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    "id": "1524208",
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    "title": "Outer Continental Shelf, 1975: Options Paper",
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        "logicalDate": "1975-03-31",
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    "ocrText": "The original documents are located in Box 32, folder \"Outer Continental Shelf, 1975:\nOptions Paper\" of the Glenn R. Schleede Files at the Gerald R. Ford Presidential Library.\nCopyright Notice\nThe copyright law of the United States (Title 17, United States Code) governs the making of\nphotocopies or other reproductions of copyrighted material. Gerald R. Ford donated to the United\nStates of America his copyrights in all of his unpublished writings in National Archives collections.\nWorks prepared by U.S. Government employees as part of their official duties are in the public\ndomain. The copyrights to materials written by other individuals or organizations are presumed to\nremain with them. If you think any of the information displayed in the PDF is subject to a valid\ncopyright claim, please contact the Gerald R. Ford Presidential Library.\nCANADA THE INTERIOR TERIOR\nUnited States Department of the Interior\nOFFICE OF THE SECRETARY\nMarch\n1849\nWASHINGTON, D.C. 20240\n3.\nMarch 12, 1975\nMEMORANDUM TO: JAMES M. CANNON\nEXECUTIVE DIRECTOR OF THE DOMESTIC\nCOUNCIL\nSUBJECT:\nOption Paper on Sharing Outer Continental\nShelf Revenues\nAttached is a new version of the option paper prepared\nby my staff on sharing Outer Continental Shelf\nrevenues with States. This version includes\nadditional options by request of Jim Lynn of OMB.\nRoyston Assistant Royston C. Secretary Hughes C. Hughes\n:\nProgram Development and Budget\nAttachment\nCC: James T. Lynn\nDirector, OMB\nFORD if LIBRARY GERALD\n(3/12/75)\nOPTION PAPER\n[Dept. Interior)\nSharing Outer Continental Shelf Revenues with States\nAn accelerated leasing program has been initiated on the Outer Continental\nShelf (OCS) to open up frontier oil and gas prospects and provide a badly\nneeded supplement to domestic onshore production. Coastal States are\ntroubled by the prospect of accelerated leasing off their shores because\nthey would have to bear the brunt of certain costs of development while\nthe entire Nation receives the benefit of increased domestic supplies of\noil and gas.\nCoastal State concerns about OCS development involve:\n- environmental damages, including possible oil spills\nFORD is LIBRARY GERALD\n- esthetic impacts\n- economic effects, including possible disorderly development,\ninjury to existing industry, and the burden of providing new\npublic services.\nTo meet these concerns, the Federal Government has already proposed\nincreased planning money for the Coastal Zone Management Act, and is\ndeveloping a Comprehensive Oil Spill Liability bill.\nIt has, however, up to now opposed providing Coastal States with a share\nof OCS revenues on the grounds that -\n- OCS revenues belong to all the Nation, and their revenues should\nbenefit all citizens\n- a number of Federal programs already exist which provide assistance\nto States in ameliorating impacts of development\n- sharing CCS revenues with Coastal States would reduce the amount\nof revenues available to support other Federal expenditures and\nrequire compensating adjustment elsewhere in the Federal budget\n- onshore development induced by offshore activities will eventually\nprovide State and local governments with an increased tax base\nto finance necessary public facilities, so that there may be no\nneed for a long-term sharing program for impact aid\n- States' rights to revenues from öffshore minerals leasing were\nlegislatively determined in the Submerged Lands Act of 1953\nwhich gave States complete jurisdiction over the first three\nmiles of seabed, but nothing beyond\n- sources of opposition to OCS leasing are varied, and not all\nmight be eliminated by sharing of revenues\nHowever, there are reasons for reconsidering this position.\n- failure to respond to State concerns could solidify opposition\nwhich would postpone leasing in frontier OCS areas and delay\nreceipt of the National benefits of accelerated development.