percent, respectively, for the same variables.
Another interesting relationship can be derived from these tables
that may portend significant impact on coastal states. Approximately
23 percent of the estimated total remaining discoverable oil-in-
place for all the United States is offshore states in the lower 48 states.
Approximately 18 percent of the estimated remaining discoverable gas
is estimated to be in the same area. Also, as can be seen in the
tables, the offshore Alaska area is very significant.
15
The above relationships are based on one set of estimates of
potential petroleum resources, and of course there are others.
Regardless of the source of the estimate, the continental shelves are
estimated to contain substantial reserves and can be expected to
be a significant portion of the total available to the United States.
16
THE NATIONAL ENERGY CRISIS
THE NATIONAL ENERGY CRISIS
It is nationally recognized that the United States is currently
faced with a serious energy problem. The demand for oil and natural
gas, for example, is continually spiraling upward while the supply
of such fuels is increasing less rapidly. This situation has resulted, in
recent years, in an unprecedented amount of oil imports. Besides the
increasing scarcity of oil and natural gas, there is a pronounced
nationwide lag in the production of nuclear power. The mining of coal
is being increasingly criticized on an ecological basis, thereby limiting
the supply of this important energy source. In the area of synthetic fuels,
the United States is decades away from mass production. All of these
facts emphasize the scope and nature of the present energy crisis and
are generally indicative of an increased scarcity of such resources in
the future. This scarcity will have a significant impact upon not only
the economic growth of the nation, but also national security and
the overall standard of living.
At the present time, the five primary sources of U.S. energy
supplies are petroleum, natural gas, coal, nuclear energy, and hydro-
power. Of these, petroleum is foremost, in that it satisfies as much
as 75 percent of the U.S. energy requirements for all purposes. Domestic
production of petroleum, however, is insufficient to meet current needs,
and all indications are that the deficit will become even worse in the
future. In order to decrease this deficit, the United States has recently
begun to import petroleum from foreign sources. Although this has proved
to be a short-range solution to the problem, there are long-range
problems because of uncertainties regarding price, availability,
dependability, and reliability. Also, as imports increase, there is a
corresponding increase in balance-of-trade problems which have serious
effects upon U.S. monetary and foreign policies.
17
The balance of payments implications associated with importing
large amounts of petroleum on a permanent basis can be unfavorable, and
these implications are, at best, difficult to trace. It is not
appropriate to analyze the impact of importing petroleum by simply
taking the volume times the unit price. Consideration must be given
to the probable use of the dollar earnings including the purchases
of U.S. goods and services and third country return flow.
Estimates of the size of the balance of payments burden over time
vary. One set prepared by the U.S. Department of the Interior shows
that the net deficit associated with the importation of petroleum will be
approximately $2.9 billion in 1975 and $6.6 billion in 1980. 7 Another
estimate by Dr. Arlon R. Tussing, prepared at the request of U.S.
Senator Henry M. Jackson, suggests that net outflows may be as high
as $10 billion by 1980. 8 A study by the Chase Manhattan Bank indicates
that the balance of payments deficit associated with importation of
9
petroleum could reach $25 billion by 1985.
The balance of payments problems are perhaps not so troublesome
as the implications associated with importing petroleum from relatively
unpopulated countries. These nations will accumulate large liquid
balances which could cause problems in the international money markets.
One way of mitigating these problems would be to encourage these
countries to invest in American businesses, but there is no way to
10
force this and that alternative is not without problems of its own.
7
Questions and Policy Issues Related to Oversight Hearings on
the Administration of the Outer Continental Shelf Lands Act Held by
the Senate Committee on Interior and Insular Affairs, Pursuant to
S. Res. 45 (March 23, 1972), p. 91.
8 Toward a Rational Policy for Oil and Gas Imports, Committee on
Interior and Insular Affairs, U.S. Senate, Pursuant to S. Res. 45
(1973), p. 5.
9
John G Winger, et al., Outlook for Energy in the United States
to 1985, Chase Manhattan Bank (June 1972), p. 51.
10
Toward a Rational Policy for Oil and Gas Imports, op. cit.
18
The United States currently has a potential coal resource base of
nearly 800 billion tons. At the present rate of consumption, this supply
is adequate to meet demands for the next 1,000 years. Despite this vast
reserve, however, the United States is on the threshold of a national
coal shortage. This is due to a number of economic and political factors.
Clearly, if the required funds are to be raised to generate increased
capacity, the price of coal will have to be raised substantially.
The last two sources of energy (nuclear and hydropower) are both
used primarily to generate electricity; and, consequently, are not considered
primary forms of energy. Projections are that in the future nuclear
power will be the major input utilized to produce electricity. Although
this will ease the demand on other areas in many respects, it is not a
total solution to the energy problem. Hydroelectric projects in 1970
accounted for nearly 15 percent of the electricity produced in that year.
This figure is expected to decrease, however, to approximately eight percent
by 1985.
The present energy crisis is due, in part, to the high per capita
consumption of energy in the United States. Although the United States
contains less than six percent of the world population, it is by far
the largest consumer of energy, with a daily requirement of nearly
400 million BTUs. On a per capita basis, this is eight times as much
energy as that used by the rest of the world combined. In 1971, the
United States used a total of 69 quadrillion BTUs of energy, according
to the U.S. Department of the Interior. The consumption, by source, is
shown in Fig. 5 for the year 1971 and is projected for the years 1980
and 2000. It can be seen that although the percentage of oil and gas
consumed is projected to decrease through the years, the absolute value
consumed will increase from 54 quadrillion BTUs in 1971 to 105.4
quadrillion BTUs in 2000.
Despite the current energy crisis, the U.S. Department of the Interior
states that there is still an abundance of basic energy resources:
Our Nation has been bountifully endowed with a
large resource base of fuel minerals, which
includes petroleum, natural gas, coal, oil shale,
uranium and thorium. The energy content of
known resources of these fuel minerals amounts
to 13,100 quadrillion BTUs, enough to last 190
years at the rate of consumption in 1970.
19
200
191.9*
Legend:
Coal
16.3%
31.28*
Petroleum
Natural Gas
Nuclear Power
150
Hydro Power
37.2%
71.39*
QUADRILLION BTUs
100
96.0*
16.8%
16.13*
69.0*
17.7%
33.97*
18.2%
12.56*
43.9%
42.14*
50
44.2%
30.50*
25.7%
49.32*
28.1%
26.98*
32.9%
22.70*
7.0%
6.72*
6%
.41*
4.2%
4.03*
1%
5.95*
4.1%
2.83*
1971
1980
2000
*In Quadrillion BTUs.
Source: U.S. Energy Through the Year 2000, U.S. Department of the
Interior, December 1972.
Fig. 5 U.S. ENERGY CONSUMPTION, BY SOURCE
(1971-2000)
20
The potential resources of fuel minerals that
are on the verge of use but await technologic
advance will last 16,500 years at the rate of
energy use in 1970. A major national objective,
then, is to identify and delineate these resources
and to develop the technology for utilizing them
as they are needed. 11
In view of this potential, the energy crisis is apparently not al-
together due to a lack of availability, but rather to a lack of recovery.
In other words, the reserves are not being found or developed at the
rate required to keep pace with the rapid increase in energy demands.
As indicated in Fig. 6, exploratory drilling in the United States
has declined steadily since 1956. This decline stems primarily from
the lack of economic incentives and technological capabilities; namely,
(1) diminishing economic incentives for petroleum development;
(2) federal regulation of natural gas prices at the wellhead;
(3) declining real price of domestic crude; (4) increasing environmental
pressures; and (5) rising costs within the industry as a whole.
The National Petroleum Council in 1972 projected that energy
demands will increase 4.2 percent annually between 1970 and 1985.
The significant determinants involved in this long-range projection
were (1) economic activity measured by the gross national product;
(2) cost of energy; (3) population; and (4) environmental controls.
(Table IV contains an estimate of energy demanded by certain consuming
sectors, through the year 1985.)
11
U.S. Department of the Interior, Reprint from Sun Oil Company's
Petroleum and the Capital Crunch, P. 6, December 1972.
21
17,000
170
16 000
160
Total Exploratory
15 000
wells Drilled
150
(Left Scale)
14 000
140
13 000
130
12,000
120
11,000
110
10,000
100
9,000
90
8,000
80
7,000
70
6,000
60
5 000
50
4,000
40
3,000
30
Barrels of 011 Reserves
2,000
20
Discovered
Per Foot of Exploratory
1,000
Wells Dritted
10
(Right Scale)
0
0
1946
48
50
52
54
56
58
60
62
64
66
68
70
72
* Consists of extensions, new field discoveries, and
new reservoir discoveries in old fields (exclusive of North Slope)
Fig. 6
EXPLORATORY DRILLING AND RESULTS IN THE UNITED STATES
(1946-1972)
Source: U.S. Department of the Interior.
22
Table IV
PROJECTIONS OF U.S. ENERGY DEMAND
BY MAJOR CONSUMING SECTOR
Demand Volume (Quadrillion BTUs)
Sector
Estimated
Estimated
Actual
Intermediate
Intermediate
1970
1980
1985
Residential/Commercial
15.8
22.4
26.6
Industrial
20.0
26.8
30.9
Transportation
16.3
23.9
28.3
Electric Conversion
11.6
22.8
30.2
Non-Energy
4.1
6.7
8.9
TOTAL
67.8
102.6
136.0
Source: U.S. Energy Outlook, National Petroleum Council, December 1972.
In summary, the current shortage of primary energy supplies
is projected to become increasingly worse in the near future. This
situation will occur despite corrective actions now being taken, since
it will be some time before the effect of these actions is felt. In
the meantime, it is essential that all interests--both public and
private--cooperate in making and supporting necessary policy changes
affecting the consumption of these resources.