\nGERALD FORD LIBRARY\nIn Federal revenues alone, the loss in discounted-value terms\nof even a one-year delay would be about $2.9 billion\n- there may be a valid need for Federal assistance now that frontier\nOCS areas will be opened. For example, \"front-end\" money would\nhelp State and local governments begin building public facilities\nbefore OCS developments provide an increased tax base on which to\nfinance such expenditures\n- the three-mile state jurisdiction is of little revenue value to\nStates in frontier areas such as the Atlantic Coast, where oil and\ngas reserves are all located farther offshore\n- shared revenues could give Coastal States a financial stake in\nprompt OCS development\n- sharing OCS revenues would be consistent with various onshore\nsharing precedents, notably the Minerals Leasing Act which gives\naffected States 37 1/2 percent of Federal leasing revenues\n- Congressional action on shared revenues is possible regardless\nof the Administration position\nThere are three general approaches to providing funds to States:\n- provide money for impact-amelioration projects--tie use of funds\nto specific purposes which underwrite costs faced by States as\na result of CCS activity\n- provide formula-based, no strings money to States affected by\nOCS activity--make funds available which are sufficient to keep\nCoastal States from being worse off on balance as a result of OCS\nactivity, and distribute these revenues generally in accordance\nwith expected impacts, but leave to the States the decision as to\nhow to use the money\n- provide an \"ownership\" stake in OCS development through a share\nof Federal revenues--distribute a proportion of revenues without\ndirect regard to expected impacts, perhaps to both inland and\nCoastal States\n2\nOption I: Coastal State Impact Aid\nDescription\nThis option provides funds to Coastal States to ameliorate negative impacts\nof OCS development\n- some modest proportion of Federal OCS revenues, would fund grants\nto Coastal States\n- funds would be made available soon enough for \"front-end\" costs,\nnot delayed until actual offshore production starts\n- grants could be distributed either by formula based on general\nGERALOR FORD LIBRARY\nindices of impacts, or by project after a showing of specific\nimpacts, or both\n- grants could either require State matching or provide full Federal\nfunding, and could be limited to needs not met by existing Federal\ngrant programs\nProgram Effects\nFavorable:\n- the option would focus specifically on ameliorating onshore impacts\nof OCS development, and reduce them as a barrier to accelerated\nleasing in frontier areas\n- the use of grant funds would be tied directly to impacts\n- budget outlays would be modest by comparison with the other options\nconsidered\nUnfavorable:\n- mere amelioration of impacts might be insufficient to lead Coastal\nStates to accept OCS development\n- the grants might be opposed on grounds that OCS revenues are a\nNational asset and should not be disbursed only to Coastal States\n- clear identification and measurement of impacts for purposes\nof awarding grants would be administratively difficult\n3\n- the impact rationale focuses assistance efficiently on future\nimpacts but makes no allowance for past impacts, which may seem\ninequitable to States where OCS leasing has already occurred\n- the option would not address the energy impact concerns of inland\nStates, and might appear to single out Coastal States for special\ntreatment, although inland States already receive 37 1/2 percent\nof Federal revenues from minerals leasing within their boundaries\nThree specific variants of this option warrant particular attention.\nOption Ia: Formula Impact Aid\nDescription\nThis variant would distribute among Coastal States a fixed percentage of Federal\nOCS revenues without time limit or annual dollar ceiling\n- 10 percent of Federal OCS revenues would be deposited in the impact\naid fund\n- alternatively, as in a current congressional proposal, the fund would be\nfinanced by 10 percent of Federal OCS revenues or 40 cents per barrel of\noil, whichever is greater, although the structure of Federal revenues\n(bonus plus royalties) would complicate the 40 cents per barrel calculation\n- grants would be distributed by formula based on general indicators of\nimpact\nProgram Effects\nGERALD FORD VIBRARY\nFavorable:\n- 10 percent funding as long as Federal revenues continued would provide\na continuing source of funds to meet Coastal State impact needs whenever\nthey arose\n- 10 percent funding would be ample to meet currently anticipated needs\nthereby reassuring Coastal States that their impact concerns would be\nsufficiently provided for\nUnfavorable:\n- 10 percent funding might result in distributing more money than strict\nimpact accounting would require\n4\nBudget Outlays\nImpact aid for Coastal States equal to 10 percent of Federal revenues\nwould range between $141 million and $724 million per year between 1975\nand 1985, based on current production estimates. Revenue distribution by\nState would depend on the project eligibility rules or the distribution\nformula adopted, but if properly administered would closely approximate\nthe distribution of actual impacts. More detailed projections of the budget\noutlays under this option and those that follow are provided in the\nattached tables.\nOption Ib: Targeted Impact Aid\nDescription\nThis variation would provide impact aid to Coastal States under terms that\nwould link the aid directly to the alleviation of negative impacts:\n- the fund would be limited to a total of $600 million to be\nbuilt up from bonus receipts at $100 million per year\n- aid to impacted communities for public capital investment would\nbe made in the form of 50 percent grant and 50 percent loan funds\n- the balance of the fund not spent on actual, demonstrated impacts\nwould revert to the Treasury after 15 years.\nProgram Effects\nGERALD FORD CIBRARY\nFavorable:\n- the timing and jurisdictions receiving aid would be directly tied\nto impacts\n- the loan feature would reduce the likelihood of overbuilding public\nfacilities\n- the aid would be cut off after 15 years, which should be ample time\nto meet impact needs\nUnfavorable:\n- clear identification and measurement of impacts for purposes of\nawarding grants would require complex eligibility criteria and\nadministrative review\n- grant amounts might appear to Coastal States to make inadequate\nprovision for their anticipated needs\n5\nBudget Outlays\nImpact aid under this variation of Option I would be limited to $100 million\nannually or less. The distribution by state would depend on the distribution\nof demonstrated impacts.\nOption Ic: Combination Impact Aid\nDescription\nUnder this variation of Option I, funds would be allocated to Coastal States\nby formula but allocated funds would be paid out only for demonstrated need.\n- the fund would be built by a deposit of 2 1/2 percent of annual\nOCS lease revenues for a period of 10 years\n- revenues in the fund would be allocated to the 22 Coastal States by\nformula, giving an equal share to each state\n- aid payments would be made to states out of this allocation when\ntriggered by a showing of need\n- aid payments would be available as grants and loans\n- the balance of funds not expended on need would revert to the\nTreasury after 15 years.\nGERALO, FORD LIBRARY\nProgram Effects\nFavorable:\n- equal shares would provide more aid per capita to the less populous\nstates, where impacts could be more pronounced\n- formula aid would determine, in an administratively easy way, the maximum\namount a state could get\nUnfavorable:\n- equal sharing by Coastal States could lead to a misallocation of\nresources because of impacts in rural areas of large, populous states\nBudget Outlays\nThe outlays under Option Ic, as projected by OMB, would reach $100 million a\nyear, totalling $600 million. At 2 1/2 percent of OCS revenues, $1,120 million\nwould be available if needs exceeded that projection.\n6\nOption II: Coastal State Impact Aid and Production Shares\nDescription\nIn addition to the impact grants of Option Ia, this option includes\npayment to Coastal States of 5 percent of the value of OCS oil and gas\nwhich is brought cashore within their boundaries.\n- the 5 percent share of the value of oil and gas would be\napproximately equal to 37 1/2 percent of the minimum allowable\nOCS royalty; thus setting production shares at 5 percent would\nassure that those shares never constituted a higher proportion\nof Federal OCS revenues than the proportion of leasing revenues\ncurrently paid to States for onshore minerals\n- basing the payment on the value of oil and gas rather than on\nthe Federal royalty income itself is intended to prevent the\nlevel of royalties from becoming a political issue, and retain\nneeded flexibility in financial terms for leases\n- the base for figuring the 5 percent payments could be limited,\nif desired, to \"new oil\" only, or to production above the level\nof a base period, say 1974\nProgram Effects\nGERALD FORD LIBRARY\nFavorable:\n- the 5 percent production share adds to the front-end program of\nOption I a continuing source of funds for the effects of bringing\nOCS oil ashore\n- making payments dependent on taking oil ashore would give the\nStates an increased stake in OCS development off their shores,\nwhile it still targets payments on the areas which would feel\nimpacts\nUnfavorable:\n- like Option I, this Option is subject to the objection that\nrevenues from a National resource would be distributed only to\nselected States\n- outlays under this Option would be substantially greater than\nunder Option I\n7\nBudget Outlays\nThis Option would add to the costs of Option Ia an amount equal to 5\npercent of the value of oil produced, or between $240 million and\n$834 million per year over. the years 1975 to 1985. The total amount\nshared would reach $1112 million per year by the end of the period\nOption III: Coastal State Production Shares plus Nationally Shared\nRevenues\nDescription\nThis Option would combine the 5 percent Coastal State production shares\nof Option II with an additional sharing of Federal OCS revenues with all\nStates.