The President's Special Message on Energy has gone a long way toward
finding solutions to the energy crisis. The President noted that the
increase in domestic energy production depends in large measure on how
quickly the OCS can be developed. To encourage this development, he has
asked the Interior Department to triple annual acreage offerings on the
OCS by 1979 and has recommended removal of the Federal Power Commission's
control of wellhead prices of natural gas to be dedicated to interstate
sales. These recommendations have already led the Interior Department to
23
announce plans to lease up to one million acres in January, May, and
September of each year starting in 1974. Furthermore, nominations were
accepted for new tracts between 200- and 600-meter depths off Louisiana
in June 1973. This will be the first sale of mineral leases outside
the continental shelf. Nominations have also been received for tracts
contiguous to Mississippi, Alabama, and Florida. Additional sales
of leases are planned for offshore California and Alaska.
24
IMPACT OF OUTER CONTINENTAL SHELF
ACTIVITIES ON U.S. COASTAL REGIONS
IMPACT OF OUTER CONTINENTAL SHELF
ACTIVITIES ON U.S. COASTAL REGIONS
Introduction
Offshore mining activity must have contact with certain land-based
operations and activities, beginning with the initial explorations
and extending through the drilling and production stages. Boats need
harbors; rigs must be constructed; and when the resource is produced,
it must be brought to land for processing and consumption.
This report focuses on the economic impact of OCS activity on
a local-regional area. Specifically, it is concerned with the cost
of governmental services which are demanded as a result of OCS activity.
Ecological Impact
The impact of offshore mining activities on the ecological system
has been widely publicized in recent years and has been discussed at
length in the news media and government hearings. Attention has been
focused on the short- and long-term implications of possible oil spills;
the impact of developing channels, laying pipelines, building rigs, and
disposing of waste materials; and the effects of these activities on
marsh land and on fish and wildlife habitats, on the competing uses
for land used in connection with the development of these resources;
and on the aesthetic appearance of the coastal regions.
These environmental considerations involve economic issues,
such as the onshore loss of land caused by the channelization of
rivers and marshes. This factor may be significant economically for
many coastal states and, if the marshes are not adequately protected,
could endanger a vital link in the food chain. At the same time,
it should be recognized that offshore platforms and associated
facilities provide a man-made reef which attracts and provides
protection for smaller fish. It is believed that the offshore
platforms have contributed to the increasing yields of commercial
fishing off the Louisiana coast. Table V presents a comparison of
Louisiana fish catch with that of other Gulf states and the United States.
The data indicates that Louisiana's fish catch has increased in relative
importance over the past two decades during the period of active
offshore exploration.
25
Table V
LOUISIANA FISH CATCH COMPARED WITH
THAT OF OTHER GULF STATES AND THE UNITED STATES
1950
1960
1970
Louisiana
Quantity (thousands of pounds)
307,366
566,411
1,107,251
Value (thousands of dollars)
21,575
25,949
61,072
Percent of Gulf States
Quantity
53.9
44.7
65.2
Value
42.8
30.4
36.7
Percent of United States
Quantity
6.3
11.5
22.6
Value
6.2
7.3
10.0
Source: U.S. National Oceanic and Atmospheric Administration,
Fishery Statistics of the United States.
26
Ecological or environmental impact, including the aesthetic and
economic aspects of the problem, should not be minimized in considering
how and/or if to proceed with the development of offshore resources in
various areas. To do otherwise could have grave implications for the
nation. This report, however, focuses on the economic impact of the
outer continental shelf activity on a local-regional area, and is concerned
primarily with the costs generated by that activity where the generators
are, in part, beyond the taxing reach of state and local governments.
Economic Impact
There is an on-going economic impact associated with outer continental
shelf activity, not only as it relates to the supplying of fuel for
the nation, but also as it affects the coastal regions. The impact is
on individual port facilities, roads, and the myriad public services
provided to the individuals and firms associated with outer continental
shelf activity, such as education and police protection.
As is the case with most types of economic development, there are
both positive and negative aspects associated with outer continental
shelf activities. The positive aspects are similar to those associated
with the development of the same natural resources on land. In short,
these activities result in employment opportunities, both directly
and indirectly; and they foster the development of supporting and
complementary businesses. All of this results in a better economic
climate.
On the other hand, there is a significant difference between on-land
activities or offshore activities within the three-mile limit and the
outer continental shelf activities. State and local governmental
units are not able to tax firms engaging in outer continental shelf
activity, although these firms have a direct and indirect impact on
the services required in the coastal region municipalities, parishes
or counties, and the state. These impacts have a bearing not only on
the need for port facilities, schools, medical facilities, and environ-
mental management services, but also on the whole range of governmental
activities.
27
In setting up a tax structure to support the expenditures
deemed necessary and desirable in a society, government seldom
attempts to draw precise one-for-one relationships between taxes
paid and benefits received. For example, persons pay property taxes
which are used, in turn, to support education. The taxes are not
based on how many children are in a household; rather, it is
reasoned that there is social benefit from having education available
for all children. Even in cases where there are more directly traceable
benefits between taxes and services, as in the case of highway use
taxes, the tax is based on such variables as fuel consumption and
weight--neither of which may be directly related to the benefit
the user sees in being able to use the highway system. So it is with
nearly all taxes. The revenues from a whole array of taxes are needed
to finance the nation's collective expenditures.
If people in various parts of the nation are to consume collectively
such benefits as schools, sewer and water systems, civic and recreational
facilities, and transportation facilities, they obviously must pay for
them. Of course, they do so through a variety of taxing methods.
In an industrialized area, industry will pay a portion of the taxes
needed to provide services. The consumers or users of the products of
these industries may, in turn, pay a price that reflects this tax
need at the point of production. Just as the consumers of the
products are in a sense causing the demands on public services in a
particular area, so they may be in a sense paying some of the taxes.
The production of petroleum from the outer continental shelf
does and will generate social costs, regardless of where the area is.
The magnitude of the impact of service-using outer continental shelf
activities on coastal regions will vary, depending upon how the tax
structure of the region is set up and the relative importance
of the outer continental shelf activity to other economic activities.
Regardless of the tax or economic structure, however, someone must
subsidize the supplying of service to outer continental shelf users
relative to what would be the case if taxing powers were present.
28
The groups paying for the facilities and services used, but not
paid for by outer continental shelf activity, will be, in the main,
the residents and other firms in the coastal region. Indeed, the
employees of the outer continental shelf firms themselves will be
among those doing the subsidizing. There is no equivalent sharing
of revenues from federal lands offshore to the 37-1/2 percent mineral
revenue sharing on federal property within state boundaries.
It should be pointed out that the firms engaged in outer continental
shelf activity may be paying a significant amount of federal "taxes"
in the form of bonuses, rentals, and royalties. It is not within
the scope of this report to analyze the question of whether these
payments are too large, too small, or just right. The question,
instead, is related to the distribution of these receipts and costs
of state and local government services.
Economic Impact in Louisiana
An analysis of the impact of OCS petroleum development on Louisiana
may be beneficial in planning for the increased demand for services induced
by the development of OCS resources in other areas, and it may also help in
evaluating various ways of distributing the revenues produced. Although much
of the outer continental shelf off the Louisiana coast has been developed,
this is not the case in other coastal regions. If the nation tries to
develop more of its domestic petroleum resources, other coastal states will
experience the positive and negative impacts associated with the development.
The impact of the OCS petroleum development on Louisiana can be
viewed in several ways. One is to examine the nature and relative
importance of OCS production. A second is to estimate the number
of persons employed in directly and indirectly related activities
associated with OCS development. A third is to determine the taxes
foregone because of a lack of territorial jurisdiction. A fourth
is to assess the impact on governmental services caused by the
development of OCS resources.
29
Production
Louisiana historically has been a leader among U.S. petroleum-
producing states in the exploration, drilling, and recovery of oil and
natural gas, and is today strengthening this position of leadership,
as indicated by the number of producing oil and gas wells in the
state and by increases in the volume of production from these wells.
In 1970, for example, the state had 28,278 oil wells in production,
which is more than twice the 1950 figure of 11,860 (Table VI). The
number of producing gas wells more than quadrupled during the same
period--from 2,550 in 1950 to 10,343 in 1970. These increases
in the number of wells have been accompanied with corresponding
increases in the volume of oil and gas liquids and gas, as indicated
by the data in Table VII. Between 1950 and 1970, the volume of oil
and gas liquids in the state increased from 240,174 thousands of
barrels to 1,156,500 thousands of barrels. During the same period,
the volume of gas production in the state soared--from 1,140,693
millions of cubic feet to 7,965,236 millions of cubic feet. Similarly
large increases occurred in the federal outer continental shelf and
the state offshore regions.
Table VI
NUMBER OF PRODUCING OIL AND GAS WELLS IN LOUISIANA
(1950-1970)
Number of Federal
Total Number Offshore
Number of State Offshore
Total Number in Louisiana
Outer Continental Shelf
Year
Gas Wells
Oil Wells
Gas Wells
Oil Wells
Gas Wells
Oil Wells
Gas Wells
011 Wells
1950
11,860
2,550
70
1
21
1
49
0
1960
24,682
6,479
2,229
311
960
223
1,269
88
1970
28,278
10,343
4,785
1,635
3,614
1,303
1,171
332
Source: Summarized by GSRI from the Oil and Gas Compact Bulletin, Vol. XXX, No. 2, December 1971.
30
Table VII
ANNUAL VOLUME OF PRODUCTION FROM OIL AND GAS WELLS IN LOUISIANA
(1950-1970)
State
Federal Outer Continental Shelf
Louisiana Offshore
Year
Oil and Gas Liquid
Gas
Oil and Gas Liquid
Gas
Oil and Gas Liquid
Gas
(Thousands of Barrels)
(Millions of
(Thousands of Barrels)
(Millions of
(Thousands of Barrels)
(Millions of
Cubic Feet)
Cubic Feet)
Cubic Feet)
1950
240,174
1,140,693
722
645
3,593
2,268
1960
429,911
2,994,862
45,788
287,442
42,334
120,945
1970
1,156,500
7,965,236
338,423
2,299,889
72,657
615,968
Source: Summarized by GSRI from Oil and Gas Compact Bulletin, Vol. XXX, No. 2, December 1971.