\n- the additional National sharing would be 37 1/2 percent of all\nFederal OCS revenues minus the 5 percent Coastal State production\nshare. Thus, total revenues shared in the two parts of the\nprogram would amount to 37 1/2 percent of all Federal OCS\nrevenues, the same proportion that is now shared with States in\nonshore leasing programs\n- the National shares could be distributed among States on a per\ncapita basis, or by the General Revenue Sharing formula. The\nper capita basis emphasizes the idea that OCS reserves belong to\nall citizens, while the General Revenue Sharing formula makes use\nof an existing method for distributing Federal funds to States,\nalthough that method could itself become a source of controversy\nin the future\nProgram Effects\nGERATO FORD (IBRAR)\nFavorable:\n- this Option would extend a direct financial stake in OCS leasing\nand production to inland as well as Coastal States\n- it would provide some front-end money to Coastal States through\ntheir National share, which would become available to them well\nbefore the 5 percent payments started as oil was brought onshore\n- shared revenues would be of maximum value to States since they\nwould not be tied to any particular use and could be applied as\nStates saw fit\n8\n- the Option would feature a set of sharing formulas which, once\nestablished, would be relatively easy to administer\nUnfavorable:\n- it would use a substantial amount of Federal funds, perhaps\nmore than strictly necessary to encourage prompt OCS development\n- it would not recognize any special front-end money needs of\nOCS-affected Coastal States, but would give them only the same\nNational share as other States until their 5 percent production\nshare became available\n- it would not require that money shared with Coastal States be\nused by them to ameliorate impacts, which could work against\nthe Federal interest in smooth development both on and offshore\nand might not satisfy the impact concerns of some particular\ngroups who could still delay leasing\n- it would result in a variable, and to a degree, unpredictable\nflow of funds to States, since OCS bonus revenues fluctuate\nconsiderably from sale to sale, though by averaging over more\nthan one year this problem can be eliminated\nBudget Outlays\nThis Option would distribute 37 1/2 percent of all Federal OCS revenues\nto States, or between $530 million and $2717 million per year over the\nperiod 1975 to 1985. The 5 percent Coastal production share of this\ntotal would be $240 million to $834 million per year. The remainder to\nbe distributed among all States would amount to between $106 million and\n$2344 million per year.\nOption IV: Coastal State Production Shares, Nationally Shared Revenues,\nand Nationwide Energy Impact Aid\nFORD & LIBRARY GERALD\nDescription\nThis Option combines the 5 percent production shares and the 37 1/2 percent\nnationally shared revenues of Option III with a program of impact aid like\nthat in Option I but available to all States to meet the front-end costs\nof energy development, both off and onshore.\n- the total amount paid out would equal 37 1/2 percent of OCS\nrevenues, as in Option III, but this sum would be divided three\nways: 5 percent of the value of the oil to Coastal States, up\nto $500 million (or a like amount) for a nationwide impact grant\nfund, and the remainder of the 37 1/2 percent for National per\ncapita or General Revenue Sharing distribution\n9\n- front-end grants would be available to all States on a project\nor formula basis for all types of energy-related impacts\n- grants could be limited to needs not met by existing Federal\ngrant programs\nProgram Effects\nFavorable:\n- this Option has the advantages of Option III, plus the beneficial\neffects of impact-related front-end money for all States\n- it would treat all energy-related impacts consistently, without\nsingling out OCS impacts for special consideration\n- it would use OCS revenues, which are substantial, to ameliorate\nenergy impacts inland where needs may also be significant\n- it permits taking advantage of the good features of both project\nassistance and no-strings-attached revenue sharing\n- it addresses expressed concerns of Western States about front-end\nenergy development costs, and encourages them to undertake energy\ndevelopments of National interest\nUnfavorable:\n- the timing of the flow of OCS revenues into the nationwide impact\naid fund would bear no necessary relationship to the demands on\nthat fund from inland energy development activities\n- the impact aid fund would have the same administrative problems\nas the fund in Option I, but on a larger, nationwide scale\n- combining all three elements in one proposal may make it too\ncomplex to be appealing\nFORD & LIBRARY GERALD\nBudget Outlays\nThe total amount to be shared with States would be identical to\nOption III. The only difference would be that some percent of Federal\nrevenues, perhaps up to a ceiling such as $500 million per year, would\nbe earmarked for States experiencing energy development impacts. An\nimpact fund of 10 percent of Federal revenue up to $500 million per year\nwould leave between $0 and $1844 million per year for nationally shared\nrevenues.