The location of producing oil and gas wells in Louisiana is
shown in Figure 7 and Figure 8, respectively. As indicated, the
greatest number of Louisiana wells are located on-shore. Of offshore
wells, the greatest number is located within the federal outer
continental shelf area, rather than the state offshore area. The
number of oil wells in the federal OCS increased from 30 percent of
the offshore total in 1950 to 75 percent in 1970. The number of gas
wells is arrayed in a similar manner.
Although Louisiana production of oil and gas has increased
significantly in recent years, the balance of production has shifted
noticeably from Louisiana-controlled areas to the federal OCS areas.
Table VIII indicates production statistics for the two areas as a
percentage of state totals, for the period 1950-1970. As shown, the
amount of oil production in the federal OCS increased from 0.3 percent of
the state total in 1950 to 29.3 percent in 1970, while the amount in
state-controlled offshore regions only increased from 1.5 percent to
6.8 percent. By the same token, natural gas production increased
in the federal OCS from 0.1 percent to 28.9 percent of the state
total, in contrast to an increase of only 0.2 percent to 7.7 percent
in the state-controlled offshore. These figures clearly indicate
that the major portion of the state's increased production is taking
place in areas outside the taxing jurisdiction of the state.
31
CADDO
BOSSIER
WEBSTER
CLAIBORNE
UNION
MOREHOUSE
CARROLL
WEST
CARROLL
LINCOLN
BIENVILLE
QUACHITA
RICHLAND
MADISON
JACKSON
FRANKLIN
CALDWELL
RED RIVER
TENSAS
DE SOTO
WINN
NATCHITOCHES
LA SALLE
CATAHOULA
SABINE
GRANT
CONCORDIA
RAPIDES
VERNON
AVOYELLES
WEST FELICIANA
EAST
ST.
WASHINGTON
FELICIANA
HELENA
BEAUREGARD
ALLEN
EVANGELINE
ST. LANDRY
POINT
COUSE
TANGIPAHOA
EAST
BATON ROUGE LIVINGSTON
ST. TAMMANY
On Shore
WEST
BATON
ROUGE
IDERVILLE
EFFERSON DAVIS
CALCASIEU
23,493
ST. MARTIN
ASCENSION
LAFAYETTE
T.
OREANS
JOHN
ST.
THE
JAMES
BAPTIST
CAMERON
VERMILION
IBERIA
ASSUMPTION
St.
ST.
CHARLES
BERNARD
PART OF
ST
REFERSON
ST. MARY'MARTIN
LAFOURCHE
PLAQUEMINES
TERREBONNE
State
Offshore
1,171
Federal OCS
3,614
Fig. 7
NUMBER AND GENERAL LOCATION OF PRODUCING
OIL WELLS IN LOUISIANA, 1970
32
CADDO
BOSSIER
WEBSTER
CLAIBORNE
UNION
MOREHOUSE
RASPO
ARROL
WEST
CARROLL
INCOLN
INVILLE
DUACHITA
RICHLAND
MADISON
JACKSON
FRANKLIN
CALDWELL
RED RIVER
TENSAS
DE SOTO
WINN
NATCHITOCHES
LA SALLE
CATAHOURA
SABINE
GRANT
CONCORDIA
RAPIDES
VERNON
AVOYELLES
WEST FELICIANA
EAST
ST.
WASHINGTON
FELICIANA
HELENA
BEAUREGARD
ALLEN
EVANGELINE
ST. LANDRY
POINTE
COUPEE
TANGIPANOA
EAST
BATON ROUGE
ST. TAMMANY
LIVINGSTON
WEST
BATON
-
ROUGE
ACADIA
EFFERSON DAVIS
CALCASHU
Land Wells
ASCENSION
LAFAYETTE
8,708
SL
ORLEANS
JOHN
$1.
THE
JAMES
BAPTIST
CAMERON
VERMILION
IBERIA
ASSUMPTION
Sr.
ST.
CHAILES
BERNARD
PART OF
ST
REFFERSON
ST. MARY' MARTIN
LAFOURCHE
PLAQUEMINES
TERREBONNE
State
Offshore
322
Federal
OCS
1,303
Fig. 8
NUMBER AND GENERAL LOCATION OF PRODUCING
GAS WELLS IN LOUISIANA, 1970
33
Table VIII
STATE OFFSHORE AND FEDERAL OCS PRODUCTION OF OIL AND GAS,
(As Percent of the Louisiana Total)
Federal OCS
State Offshore
Year
Oil
Gas
Oil
Gas
1950
.3
.1
1.5
.2
1960
10.6
9.6
9.9
4.0
1970
29.3
28.9
6.8
7.7
Source: Gulf South Research Institute.
Table IX indicates the dramatic increase in the amount of
petroleum production in the Gulf of Mexico offshore from Louisiana
during recent years. As indicated by these data, the major portion
of this increase has been in federal outer continental shelf areas.
Prior to 1954, for example, 98 percent of the oil and condensate
and 78 percent of the gas produced offshore from Louisiana were
derived from state-controlled areas. By 1960, however, these figures
had dropped to 44 percent and 33 percent, respectively. By 1971, only
14 percent of the oil and condensate and 17 percent of the gas came
from Louisiana-controlled areas.
Moreover, the absolute number of barrels of oil and condensate
produced increased until 1968 when their production leveled off and
began to decline--a fact which might indicate that most of the
resources within the state's jurisdiction may have already been extracted
(Fig. 9). This shift in production from state to federal lands has a
major impact on the revenue structure of Louisiana.
Other states currently involved in petroleum production on
the outer continental shelf are Texas and California. Table X
illustrates the magnitude of the Louisiana OCS operations in relation
to production in Texas and California. The production figures are
separated into oil, condensate, and natural gas. Louisiana is
ranked first in all three areas, producing 91.8 percent of the oil,
96.6 percent of the condensate, and 94.8 percent of the gas in the
OCS areas. Louisiana's OCS oil production exceeded 358 million barrels,
while second-ranked California produced only 31 million barrels.
Texas ranked second to Louisiana, in barrels of condensate produced
and in millions of cubic feet of natural gas.
34
Table IX
TOTAL PRODUCTION OF GAS AND OIL AND CONDENSATE IN LOUISIANA
(State Offshore and Federal Outer Continental Shelf)
Gas
Oil and Condensate
Year
Millions of
Percent
Thousands
Percent
Cubic Feet
State
OCS
of Barrels
State
OCS
Prior
91,675
78
22
54,803
98
2
1954
81,325
31
69
15,926
79
21
1955
121,279
33
67
25,731
74
26
1956
136,527
39
61
40,906
73
27
1957
160,472
49
51
52,835
70
30
1958
233,967
45
55
57,381
57
43
1959
329,280
37
63
72,793
51
49
1960
408,388
33
67
88,122
44
56
1961
458,481
31
69
103,197
38
62
1962
588,361
23
77
126,801
29
71
1963
706,545
20
80
149,087
30
70
1964
783,474
21
79
173,709
29
71
1965
871,124
26
74
199,293
27
73
1966
1,265,899
24
76
243,080
23
77
1967
1,655,223
34
66
284,033
23
77
1968
2,057,291
31
69
329,922
20
80
1969
2,478,745
26
74
365,691
18
82
1970
2,800,104
19
81
398,378
16
84
1971
3,176,740
17
83
448,772
14
86
Source: Louisiana Department of Conservation and U.S. Department of
Interior.
35
100
95
90
85
80
75
Oil and Condensate
70
State
65
Federal
Percent of Offshore
60
OCS
55
50
45
40
35
30
25
20
15
10
5
54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71
Year
Fig. 9 NUMBER OF BARRELS OF OIL AND CONDENSATE PRODUCED IN LOUISIANA
(1954-1971)
36
Table X
OCS PETROLEUM PRODUCTION, 1972
Gas
Oil Barrels
Condensate Barrels
(millions of cubic feet)
State
Percent
Percent
Percent
Number
Number
Number
of Total
of Total
of Total
California
31,103,548
8.0
--
0.0
15,671,479
0.6
Louisiana
358,366,080
91.8
27,394,271
96.6
2,634,014,031
94.8
Texas
710,463
0.2
974,584
3.4
127,357,908
4.6
Total
390,180,091
100.0
28,368,855
100.0
2,777,043,418
100.0
Source: U.S. Department of the Interior, Bureau of Land Management.
TableXI shows the 1967 to 1972 values of petroleum production from
federal OCS areas offshore from Louisiana and the amount of royalties
associated with the production. Royalty payments alone more than doubled
during the period--from $149 million in 1967 to $336 million in 1972.
In addition, bonuses and rentals have been received on the areas producing
this petroleum. Coupled with the depletion of resources within the
Louisiana three-mile limit, these rapidly increasing figures represent
grave problems for the State of Louisiana.
Table XI
VALUE OF PRODUCTION OF PETROLEUM FROM THE OUTER CONTINENTAL SHELF
BEYOND THE JURISDICTION OF LOUISIANA AND CORRESPONDING ROYALTY
PAYMENTS BY YEAR
Year
Value
Royalty
1967
$ 883,852,538
$149,073,159
1968
1,093,049,920
190,904,928
1969
1,322,256,575
225,285,281
1970
1,527,370,429
259,135,087
1971
1,902,431,031
319,150,988
1972*
2,013,382,419
336,203,550
*Includes both disputed and undisputed area.
Source: U.S. Geological Survey, 1973.