\n10\nTable 1\nPROJECTIONS OF OCS PRODUCTION, VALUE AND FEDERAL REVENUES\nValue of Oil\nFederal Revenues\nOil Production\nProduction\n(millions of dollars)\n(millions of\n(millions of\nYear\nbarrels)\ndollars)\nBonus\nRoyalty (16-2/3%) Total\n1975\n447\n$ 4,792\n$6,000\n799\n$6,799\n1976\n476\n5,103\n6,000\n851\n6,851\n1977\n506\n5,424\n6,000\n904\n6,904\n1978\n601\n6,443\n6,000\n1,074\n7,074\n1979\n696\n7,461\n6,000\n1,244\n7,244\n1980\n791\n8,480\nI\n1,413\n1,413\n1981\n944\n10,120\n-\n1,687\n1,687\n1982\n1,097\n11,760\n-\n1,960\n1,960\n1983\n1,250\n13,400\nI\n2,234\n2,234\n1984\n1,403\n15,040\n-\n2,507\n2,507\n1985\n1,557\n16,691\n-\n2,782\n2,782\nAssumptions:\n1. Production at levels corresponding to Project Independence Report.\n2. Oil priced at $8 per barrel and gas priced at $0.70 per thousand\ncubic feet, giving a total value 1.34 times the value of oil\nproduction.\n3. 16-2/3 percent royalty collected on all production from Federal\nOCS lands.\nFORD if LIBRARY GERALD\nTable 2\nSUMMARY OF PAYMENTS TO STATES UNDER FOUR OPTIONS\n(millions of dollars)\nOption Ia\nOption II\nOption III\nOption IV\nCoastal\nCoastal\nPro-\nPro-\nPro-\nNationwide\nState\nState\nduction\nduction\nNational\nduction\nEnergy\nNational\nYear\nImpact Aid\nImpact Aid\nShares\nTotal\nShares\nShares\nTotal\nShares\nImpact Aid\nShares\nTotal\n1975\n680\n680\n240\n920\n240\n2310\n2550\n240\n500\n1810\n2550\n1976\n685\n685\n255\n940\n255\n2314\n2569\n255\n500\n1814\n2569\n1977\n690\n690\n271\n961\n271\n2318\n2589\n271\n500\n1818\n2589\n1978\n707\n707\n322\n1029\n322\n2331\n2653\n322\n500\n1831\n2653\n1979\n724\n724\n373\n1097\n373\n2344\n2717\n373\n500\n1844\n2717\n1980\n141\n141\n424\n565\n424\n106\n530\n424\n106\n--\n530\n1981\n169\n169\n506\n675\n506\n127\n633\n506\n127\n--\n633\n1982\n196\n196\n588\n784\n588\n147\n735\n588\n147\n735\n1983\n223\n223\n670\n893\n670\n168\n838\n670\n168\n--\n838\n1984\n251\n251\n752\n1003\n752\n188\n940\n752\n188\n--\n940\n1985\n278\n278\n834\n1112\n834\n209\n1043\n834\n209\n--\n1043\nDefinition of options:\nOption Ia\n-- Coastal State Impact Aid at 10 percent of Federal OCS revenues.\nOption II\n-- Coastal State Impact Aid at 10 percent of Federal OCS revenues.\n--- Coastal State Production Shares equal to 5 percent of the value of oil landed in each State.\nOption III\n-- Coastal State Production Shares equal to 5 percent of the value of oil landed in each State.\n-- National Shares to all States equal to 37.5 percent of OCS revenues less 5 percent of the value\nof oil landed.\nOption IV\n-- Coastal State Production Shares equal to 5 percent of the value of oil landed in each State.\n-- Nationwide Energy Impact Aid equal to 10% of OCS revenues not to exceed $500 million per year.\n--- National Shares to all States equal to 37.5 percent of OCS revenues less 5 percent of the value\nof oil landed and less 10% of OCS revenues not to exceed $500 million per year (no negative\npayments to States)\nGERALD\nR.\nFORD\nLIBRARY\nTable 3\nSUMMARY OF PAYMENTS UNDER VARIANTS OF OPTION I\nOption Ia\nOption Ib*\nOption Ic*\n1975\n680\n--\n--\n1976\n685\n--\n--\n1977\n690\n--\n--\n1978\n707\n50\n50\n1979\n724\n50\n50\n1980\n141\n100\n100\n1981\n169\n100\n100\n1982\n196\n100\n10C\n1983\n223\n100\n100\n1984\n251\n100\n100\n1985\n278\n*Note: Payments for Options Ib and Ic are limited to OMB projection\nof $600 million in expected impacts. Option Ib would have\n$600 million available whereas Option IIb would have a\ntotal of $1120 million.\nFORD LIBRARY & GERALD\nTable 4\nSUMMARY OF STATES' AND FEDERAL\nSHARES UNDER FOUR OPTIONS\n(millions of dollars)\nOPTION I\nOPTION II\nOPTIONS III & IV\nTotal\nFederal OCS\nStates'\nFederal\nStates'\nFederal\nStates'\nFederal\nYear\nRevenues\nShare\nShare\nShare\nShare\nShare\nShare\n1975\n6799\n680\n6119\n920\n5879\n2550\n4249\n1976\n6851\n685\n6166\n940\n5911\n2569\n4282\n1977\n6904\n690\n6214\n961\n5943\n2589\n4315\n1978\n7074\n707\n6367\n1029\n6045\n2653\n4421\n1979\n7244\n724\n6520\n1097\n6147\n2717\n4527\n1980\n1413\n141\n1272\n565\n848\n530\n883\n1981\n1687\n169\n1518\n675\n1012\n633\n1054\n1982\n1960\n196\n1764\n784\n1176\n735\n1225\n1983\n2234\n223\n2011\n893\n1341\n838\n1396\n1984\n2507\n251\n2256\n1003\n1504\n940\n1567\n1985\n2782\n278\n2504\n1112\n1607\n1043\n1739\nGEBALOR FORD LIBRARY\nTable 5\nREGIONAL DISTRIBUTION OF\nPRODUCTION SHARE\n(millions of dollars)\nTotal OCS Production\nYear\nTotal\nGulf of Mexico\nPacific\nAlaska\nAtlantic\n1974\n224\n215\n9\n0\n0\n1975\n240\n226\n14\n0\n0\n1976\n255\n235\n20\n0\no\n1977\n271\n247\n24\n0\n0\n1978\n325\n267\n48\n0\n10\n1979\n373\n287\n67\n0\n19\n1980\n419\n305\n89\n0\n25\n1981\n505\n334\n116\n15\n40\n1982\n589\n359\n147\n24\n59\n1983\n670\n382\n174\n40\n74\n1984\n752\n406\n203\n53\n90\n1985\n844\n434\n234\n67\n109\nOCS