37
Employment
In 1971, a total of 49,685 persons were employed in mining in
Louisiana (almost all of which was petroleum mining). Of this number,
39,397 (or 79 percent) were in the 38 southern parishes of the state. The
importance of mining employment can be seen in Table XII. Statewide, mining
accounts for approximately 6.8 percent of the employment subject to the
Louisiana Employment Security Law. As can be noted, the impact varies from
parish to parish. In some coastal parishes, such as St. Mary and Cameron,
mining employment has a much larger direct impact on employment. The
relative importance is shown in figures 10 and 11 for the southern parishes
of the state.
The number of persons employed in mining associated with OCS
activity is estimated to be at least 15,000. This estimate was
determined by analyzing the results of a mail questionnaire, interviews,
and petroleum production statistics. A discussion of the methodology
underlying this estimate and those for other employment categories
is contained in Appendix B.
In addition to those employed in mining, there are many persons
employed in other activities that are related to or dependent upon
OCS activity in various ways. A large number of persons are engaged
in manufacturing and constructing rigs and platforms, service boats,
and other equipment. A significant portion of the employment in the
production of chemicals and allied products, as well as that in
refining petroleum, is related to OCS production. All of these
employees generate other employment because they and their families
need housing, goods, and services.
38
Table XII
PERCENTAGE DISTRIBUTION OF LOUISIANA EMPLOYMENT, BY PARISH*
(1971)
Transportation,
Wholesale
Finance,
Services
Contract
Parish
Mining
Manufacturing
Communication,
and Retail
Insurance,
and
Construction
Public Utilities
Trade
Real Estate
Miscellaneous
STATEWIDE
6.8
9.7
23.4
11.2
30.1
5.8
13.0
Acadia
8.3
6.6
24.7
9.7
37.4
3.9
9.3
Allen
3.2
3.7
60.0
6.6
17.2
3.4
5.9
Ascension
1.8
15.3
39.5
9.2
23.6
3.2
7.4
Assumption
5.9
3.3
70.4
1.6
12.1
3.2
3.5
Avoyelles
1.6
8.5
28.8
8.3
28.3
9.8
14.7
Beauregard
3.6
3.4
37.4
11.2
33.8
3.2
7.3
Calcasieu
4.7
14.4
33.2
8.7
25.6
3.9
9.5
Cameron
42.3
5.2
17.6
16.8
5.0
1.4
11.7
East Baton Rouge
0.7
15.1
24.4
6.7
30.1
7.1
15.9
East Feliciana
1.6
17.7
39.7
5.3
22.2
4.4
9.1
Evangeline
4.8
5.5
15.2
9.9
31.2
4.4
28.9
Iberia
22.0
6.8
19.9
10.3
29.1
3.5
8.4
Iberville
3.5
29.0
32.8
4.6
15.6
1.9
12.6
Jefferson
7.1
9.5
29.0
9.2
33.0
2.5
9.7
Jefferson Davis
13.1
6.6
17.8
10.4
33.1
4.7
14.3
Lafayette
19.3
8.4
7.9
11.7
34.3
4.0
14.4
Lafourche
15.4
4.1
20.1
22.6
26.8
3.4
7.6
Livingston
0.9
17.6
29.4
4.0
32.5
4.7
11.0
Orleans
4.0
7.1
13.9
16.5
31.7
9.4
17.4
Plaquemines
35.6
13.8
12.8
16.3
10.3
0.8
10.4
Pointe Coupee
15.6
11.1
18.0
5.4
39.1
4.7
6.1
Rapides
1.5
9.9
23.0
7.0
35.9
7.0
15.7
St. Bernard
1.6
8.2
54.5
4.8
21.5
2.9
6.6
St. Charles
3.0
15.9
45.1
14.9
13.4
2.0
5.7
St. Helena
8.5
17.6
35.8
14.0
19.0
2.8
2.2
St. James
6.7
11.1
63.7
2.3
12.6
1.5
2.1
St. John
0.6
3.8
50.0
11.3
22.8
2.7
8.8
St. Landry
11.8
7.4
16.2
6.5
41.9
5.2
11.0
St. Martin
14.8
16.0
26.0
1.7
28.9
4.4
8.2
St. Mary
20.8
8.3
19.6
15.5
22.8
2.1
10.9
St. Tammany
3.0
11.4
26.5
6.6
34.4
4.9
15.7
Tangipahoa
0.8
5.4
26.8
4.2
48.6
4.3
9.8
Terrebonne
22.1
5.9
18.6
11.6
29.4
2.5
9.8
Vermilion
17.1
6.5
18.5
11.9
30.9
3.7
11.4
Vernon
0.4
6.5
9.1
15.3
44.6
5.2
18.9
Washington
1.9
4.2
52.8
5.1
24.4
5.5
6.1
West Baton Rouge
0.0
6.6
12.2
56.5
18.6
1.9
4.2
West Feliciana
1.3
11.5
78.1
0.1
7.1
0.7
1.2
*Includes employment categories covered by the Louisiana Employment Security Act.
Source: Employment Wages, Louisiana Department of Employment Security, August 1972.
39
CADDO
BOSSIER
WEBSTER
CLAIBORNE
UNION
MOREHOUSE
CARROLI
WEST
CARROLL
LINCOLN
MENVILLE
QUACHITA
RICHLAND
LEGEND
MADISON
JACKSON
FRANKLIN
CALDWELL
RED RIVER
2
20 and above
TENSAS
DE SOTO
WINN
NATCHITOCHES
LA SALLE
10-20
CATAHOURA
SABINE
GRANT
CONCORDIA
5-70
RAPIDES
VERNON
<5
1.5
AVOYELLES
0.4
1.6
WEST FELICIANA
EAST
St.
WASHINGTON
FELICIANA
HELENA
BEAUREGARD
ALLEN
EVANGELINE
1.3
LANDRY
POINTE
1.6
1.9
8.5
TANGIPAHO
3.6
3.2
4.8
EAST
15.6
BATON BOUGL
ST. TAMMANY
11.8
LIVINGSTON
.8
WEST
BATONY
.7
3.0
ACADIA
OVBERVILLE
ROUGE
0
.9
EFFERSON DAVIS
CALCASIEU
MARVI
13.1
8.3
4.7
19.3
14.8
3.5
ASCENSION
LAFAYETTE
1.8
DILEANS
JOHN
RSI.
THE
JAMES
BAPTIST
4.0
CAMERON
VERMILION®
IBERIAL
ASSUMPTION
6.7
EST
ST.
22.0
CHARLES
BERNARD
PART OF
42.3
ST
5.9
17.1
ST. MARY MARTIN
3.0
REFERSON
LAFOURCHE
1.6
PLAQUEMINES
20.8
TERREBONNE
15.4
35.6
22.1
Fig. 10 PERCENTAGE MINING EMPLOYMENT OF TOTAL
PARISH EMPLOYMENT
40
CADDO
BOSSIER
WEBSTER
CLAIBORNE
UNION
MOREHOUSE
EAST
CARROLI
WEST
CARROLL
LINCOLN
MENVILLE
QUACHITA
RICHLAND
LEGEND
MADISON
JACKSON
FRANKLIN
CALDWELL
above 5
RED RIVER
TENSAS
DE soro
WINN
NATCHITOCHES
LA SALLE
3-5
CATAHOULA
SABINE
GRANT
CONCORDIA
1-3
RAPIDES
VERNON
.5
AVOYELLES
< 1
.0
.1
WEST FELICIANA
EAST
ST.
WASHINGTON
FELICIANA
HELENA
BEAUREGARD
ALLEN
EVANGELINE
.1
ST. LANDRY
POINTE
.0
.1
.3
COUPEE
TANGIPAMOA
.2
.2
.2
EAST
1.9
.4
BATON_ROUGE
LIVINGSTON
.1
ST. TAMMANY
WEST
BATON
1.0
ROUGE
X
ACADIA
BERVILLE
.0
.7
EFFERSON DAVIS
CALCASIEU
ST MARTH
.9
.9
10.1
.6
2.7
.4
SCENSION
AFAYETTE
.2
OILEANSO
JOHN
ST.
THE
15.9
JAMES
BAPTIST
AMERON)
VERMILION
IBERIA
ASSUMPTION
ST
5
0
CHARLES
BERNARD
4.5
PART OF
1.8
ST
.3
SI,MARY,MARTIN
4
REFERSON
LAFOUICHE
1.5
9.8
.2
PLAQUEMINES
6.4
TERREBONNE
3.1
6.1
7.9
Fig. 11 PERCENTAGE MINING EMPLOYMENT OF PARISH OF TOTAL
STATE MINING EMPLOYMENT
41
The estimated number of persons employed in these various
categories are shown in the following tabulation:
Estimate of Number
Employment Category
Employed as a Result
of OCS Activity
Mining
15,000
Manufacturing
10,500
Construction
4,700
Chemicals and allied
products
7,300
Refining
2,800
Subtotal
40,300
Supporting employment
84,100
Total
124,400
Taxes Foregone
Louisiana, like other coastal states, cannot tax the activity
conducted on the outer continental shelf beyond the three-mile limit
(three leagues for Texas and the Gulf side of Florida). Although
the impact of these activities is reflected in the demand for services,
as discussed previously, the state must forego the tax revenues that
it would collect if it had complete control over the outer continental
shelf activity. The taxes foregone in the case of Louisiana include
(1) severance, (2) income, (3) corporate franchise, (4) sales and use,
(5) occupational license, (6) ad valorem, and (7) miscellaneous, which
includes primarily power use taxes and a small amount of natural gas
franchise tax.
The various sections of the Louisiana Department of Revenue
estimate that the taxes foregone for 1972 would have amounted to
$183,488,000. The following tabulation indicates the amounts of state
taxes foregone, by category.