Production Above 1974 Levels Only\nYear\nTotal\nGulf of Mexico\nPacific\nAlaska\nAtlantic\n1974\n0\n0\n0\n0\n0\n1975\n16\n11\n5\n0\n0\n1976\n31\n20\n11\n0\n0\n1977\n47\n32\n15\n0\n0\n1978\n101\n52\n39\n0\n10\n1979\n149\n72\n58\n0\n19\n1980\n195\n90\n80\n0\n25\n1981\n281\n119\n107\n15\n40\n1982\n365\n144\n138\n24\n59\n1983\n446\n167\n165\n40\n74\n1984\n528\n191\n194\n53\n90\n1985\n620\n219\n225\n67\n109\nFORD LIBRARY\nTable 6\nDISTRIBUTION OF NATIONAL REVENUE SHARES\nBY STATES (OPTION III)\n1975\nAmount by\nShare by\nGeneral\nAmount by\nGeneral\nRevenue\nShare by\nPopulation\nRevenue\nSharing\nPopulation\n(millions of\nSharing\n(millions of\nState\n(percent)\ndollars)\n(percent)\ndollars)\nAlabama\n1.686\n39.058\n1.601\n37.084\nAlaska\n0.157\n3.642\n0.144\n3.332\nArizona\n0.981\n22.713\n1.020\n23.634\nArkansas\n0.971\n22.481\n1.039\n24.063\nCalifornia\n9.817\n227.361\n10.355\n239.833\nColorado\n1.161\n26.896\n1.084\n25.099\nConnecticut\n1.466\n33.948\n1.346\n31.176\nDelaware\n0.274\n6.357\n0.302\n6.997\nD.C.\n0.355\n8.233\n0.422\n9.772\nFlorida\n3.659\n84.738\n3.134\n72.587\nGeorgia\n2.281\n52.820\n2.087\n48.336\nHawaii\n0.396\n9.182\n0.437\n10.115\nIdaho\n0.367\n8.498\n0.395\n9.157\nIllinois\n5.354\n124.005\n5.079\n117.632\nIndiana\n2.533\n58.670\n2.033\n47.090\nIowa\n1.384\n32.050\n1.324\n30.666\nKansas\n1.086\n25.152\n0.922\n21.350\nKentucky\n1.593\n36.884\n1.627\n37.680\nLouisiana\n1.794\n41.541\n2.166\n50.157\nMaine\n0.490\n11.345\n0.634\n14.685\nMaryland\n1.939\n44.918\n1.987\n46.013\nMassachusetts\n2.772\n64.210\n3.256\n75.420\nMichigan\n4.310\n99.813\n4.203\n97.337\nMinnesota\n1.857\n43.009\n2.096\n48.535\nMississippi\n1.087\n25.174\n1.470\n34.045\nMissouri\n2.267\n52.500\n1.923\n44.538\nGERRALD FORD LIBRARY\nTable 6\n(continued)\nDISTRIBUTION OF NATIONAL REVENUE SHARES\nBY STATES (OPTION III)\n1975\nAmount by\nShare by\nGeneral\nAmount by\nGeneral\nRevenue\nShare by\nPopulation\nRevenue\nSharing\nPopulation\n(millions of\nSharing\n(millions of\nState\n(percent)\ndollars)\n(percent)\ndollars)\nMontana\n0.344\n7.957\n0.369\n8.535\nNebraska\n0.735\n17.018\n0.668\n15.464\nNevada\n0.261\n6.048\n0.231\n5.353\nNew Hampshire\n0.377\n8.730\n0.315\n7.291\nNew Jersey\n3.508\n81.239\n3.133\n72.549\nNew Mexico\n0.527\n12.206\n0.628\n14.537\nNew York\n8.704\n201.580\n11.340\n262.641\nNorth Carolina\n2.513\n58.195\n2.432\n56.318\nNorth Dakota\n0.305\n7.063\n0.306\n7.083\nOhio\n5.114\n118.432\n4.082\n94.542\nOklahoma\n1.269\n29.390\n1.106\n25.609\nOregon\n1.060\n24.556\n1.052\n24.357\nPennsylvania\n5.672\n131.355\n5.321\n123.233\nRhode Island\n0.464\n10.738\n0.433\n10.032\nSouth Carolina\n1.299\n30.085\n1.407\n32.587\nSouth Dakota\n0.326\n7.560\n0.400\n9.255\nTennessee\n1.966\n45.536\n1.861\n43.093\nTexas\n5.620\n130.164\n4.853\n112.403\nUtah\n0.551\n12.769\n0.590\n13.664\nVermont\n0.221\n5.121\n0.309\n7.145\nVirginia\n2.293\n53.096\n2.015\n46.663\nWashington\n1.634\n37.844\n1.458\n33.764\nWest Virginia\n0.855\n19.799\n0.905\n20.966\nWisconsin\n2.177\n50.425\n2.545\n58.934\nWyoming\n0.168\n3.896\n0.158\n3.656\nFORD LIBRARY & 9ERALD\nSTATEM OF THE TERIOR\nUnited States Department of the Interior\nOFFICE OF THE SECRETARY\nDuval\nWASHINGTON, D.C. 20240\nMarch 3, 1849\nMAR 10 1975\nMemorandum\nTo:\nExecutive Director, Domestic Council\nFrom:\nAssistant Secretary- Program Development and Budget\nSubject: Option Paper on Sharing Outer Continental Shelf Revenues\nwith States\nI attach the option paper your staff requested we prepare on sharing\nOuter Continental Shelf revenues with States. A draft was circulated\nto Treasury, FEA, Commerce (NOAA) and OMB, and the final version\nincorporates modifications responsive to their comments.\nSecretary Morton favors Option III as outlined in the paper; FEA\nalso favors Option III (applied to new oil only) and would consider\nadding Option I as well, but only if actual impacts could be\naccurately measured; Treasury favors a modified version of Option II\n(5 percent production shares applied to both new and old oil, but\nno impact aid) ; and NOAA supports Coastal State impact aid (a feature\nof Options I, II and IV).\nRoyston Royston C. Hughes C. Hughes\nAttachment\nFORD LIBRARY\nsha\nTHE INTERIOR 'S\nUnited States Department of the Interior\nOFFICE OF THE SECRETARY\nWASHINGTON, D.C. 20240\nMarch\n1849\nMAR 10 1975\nMemorandum\nTo:\nExecutive Director, Domestic Council\nFrom:\nAssistant Secretary--Program Development and Budget\nSubject: Option Paper on Sharing Outer Continental Shelf Revenues\nwith States\nI attach the option paper your staff requested we prepare on sharing\nOuter Continental Shelf revenues with States. A draft was circulated\nto Treasury, FEA, Commerce (NOAA) and OMB, and the final version\nincorporates modifications responsive to their comments.