42
Tax Category
Amount Foregone
Severance
$ 127,210,000
Income
17,059,000
Corporate Franchise
11,968,000
Sales and Use
10,000,000
Occupational License
100,000
Ad Valorem
9,811,000
Miscellaneous
7,340,000
Total
$ 183,488,000
It can be noted that even without the severance tax, the amount
foregone would have been $56,278,000. These amounts are annual, and
could be expected at least to remain at these levels and probably
to increase. In addition, it should be noted that the sales tax
collections included in the total represents only that portion which
would be collected for the state. It does not include foregone sales
tax collections for individual parishes and municipalities.
The annual amounts of taxes foregone by the state since 1965
for the severance, ad valorem, and miscellaneous tax categories are
shown in Table XIII. Where available, the amounts collected from
offshore activity within the three-mile limit are shown for purposes
of comparison. The much greater level of activity beyond the three-
mile limit is reflected in these data.
Like the state, parishes and municipalities from which the companies
operate also forego tax revenues because of a lack of jurisdiction.
Most of the taxes foregone at the local level are in the sales and
ad valorem tax categories. On the assumption that the estimate of
state sales tax foregone is reasonable, an estimate can be made of
the amounts of parish and municipal sales taxes foregone. The rate
of municipal and parish sales taxes ranges from one percent to three
percent, and the amount foregone depends upon the distribution of sales
by locality for each year. However, if two percent represents a good
estimate of the average rate that would be applied, the parish and
43
Table XIII
SELECTED TAXES COLLECTED FROM OFFSHORE AND FOREGONE FROM OUTER CONTINENTAL SHELF
(1965-1972)
Severance Taxes
Ad Valorem Taxes
Miscellaneous Taxes
Year
Collected
Foregone
Collected
Foregone
Collected
Foregone
1965
$ 13,489,160
$ 50,157,750
$ 1,131,875
$ 3,332,561
NA*
$ 4,840,000
1966
15,758,691
63,103,993
1,267,709
3,849,400
NA
5,252,000
1967
18,458,854
74,343,831
1,386,771
4,163,106
NA
5,960,000
NA
6,256,000
44
1968
21,798,110
90,350,636
1,397,230
4,497,553
1969
23,039,837
105,102,868
1,515,070
5,396,734
NA
6,600,000
1970
25,617,228
123,515,864
1,834,345
8,286,711
NA
6,944,000
1971
25,679,138
131,728,474
1,811,754
9,513,196
NA
7,100,000
1972
30,963,365
127,209,836
1,841,572
9,811,094
NA
7,340,000
*NA = Not available. Most taxpayers do not separate inland and offshore sources of tax in their reports.
Source: State of Louisiana, Department of Revenue, February 1973.
municipal governments are foregoing approximately $6.7 million in sales
taxes per year. The ad valorem tax represents an even larger opportunity
loss. For every dollar of state ad valorem taxes collected in Louisiana,
approximately $7.86 is collected on the local level, according to
Bureau of Census data related to governmental finances in 1969-1970.
Assuming that this relationship is relatively stable and recalling
that the state is foregoing $9,811,000 of ad valorem taxes, the local
governments are foregoing $77,100,000. Thus, the total foregone
by local governments in Louisiana is $83.8 million.
The total amount of taxes foregone by both the state government
and the parish and municipal governments because of a lack of
jurisdiction over the outer continental shelf offshore Louisiana is
summarized as follows:
State taxes foregone
$183,488,000
Parish and municipal taxes
foregone
83,800,000
Total
$267,288,000
Cost of Governmental Services
The cost of governmental services associated with OCS petroleum
activity is, in large part, related to the population associated with it.
This in turn is dependent upon the number of persons employed in the OCS
activity, related major industry employment, supporting employment,
and the dependents of all these employees.
As shown in Table XIV, the estimated cost of governmental services
arising as a result of OCS activity is $265,044,000. This estimate is
based on (1) employment data taken from Appendix B, as discussed
previously; (2) 1970 census data, which indicates that there are 2.14
persons for every employed individual; and (3) Bureau of the Census data,
which shows that expenditures by state and local governments in
12
Louisiana were $677.88 per capita for fiscal year 1970-1971.
12
Governmental Finances in 1970-71, U.S. Bureau of the Census,
U.S. Government Printing Office, Washington, D. C., p. 45. Approximately
20.4 percent of these funds represents federal government transfers.
45
Table XIV
COST OF GOVERNMENTAL SERVICES ARISING AS A RESULT OF
EMPLOYMENT ASSOCIATED WITH OCS ACTIVITY
Taxes Needed To Provide
Number of Employees
Governmental Services
Employment Category
Related to OCS
Number of Employees
and Dependents
To Be Paid By
To Be Paid By
Activity
Total
Individuals
Corporations
Mining
15,000
47,150
$ 31,962,000
$ 12,785,000
$ 19,177,000
Manufacturing
10,500
33,000
22,370,000
8,948,000
13,422,000
Construction
4,700
14,770
10,012,000
4,005,000
6,007,000
46
Chemicals and
Allied Products
7,300
22,940
15,551,000
6,220,000
9,331,000
Refining
2,800
8,800
5,965,000
2,386,000
3,579,000
Supporting Employment
84,100
264,330
179,184,000
71,674,000
107,510,000
Total
124,400
390,990
$265,044,000
$106,018,000
$159,026,000
NOTE: Employment X 3.1431 = Employees + Dependents.
(Employees + Dependents) X $677.88 = Taxes needed to pay for governmental services.
Source: Gulf South Research Institute.
The estimated costs are based on employment and population and thus
take into account the interrelationship of employment in basic industries,
supporting activities, and mining. They are not intended to be precise
measures of the benefits received by groups. They do show that there
is a substantial cost generated by the OCS activity.
Some of the cost of governmental services is paid for by
individuals and some by corporations. Based on an analysis of tax
categories for both the state and local governmental units, it is
estimated that approximately 40 percent of total taxes are paid by
individuals and 60 percent by corporations. Therefore, as shown
in Table XIV, the corporate share of the cost associated with the
OCS activity is estimated to be $159,026,000.
Attention is focused on the corporate-borne cost because the OCS
activity is beyond the taxing authority of the state and local govern-
ments. While the tax burden as a whole is borne by individuals and
corporations, a part of one of these groups is incurring and
initiating demands for state and local governmental services,
but is not participating in the paying of the state and local
taxes.
Some of the cost of services that should be paid for by corporations
is not being paid. Many of the firms whose activity is dependent in
part on OCS activity are paying taxes for their operations which are
located on land and within state and local taxing jurisdictions,
but do not pay taxes on that portion of business attributed to the
OCS.
Of companies which are physically operating in the OCS region,
some are paying "taxes" in the form of higher royalty and bonus payments
to the federal government because they are not within a state's
boundaries, but the state and local governmental units are not receiving
their share of this money. It is estimated that the net cost associated
with OCS activities is $38,000,000 or approximately 24 percent of
the total corporate share. This estimate is based on the following
assumptions:
47
1. Ninety percent of the cost of governmental
services provided mining corporation
operating in the OCS are uncompensated
for due to the tax jurisdiction
$17,259,300
2. Fifty percent of the cost of governmental
services provided manufacturing firms
serving the OCS are uncompensated
6,711,000
3. Fifty percent of the cost of governmental
services provided construction firms
serving the OCS are uncompensated
3,003,500
4. Ten percent of the cost of governmental
services provided supporting firms
serving the OCS are uncompensated
10,751,000
TOTAL
$37,724,800
These percentage allocations are based on information contained in
the questionnaires and information supplied by the Department of
Revenue. It is important to note that these figures apply only to
those firms which are engaged in OCS activities and make no allowances
for taxes paid for onshore activities by the same firms except those
which support OCS activities.
The cost of governmental services that should be paid by corporations
and is not being paid to state and local governmental units may be
greater than that associated with the estimated 15,000 persons employed
in mining. The OCS petroleum mining is relatively capital-intensive
when compared with other activities in the state which arise because
of it--that is, there is more machinery, plant, and equipment per employee
than in other activities. This means that as the mining activity adds
employment, relatively more employees will be hired by firms that
use less capital per employee.
The demand for such things as ports, highways, airports, and other
facilities is probably higher for the capital-intensive. In a survey
of offshore operations and support firms, extensive use of Louisiana
airports, highways, ports and waterways was reported. These facilities
are depicted in figures 12, 13, and 14.
48
Mississipp
RYAN
Baton Rouge
DOWNTOWN
Lafayette
Lake Charles
River
Lake
LAFAYETTE
Pontchartrain
49
New Orleans LAKEFRONT
ACADIANA REGIONAL AIRPORT NEW ORLEANS INTERNATIONAL
(MOISANT FIELD)
WESTWEGO
B
THIBODAUX
PATTERSON
AMELIA
71n
HOUMA-TERREBONNE
NORTH
0
30
40
GULF
"I
10
20
DULAC-HELICOPTER
Scale In Miles
OF
AIRPORTS
MEXICO
Fig. 12 LOUISIANA AIRPORTS AND HELIPORTS USED BY OFFSHORE OPERATIONS
Mississippi
US
US
61
La 13
167
US 190
Baton Rouge
US 190
59
Lake Charles
I-10
Lafayette
River
Lake
90
a
US 90
La
Pontchartrain
27
La 14
La 35
US 167
31
US 61
New Orleans
86
50
87
46
La
308
La
82.
La 83
la
US 90
39:
11.