\nSecretary Morton favors Option III as outlined in the paper; FEA\nalso favors Option III (applied to new oil only) and would consider\nadding Option I as well, but only if actual impacts could be\naccurately measured; Treasury favors a modified version of Option II\n(5 percent production shares applied to both new and old oil, but\nno impact aid) ; and NOAA supports Coastal State impact aid (a feature\nof Options I, II and IV).\n(sgd) Royston C. Hughes\nRoyston C. Hughes\nGERALD, FORD LIBRARY\nAttachment\nOPTION PAPER\nSharing Outer Continental Shelf Revenues with States\nAn accelerated leasing program has been initiated on the Outer Continental\nShelf (OCS) to open up frontier oil and gas prospects and provide a badly\nneeded supplement to domestic onshore production. Coastal States are\ntroubled by the prospect of accelerated leasing off their shores because\nthey would have to bear the brunt of certain costs of development while\nthe entire Nation receives the benefit of increased domestic supplies of\noil and gas.\nCoastal State concerns about OCS development involve:\n- environmental damages, including possible oil spills\nGERALD FORD LIBRARA\n- esthetic impacts\n- economic effects, including possible disorderly development,\ninjury to existing industry, and the burden of providing new\npublic services.\nTo meet these concerns, the Federal Government has already proposed\nincreased planning money for the Coastal Zone Management Act, and is\ndeveloping a Comprehensive Oil Spill Liability bill.\nIt has, however, up to now opposed providing Coastal States with a share\nof OCS revenues on the grounds that -\n- OCS revenues belong to all the Nation, and their revenues should\nbenefit all citizens\n- a number of Federal programs already exist which provide assistance\nto States in ameliorating impacts of development\n- sharing OCS revenues with Coastal States would reduce the amount\nof revenues available to support other Federal expenditures and\nrequire compensating adjustment elsewhere in the Federal budget\n- onshore development induced by offshore activities will eventually\nprovide State and local governments with an increased tax base\nto finance necessary public facilities, so that there may be no\nneed for a long-term sharing program for impact aid\n- States' rights to revenues from offshore minerals leasing were\nlegislatively determined in the Submerged Lands Act of 1953\nwhich gave States complete jurisdiction over the first three\nmiles of seabed, but nothing beyond\n- sources of opposition to OCS leasing are varied, and not all\nmight be eliminated by sharing of revenues\nHowever, there are reasons for reconsidering this position.\n- failure to respond to State concerns could solidify opposition\nwhich would postpone leasing in frontier OCS areas and delay\nreceipt of the National benefits of accelerated development.\nIn Federal revenues alone, the loss in discounted-value terms\nof even a one-year delay would be about $2.9 billion.\n- there may be a valid need for Federal assistance now that frontier\nOCS areas will be opened. For example, \"front-end\" money would\nhelp State and local governments begin building public facilities\nbefore OCS developments provide an increased tax base on which to\nfinance such expenditures\n- the three-mile state jurisdiction is of little revenue value to\nStates in frontier areas such as the Atlantic Coast, where oil and\ngas reserves are all located farther offshore\n- shared revenues could give Coastal States a financial stake in\nprompt OCS development\n- sharing OCS revenues would be consistent with various onshore\nsharing precedents, notably the Minerals Leasing Act which gives\naffected States 37 1/2 percent of Federal leasing revenues\nR.\nGERALD\nFORD\n- Congressional action on shared revenues is possible regardless\nof the Administration position\nLIBRARY\nThere are three general approaches to providing funds to States:\n- provide money for impact-amelioration projects--tie use of funds\nto specific purposes which underwrite costs faced by States as\na result of OCS activity\n- provide formula-based, no strings money to States affected by\nOCS activity--make funds available which are sufficient to keep\nCoastal States from being worse off on balance as a result of OCS\nactivity, and distribute these revenues generally in accordance\nwith expected impacts, but leave to the States the decision as to\nhow to use the money\n- provide an \"ownership\" stake in OCS development through a share\nof Federal revenues--distribute a proportion of revenues without\ndirect regard to expected impacts, perhaps to both inland and\nCoastal States\n2\nOption I: Coastal State Impact Aid\nDescription\nThis option is similar in some respects to proposals introduced recently\nin the Congress:\n- 10 percent of Federal OCS revenues, perhaps with an annual upper\nlimit, would fund grants to Coastal States to ameliorate