NORTH
315
sLa 24
56
0
10
20
30
40
GULF
57
o
Scale In Miles
OF
MEXICO
Fig. 13 LOUISIANA HIGHWAYS USED BY OFFSHORE OPERATIONS
Mississippi
RITY Chen nais drus) leg
Baton Rouge
Lafayette
Lake Charles
River
Lake
LAKE CHARLES
Pontchartrain
Lake Charles-
Cameron Channel
Vermilion River
New Orleans
PORT OF NEW IBERIA
Intracoastal
Industrial Canal NEW ORLEANS
51
AVERY ISLAND
GRAND CHENIERE
Rever
BERWICK
MORGAN CITY
Harvey Canal
INTRACOASTAL CITY
CAMERONMermentau
Waterway
AMELIA
ter Freshwater Bayou
HOUMA
Atchai Lower River falaya Atchafalaya
Bayou Boeuf
Houma
NORTH
Navigation
DULAC
GULF
Canal
0
10
20
30
40
Bayou Terrebonne
Bayou Lower Bar BATBLATTE Mississipping SUPHUR PHUR waterway EMPIRE EMP River BURAS we
VENICE
Scale In Miles
OF
LEEVILLE
GRAND ISLE
MEXICO
Grand Ca
Southment Pas
N
PORTS
Fig. 14 LOUISIANA PORTS AND WATERWAYS USED BY OFFSHORE OPERATIONS
An important aspect of the cost of providing governmental
services in OCS area arises from the location of the demand. In
many cases, these services are more expensive to provide in coastal
regions than in other areas because of certain unique characteristics.
Along the Gulf coast, for example, hurricanes, tropical storms, and
tropical depressions are especially damaging between May and October.
Many of these bring only brief, gusty winds and locally heavy rainfall.
Others, like hurricanes Betsy and Camille, are accompanied with violent
winds in excess of 100 miles per hour, massive inundations of shoreline
10 to 15 feet above mean Gulf level, and rainfalls of 10-20 inches in
24 hours. These conditions require expenditures not only for hurricane
protection, but also for adequate means of evacuation and for repairs
to damaged property and materials. In many instances, highways must
be constructed especially for use during flooding conditions. The
cost of highway construction is also increased in many cases because the
proposed route crosses a marsh region where extensive preparation is
required in advance of construction.
In addition to the fact that current offshore operations require
shoreline governmental services, there is uncertainty over the future
economic base of the area. Much of the expansion of public facilities
and services has been based on the rapid growth and needs of the
offshore oil and gas operations. However, in 1972 over 38 percent of the
offshore area adjacent to Louisiana was already under lease. As to what
happens to this area when the oil and gas reserves are depleted, one
cannot say. This added uncertainty is a cost to state and local government
which cannot be quantified at this time. Nevertheless, the cost must
be recognized and steps taken to prevent an Appalachia from developing
in the coastal zone.
Implications for Other Coastal States
The development of petroleum resources from the OCS region
offshore any coastal state generates demand for governmental facilities
and services. The magnitude and timing of this demand depend upon
the rate of exploration, the success in finding reserves, the
productivity of the wells, and the rate of development of reserves.
52
Other factors influence the induced impact of such development upon
a region. These include, among others, the willingness of states and
localities to construct and operate refineries and petrochemical
plants. One way of estimating the possible impact of the demand for
governmental services is to relate the projected additions in
petroleum reserves to employment. The following analysis focuses on
the possible magnitude of the cost of governmental services stemming
from development of resources offshore the United States in the
Pacific Ocean, the Atlantic Ocean, and the Gulf of Mexico.
The Committee on the U.S. Energy Outlook of the National Petroleum
Council recently published estimates of petroleum potential for
various regions of the United States. These estimates of remaining
discoverable resources were presented previously in tables II and III.
The committee also forecast additions to reserves under varying
assumptions with respect to drilling rates and finding rates.
The estimates for regions offshore the lower 48 states are shown
in tables XV and XVI for two of the assumptions.
Table XV
PROJECTED REGIONAL NON-ASSOCIATED GAS RESERVES
ADDED DURING THE PERIOD 1971-1985
(Cumulative in Thousands of Cubic Feet)
High Finding Rate
Low Finding Rate
Region
and Medium Drilling
and Medium Drilling
Rate
Rate
Atlantic Ocean
11.4
7.6
Pacific Ocean
0.3
0.3
Gulf of Mexico
95.6
63.3
Source: U.S. Energy Outlook: A Report of the National Petroleum
Council's Committee on U.S. Energy Outlook, December 1972,
P. 103.
53
Table XVI
PROJECTED REGIONAL CRUDE OIL RESERVE ADDITIONS
DURING THE PERIOD 1971-1985
(In Billions of Barrels)
High Finding Rate
Low Finding Rate
Region
and Medium Drilling
and Medium Drilling
Rate
Rate
Atlantic Ocean
0.5
0.4
Pacific Ocean
4.2
3.1
Gulf of Mexico
6.4
4.6
Source: U.S. Energy Outlook: A Report of the National Petroleum
Council's Committee on U.S. Energy Outlook, December 1972,
P. 84.
The estimates shown in tables XV and XVI were used in conjunction
with historical relationships for Louisiana to obtain estimates of the
magnitude of governmental costs. For the period 1956-1970, the
additions to reserves for natural gas and oil for the Gulf of Mexico
were 42.1 thousands of cubic feet and 5.0 billion barrels, respectively.
Based on the earlier estimate of 15,000 persons being employed in the
OCS offshore Louisiana and the fact that about 85 percent of offshore
production comes from federal areas, it is estimated that approximately
17,650 are engaged in all offshore activity. This number was used as
the employment level necessary to develop the additions to reserves in
the Gulf of Mexico for the 1956-1970 period. This number may be
low because in recent years approximately 10 percent of the oil produced
from the OCS came from offshore Texas. The 17,650 employees were
then allocated to oil and gas on the basis of the number of producing
wells of each type--25 percent gas and 75 percent oil.
The estimates of the mining employment needed to develop the
additions to reserves for the various areas were then developed, using
the following relationship:
Allocated Louisiana
Estimated Regional
Mining Employment
=
Mining Employment
Additions to Reserves
Estimated Additions
for the Period 1956-1970
to Reserves
54
To estimate the additional employment in other activites such as
manufacturing, construction, refining, and chemicals and allied
products, the relationship that currently holds for Louisiana was
used. There are 1.687 persons employed in these categories for each
mining employee. In addition, supporting employment was estimated
in the same way it was earlier in the report for Louisiana--for
every employee in the basic industries discussed above, it was assumed
that there were approximately 2.087 persons in supporting employment
opportunities.
The estimates for employment by region under both the assumption
of high finding and low finding rates coupled with a medium drilling
rate, are shown in Table XVII.
Table XVII
ESTIMATED REGIONAL EMPLOYMENT ASSOCIATED WITH THE
DEVELOPMENT OF OFFSHORE OIL AND GAS
Other Basic
Supporting
Mining
Total
Region
Industry
Activity
Employment
Employment
Employment
Employment
Assumption I: High Finding Rate and Medium Drilling Rate
Atlantic Ocean
2,520
4,250
14,130
20,900
Pacific Ocean
11,150
18,810
62,520
92,480
Gulf of Mexico
26,960
45,490
151,190
223,640
Assumption II: Low Finding Rate and Medium Drilling Rate
Atlantic Ocean
1,860
3,130
10,410
15,400
Pacific Ocean
8,240
13,900
46,200
68,340
Gulf of Mexico
18,810
31,730
105,470
156,010
55
The cost of governmental services was estimated using the
current relationships between employment and population for Louisiana
and the current cost per capita for governmental services. The total
population is 3.1431 times as large as total employment, and governmental
expenditures were $677.88 per capita, as shown in Table XVIII.
Table XVIII
IMPACT ON DEMAND FOR GOVERNMENTAL SERVICES ASSOCIATED
WITH DEVELOPMENT OF REGIONAL OFFSHORE PETROLEUM
Annual Cost of
Region
Employment
Population
Governmental
Services
Assumption I: High Finding Rate and Medium Drilling Rate
Atlantic Ocean
20,900
65,690
$ 44,529,900
Pacific Ocean
92,480
290,670
197,039,400
Gulf of Mexico
223,640
702,920
476,495,400
Assumption II: Low Finding Rate and Medium Drilling Rate
Atlantic Ocean
15,400
48,400
$ 32,809,400
Pacific Ocean
68,340
214,800
145,608,600
Gulf of Mexico
156,010
490,360
332,405,000
These estimates of costs for governmental services are only
rough indications of the potential magnitude of such costs. In reality,
many factors enter the situation. The cost of governmental service
will vary from region to region and probably can be expected to rise
for all regions. The employment relationships currently applicable
in the Louisiana situation may not hold for other areas now or in the
future. Moreover, the productivity of the petroleum fields themselves
can be expected to vary from region to region.
56
In view of all these factors, it is useful to consider the
magnitude of the potential costs and to consider the direction of
potential errors in these estimates. Two factors may suggest that
the costs can be even higher than that estimated. These factors are
(1) that the Louisiana offshore fields have been very productive and
other regions may experience less productivity; and (2) the costs of
governmental services have steadily risen for all regions in the
country.
The estimates previously discussed deal with all of the offshore
areas because estimates of additions to reserves are not broken down
into state and federal areas. The proportion of development taking
place in federal areas and state areas will vary from region to region.
57
MINERAL LEASING ON FEDERAL AND OFFSHORE AREAS
MINERAL LEASING ON FEDERAL AND OFFSHORE AREAS
Onshore Lands
The Mineral Leasing Act of February 25, 1920 (41 Stat. 436,
30 U.S.C. 181 seq.) provides for the sharing of mineral leasing
revenues from federal lands with the state within which the federal
lands are located.
37-1/2 per centum of the amounts derived
from such bonuses, royalties, and rentals shall
be paid by the Secretary of the Treasury after
the expiration of each fiscal year to the State
within the boundaries of which the leased lands
or deposits are or were located, said monies
to be used by such State or subdivisions thereof
for the construction and maintenance of public
roads or for the support of public schools or
other public educational institutions, as the
legislature of the State may direct
The apparent intent of the rebate provision of the Mineral
Leasing Act of 1920 was it
"gives the States a certain portion
,13
of the revenues to partly reimburse them for their losses in taxes.
Today each state receives 37.5 percent of the bonuses, royalties and
rentals collected by the federal government except Alaska which receives
90 percent of mineral leasing revenues. The distribution of funds
under the Mineral Leasing Act of 1920 is presented in Table XIX.
Offshore Water Bottoms
The following paragraphs contain a brief summary of the historical
legal status of offshore lands and the current practices now in effect
in regard to the leasing of such lands.
Legal Status
The controversy over ownership of coastal submerged lands began in
14
the 1920s.
California was the first state to issue oil and gas lease
13
Mr. Mondel, Congressional Record (October 28, 1919), P. 7649.
14
This description of legal status is drawn from L. K. Weaver,
C. J. Jirik, and H. T. Pierce, Impact of Petroleum Development in the
Gulf of Mexico (Washington: U.S. Department of the Interior, Bureau
of Mines), 1969, PP. 10-14.
58
Table XIX
RECEIPTS UNDER THE MINERAL LEASING ACT, FEBRUARY 25, 1920 - JUNE 30, 1972
Fiscal Year
State
1920-1969
1970
Total
1971
1972
Alabama
$
355,625
$
15,729
$
40,676
$
28,384
$
440,414
Alaska
88,137,456
9,207,850
8,910,283
8,144,514
114,400,103
Arizona
6,611,169
347,808
335,750
496,926
7,791,653
Arkansas
1,444,174
55,435
51,757
44,121
1,595,487
California
224,856,230
7,542,059
8,261,400
7,028,435
247,688,124
Colorado
184,213,230
8,236,750
7,888,341
9,392,007
209,730,328
Florida
15,377
79,579
90,973
5,377
191,306
Idaho
8,691,083
558,042
419,783
587,683
10,256,591
Illinois
222
I
I
:
222
Indiana
240
:
--
--
240
Kansas
5,195,543
479,787
436,381
463,415
6,575,126
Louisiana
8,565,927
753,754
865,603
711,594
10,896,878
Michigan
172,121
43,229
45,028
44,307
304,685
Mississippi
320,263
42,614
32,150
26,415
421,442
Montana
93,414,992
7,508,049
6,823,400
6,685,006
114,431,447
Nebraska
301,330
6,620
4,435
4,615
317,000
Nevada
16,410,332
1,152,170
969,208
720,636
19,252,346
New Mexico
347,831,566
29,989,734
31,502,346
31,049,508
440,373,154
North Dakota
7,407,404
534,198
538,628
576,882
9,057,112
Oklahoma
3,401,720
528,580
410,649
578,929
4,919,878
Oregon
869,176
73,685
183,542
178,552
1,304,955
South Dakota
4,821,700
468,202
283,463
227,310
5,800,675
Utah
136,028,278
8,597,546
9,208,512
9,970,842
163,805,178
Washington
221,325
281
15,008
522
237,136
Wyoming
710,663,071
50,889,708
57,923,768
52,858,026
872,334,573
TOTAL
$1,849,949,554
$127,111,409
$135,241,084
$129,824,006
$2,242,126,053
NOTE: Act of February 25, 1920 (41 Stat. 437, 30 U.S.C. 181 et seq.). These
figures are not adjusted for refunds and other corrections.
Source: U.S. Department of Interior, Bureau of Land Management, 1973.
59
rights for submerged land. With the development of offshore activity
in California, the U.S. Department of the Interior began receiving
applications for oil leases under the Mineral Leasing Act of 1920.
During the ensuing years, attempts were made in Congress to pass
legislation defining the state and federal role in the development of
submerged lands. The issue remained unsettled during World War II. In
September 1945, however, President Franklin D. Roosevelt issued
Proclamation No. 2667 stating the federal government's jurisdiction
over the seabed of the continental shelf. At the same time, he
issued Executive Order No. 9633, placing the natural resources of the
continental shelf under the jurisdiction of the Department of the
Interior. This was followed by the landmark California Case (332 U.S. 19)
in which the U.S. Supreme Court ruled that the rights of the state
ended at the water's edge and that the federal government had
"paramount rights" to the submerged lands adjacent to its coast.
The decision of the U.S. Supreme Court aroused a great deal of
opposition. A bill was introduced and passed in Congress to reverse
the court's decision. The bill, however, was vetoed by President
Harry S. Truman.
On June 5, 1950, the U.S. Supreme Court ruled against the claims of
Texas and Louisiana to the submerged waterbottoms (339 U.S. 707 and 339
U.S. 699). During the presidential campaign of 1952, General Dwight D.
Eisenhower indicated that, if elected, he would support legislation
establishing the state's rights to submerged land. Subsequently, the
Submerged Lands Act was signed into law on May 22, 1953. The act established
the seaward boundary of the states at three geographic miles from the coast-
line, unless another historic boundary could be proved. In the litigation
that followed, the constitutionality of the Submerged Lands Act was upheld
by the Supreme Court. The Court held that the division of the continental
shelf between the federal and state governments was a domestic matter and
was therefore governed by Congress, which passed the act. In 1955, the
federal government initiated action against Louisiana to establish its
rights to the water bottoms beyond three geographic miles and to establish
an accounting for money derived from the disputed area. 15
15
For a discussion of the delineation of zones 1, 2, 3, and 4, see
Ibid., pp. 11-14.
60
In 1960, the Supreme Court upheld the right of Texas and Florida to
submerged lands extending three leagues (or 10.5 nautical miles) into the
Gulf of Mexico. The same decree ruled that Louisiana, Mississippi, and
Alabama are entitled to the submerged lands extending not more than
three geographic miles from their coastlines. At this time Alaska, the
Atlantic coast states, and Louisiana are still engaged in tidelands
disputes with the federal government.
Leasing Practices
The Outer Continental Shelf Lands Act, enacted on August 7, 1953,
gives the Department of the Interior administrative authority over
leasing of mineral rights in the outer continental shelf area. Within
the Department of the Interior, the Bureau of Land Management (BLM)
administers the OCS leasing provisions, and the U.S. Geological Survey (USGS)
administers the OCS operating regulations.
Lease sales are scheduled at the Secretary of Interior's discretion.
Normally, two lease sales are scheduled each fiscal year. The President's
Energy Message in April 1973, however, called for more frequent and larger
lease sales on the outer continental shelf. Both the USGS and BLM advise
the Secretary in planning and evaluating lease activities. Usually when
interest is expressed in a certain area, a call for nominations in a
specified area is made. Specific tracts to be offered for lease are
selected on the basis of a combination of geological, engineering, economic
and environmental data. Once the tracts are selected, a notice of lands
for lease is published in the Federal Register. The notice defines the
terms and conditions of lease.
To date, leases have been received on the basis of a cash bonus and
fixed royalty. The first year rental or minimum royalty is prescribed in
notice. Royalties for OCS oil and gas have been 16-2/3 percent and, by
law, cannot be less than 12.5 percent. Leases are made for five years and
are maintained in force as long as production justifies the lease. The
bid for a tract must be accompanied with a certified check or cashiers
check, bank draft, money order, or cash equal to one-fifth the value of
the bid. The remaining four-fifths of the bonus bid, plus the first year
rental, is due within 30 days of the lease award. A summary of first year
rentals and bonuses by contiguous states is presented in Table XX.
61
Table XX
SUMMARY OF OUTER CONTINENTAL SHELF LEASE SALES, BY STATE, BY PRODUCT
(1954-1972)
Lease Sales
Number of
First Year
By State
Acreage
Bonus
By Product
Leases
Rental
California
124
678,121
$ 636,715,849
$ 2,038,361
Florida
23
132,480
1,711,872
397,440
Louisiana
1,321
5,588,918
5,352,891,396
19,352,116
Oregon
74
425,433
27,768,772
1,276,302
Texas
264
1,099,493
695,723,597
3,298,485
Washington
27
62
155,420
7,764,928
466,260
Total
1,833
8,079,865
$6,763,764,414
$26,828,964
Oil and Gas
1,772
7,972,245
6,727,969,641
26,531,104
Salt
2
4,995
105,814
14,985
Sulfur
59
102,625
35,688,959
282,875
Total
1,833
8,079,865
$6,763,764,414
$26,828,964
Source: U.S. Department of the Interior, Bureau of Land Management.
Table XX
SUMMARY OF OUTER CONTINENTAL SHELF LEASE SALES, BY STATE, BY PRODUCT
(1954-1972)
Lease Sales
Number of
First Year
By State
Acreage
Bonus
By Product
Leases
Rental
California
124
678,121
$ 636,715,849
$ 2,038,361
Florida
23
132,480
1,711,872
397,440
Louisiana
1,321
5,588,918
5,352,891,396
19,352,116
Oregon
74
425,433
27,768,772
1,276,302
Texas
264
1,099,493
695,723,597
3,298,485
Washington
27
155,420
7,764,928
466,260
62
Total
1,833
8,079,865
$6,763,764,414
$26,828,964
Oil and Gas
1,772
7,972,245
6,727,969,641
26,531,104
Salt
2
4,995
105,814
14,985
Sulfur
59
102,625
35,688,959
282,875
Total
1,833
8,079,865
$6,763,764,414
$26,828,964
Source: U.S. Department of the Interior, Bureau of Land Management.
The USGS administers the rules and regulations applicable to operations
conducted under a lease issued by the Department of the Interior, including
the regulation of drilling and production, collection of rental and royalty,
well and other structure abandonment, etc. A summary of royalty payments
made from 1954 to 1972 by contiguous states is presented in Table XXI.
63
Table XXI
SUMMARY OF OUTER CONTINENTAL SHELF ROYALTIES FOR ALL PRODUCTS, BY ADJACENT STATE
(1954-1972)
State
Year
Total
California
Florida
Louisiana
Oregon
Texas
Washington
1954
--
--
2,748,977
--
--
--
2,748,977
1955
--
--
5,139,027
--
979
--
5,140,006
1956
--
--
7,622,708
--
6,675
--
7,629,383
1957
--
--
11,387,865
--
3,380
--
11,391,245
1958
--
--
17,423,878
---
--
--
17,423,878
1959
--
--
26,539,836
--
141
--
26,539,977
1960
--
--
37,095,254
--
47
--
37,095,301
1961
--
--
47,920,332
--
--
--
47,920,332
1962
--
--
66,094,497
--
1,837
--
66,096,334
64
1963
--
--
76,972,598
--
26,627
--
76,999,225
1964
--
--
88,397,781
--
2,449
--
88,400,230
1965
--
|
102,860,874
--
1,666
--
102,862,540
1966
--
--
135,390,922
--
1,596,615
--
136,987,537
1967
--
--
153,271,258
--
4,336,351
--
157,607,609
1968
906,430
--
195,553,524
--
4,676,977
--
201,136,931
1969
4,891,885
--
230,198,962
--
4,999,819
--
240,090,666
1970
12,599,910
--
265,953,798
--
4,940,860
--
283,494,568
1971
17,115,304
--
328,279,048
--
4,648,136
--
350,042,488
1972
--
--
--
--
--
--
--
Total
35,513,529
--
1,798,851,139
--
25,242,559
--
1,859,607,227
Source: Gulf South Research Institute.
Appendix A
NUMBER OF PERMITS GRANTED FOR GEOLOGICAL
AND/OR GEOPHYSICAL EXPLORATION
Appendix A
Outer Continental Shelf
NUMBER OF PERMITS GRANTED FOR GEOLOGICAL
AND/OR GEOPHYSICAL EXPLORATION
Gulf Coast
Yearly
Year
Alaska
Atlantic
Pacific
Total
Alabama
Florida
Louisiana
Mississippi
Texas
1963
9
1
2
1
143
1
18
6
181
1964
5
6
2
7
110
1
85
14
230
1965
12
2
3
7
155
1
140
21
341
1966
11
10
11
30
360
6
136
27
591
1967
17
5
7
26
301
3
138
54
551
1968
27
9
13
26
188
12
95
28
398
1969
30
7
10
10
160
9
61
18
305
1970
40
4
4
13
134
5
48
5
253
1971
27
4
7
19
150
5
38
4
254
TOTAL
178
48
59
139
1,701
43
759
177
3,104
Source: "Questions and Policy Issues Related to Oversight Hearings
on the Administration of the Outer Continental Shelf Lands
Act to be Held by the Senate Committee on Interior and
Insular Affairs, Pursuant to S. Res. 45, March 23, 1972,"
U.S. Department of the Interior, 1972.
A-1
Appendix B
EMPLOYMENT AND GOVERNMENTAL EXPENDITURES
ASSOCIATED WITH OCS PETROLEUM PRODUCTION
Appendix B
EMPLOYMENT AND GOVERNMENTAL EXPENDITURES ASSOCIATED
WITH OCS PETROLEUM PRODUCTION
Employment in a basic industry such as mining can be expected to
induce employment in related and supporting activities. The methodology
for arriving at the estimates of the number of persons employed in
mining related to OCS activity and in induced activities is discussed
in this section. Employment data is summarized in the following
tabulation:
Employment Category
Estimate of Number Employed
as a Result of OCS Activity
Mining
15,000
Manufacturing
10,500
Construction
4,700
Chemicals and allied products
7,300
Refining
2,800
Subtotal
40,000
Supporting employment
84,100
Subtotal
84,100
TOTAL
124,400
B-1
Mining
It is estimated that 15,000 persons employed in the mining
category in Louisiana are associated with outer continential shelf
activity. This estimate is based on information from a mail question-
naire, telephone conversations with a number of people associated with
the industry, and an analysis of employment data.
Discussions of the problem with persons in the industry indicate
that even those intimately concerned with OCS activity have difficulty
in determining how many people are engaged in activity associated with
the OCS. Part of the problem is separating an individual's time into
the part spent on on-shore problems and the part spent on offshore
problems. Perhaps as many as 75 percent of the 50,000 persons employed
in the mining category spend some time on offshore-related problems.
It may be that as many as 50 percent of the people now employed in
mining would not be so employed if there were no OCS activity.
Analysis of data from questionnaires returned by large firms
(which were verified by telephone calls) resulted in a conservative
estimate that 30 percent of the employees in mining are associated
with OCS activities.
The number of persons reported on the questionnaires as being
engaged in activity related to the OCS was related to the number of
persons employed in SIC codes 131, 132, 138, according to Louisiana
Employment Security data for 38 southern parishes. The results are
shown in Table B-1.
The number of persons associated with OCS activity can also be
estimated by relating the percentage of production taking place from
the OCS of total Louisiana production to employment. In 1970, 29.3
percent of the oil and 28.9 percent of the gas came from the federal
OCS areas. By rounding both figures to 29 percent and multiplying
total state mining employment by that figure, the following number is
obtained:
49,685 X .29 = 14,409
B-2
Table B-1
RELATIONSHIP OF OCS MINING EMPLOYMENT OF TOTAL MINING EMPLOYMENT
OCS
Employment
Employment
OCS Mining
Company
in SIC Codes
Reported on
Employment, as
131, 132, 138*
Questionnaire
Percent of Total
A
1,020
225
.22
B
1,960
493
.25
L
959
311
.32
D
184
75
.41
E
279
250
.90
*For 38 southern parishes in Louisiana.
This is an estimate of only the federal OCS-related employment.
Additional employment would be associated with state offshore activity.
In 1970, state offshore oil and gas production was 6.8 percent and 7.7
percent of the state total, respectively. If seven percent is used as
a conservative approximation of the two, employment for this activity
can be estimated as
49,685 X .07 = 3,478
The total for the federal OCS and the state offshore areas, therefore,
would be 17,887 persons.
Employment can alternatively be estimated by using the number of
producing oil and gas wells as a means of allocating total employment.
The following relationships are then found:
Oil Wells
Total number of wells, 1970 = 28,278
Land 23,493 ÷ total = .83
State offshore 1,171 ÷ total = .04
Federal OCS 3,614 + total = .13
B-3
Gas Wells
Total number of wells, 1970 = 10,333
Land 8,708 : total = .84
State offshore 322 ÷ total = .03
Federal OCS 1,303 ÷ total = .13
Related to Employment
49,685 X .13 = 6,459
"
7,949
X .03 = 1,490
"
X .84 = 41,735
The last estimate does not seem realistic, according to people involved
in the industry.
One of the major problems associated with estimating the total
number of people related to OCS activity is the manner in which govern-
mental sources classify employment. For example, one firm indicated on
the questionnaire that approximately 455 of its employees with Louisiana
residences are associated with OCS production. These individuals,
however, were not counted in the mining category in Employment Security
data.
Construction
The number of persons in Louisiana employed in construction related
to OCS petroleum production is estimated to be 4,700, on the basis of
1970 census data and the methodology described below.
The four employment categories of agriculture, forestry and
fisheries; mining; construction; and manufacturing were assumed to be
the basic industrial employment base. It was assumed that if there
were no employment in any of these four categories, there would be no
other employment. The employment in the major category of construction
was then allocated to the other three in relation to their relative
importance. In the case of mining, the percentage of construction
employment allocated was determined by dividing 46,584 (the 1970
employment in mining) by the total employment in agriculture, forestry,
B-4
and fisheries; mining; and manufacturing (278,607).
The resulting percentage was multiplied by employment in construction
(96,600). The number obtained is the total associated with mining,
and since 29 percent of the total production is obtained from the
OCS, that percentage was used to obtain the final estimate of approxi-
mately 4,700.
Construction Calculation
Total construction employment
96,609
Agriculture, forestry, and fisheries
47,999
Mining
46,584
Manufacturing
184,024
278,607
(
46,584
278,607
(96,609) (.29) = 4,684
Manufacturing
It is estimated that approximately 10,500 persons employed in manu-
facturing are associated with, or dependent upon, OCS activity. This
number excludes those in the subcategories of refining and chemicals
and allied products. The methodology employed in obtaining this
estimate was the same as that used for construction, with the exception
that all of the employment in chemicals and allied products and 9,500
persons from the other nondurable goods category to account for refining
employment were excluded and treated separately.
Manufacturing Calculation
Total Employment in Manufacturing
184,024
Less:
Chemicals and Allied Products
25,223
Refining
9,500
34,723
149,301
Agriculture, Forestry, and Fisheries
47,999
Mining
465,584
Construction
96,609
191,192
(
46,584
(149,301) (.29) = 10,549
191,192
B-5
Chemicals and Allied Products
Based on the ratio of OCS production to total petroleum production,
it is estimated that approximately 7,300 employees in the chemicals and
allied products category are dependent upon OCS activity. Since petro-
leum activity is so directly related to the manufacture of chemicals and
allied products, it seems appropriate to relate the employment to pro-
duction in this manner.
Chemicals and Allied Products Calculation
25,223 X .29 = 7,315
Refining
The number of employees in refining who are dependent upon OCS
production is estimated to be approximately 2,800. This estimate was
determined in the same way as that for chemicals and allied products.
Refining Calculation
9,500 X .29 = 2,755
Agriculture, Forestry, and Fisheries
None of the employment in the category of agriculture, forestry,
and fisheries was related to the OCS petroleum production.
Supporting Employment
For every employee in one of the four major categories, it is
estimated that there are 2.0868752 persons employed, on the average,
in other categories. This figure was obtained using 1970 census data
which indicated that employment in the four categories totaled 375,216,
while all other employment totaled 783,029. The number of persons
employed in supporting activities is estimated to be 84,100.
B-6