negative\nimpacts of OCS development\n- alternatively, the total amount of funds in any year could be\nbased on demonstrated impacts rather than on a percentage of OCS\nrevenues, again possibly up to some limit\n- funds would be made available soon enough for \"front-end\" costs,\nnot delayed until actual offshore production starts\n- States could apply for grants for only a five (perhaps ten) year\nperiod, so that the program would phase out after front-end\nimpact aid was no longer needed\n- grants could be distributed either by formula based on general\nindices of impacts, or by project after a showing of specific\nimpacts, or both\n- grants could either require State matching or provide full Federal\nfunding, and could be limited to needs not met by existing Federal\ngrant programs\nR.\nFORD\nProgram Effects\nGERALD\nFavorable:\n- the option would focus specifically on ameliorating onshore impacts\nof OCS development, and reduce them as a barrier to accelerated\nleasing in frontier areas\n- the use of grant funds would be tied directly to impacts\n- budget outlays would be modest by comparison with the other options\nconsidered\nUnfavorable:\n- mere amelioration of impacts might be insufficient to lead Coastal\nStates to accept OCS development\n- the grants might be opposed on grounds that OCS revenues are a\nNational asset and should not be disbursed only to Coastal States\n3\n- clear identification and measurement of impacts for purposes\nof awarding grants would be administratively difficult\n- the impact rationale focuses assistance efficiently on future\nimpacts but makes no allowance for past impacts, which may seem\ninequitable to States where OCS leasing has already occurred\n- the option would not address the energy impact concerns of inland\nStates, and might appear to single out Coastal States for special\ntreatment, although inland States already receive 37 1/2 percent\nof Federal revenues from minerals leasing within their boundaries\nBudget Outlays\nImpact aid for Coastal States equal to 10 percent of Federal revenues\nwould range between $141 million and $724 million per year between 1975\nand 1985, based on current production estimates. An annual limit such as\n$200 million would reduce these outlays. Revenue distribution by State\nwould depend on the project eligibility rules or the distribution formula\nadopted, but if properly administered would closely approximate the\ndistribution of actual impacts. More detailed projections of the budget\noutlays under this option and those that follow are provided in the\nattached tables.\nOption II: Coastal State Impact Aid and Production Shares\nFORD & GERALD LIBRARY\nDescription\nIn addition to the impact grants of Option I, this option includes\npayment to Coastal States of 5 percent of the value of OCS oil and gas\nwhich is brought onshore within their boundaries.\n- the 5 percent share of the value of oil and gas would be\napproximately equal to 37 1/2 percent of the minimum allowable\nOCS royalty; thus setting production shares at 5 percent would\nassure that those shares never constituted a higher proportion\nof Federal OCS revenues than the proportion of leasing revenues\ncurrently paid to States for onshore minerals\n- basing the payment on the value of oil and gas rather than on\nthe Federal royalty income itself is intended to prevent the\nlevel of royalties from becoming a political issue, and retain\nneeded flexibility in financial terms for leases\n- the base for figuring the 5 percent payments could be limited,\nif desired, to \"new oil\" only, or to production above the level\nof a base period, say 1974\n4\nProgram Effects\nFavorable:\n- the 5 percent production share adds to the front-end program of\nOption I a continuing source of funds for the effects of bringing\nOCS oil ashore\n- making payments dependent on taking oil ashore would give the\nStates an increased stake in OCS development off their shores,\nwhile it still targets payments on the areas which would feel\nimpacts\nUnfavorable:\n- like Option I, this Option is subject to the objection that\nrevenues from a National resource would be distributed only to\nselected States\n- outlays under this Option would be substantially greater than\nunder Option I\nBudget Outlays\nThis Option would add to the costs of Option I an amount equal to 5\npercent of the value of oil produced, or between $240 million and\nFORD & LIBRARY GERALD\n$834 million per year over the years 1975 to 1985. The total amount\nshared would reach $1112 million per year by the end of the period\nOption III: Coastal State Production Shares plus Nationally Shared\nRevenues\nDescription\nThis Option would combine the 5 percent Coastal State production shares\nof Option II with an additional sharing of Federal OCS revenues with all\nStates.\n- the additional National sharing would be 37 1/2 percent of all\nFederal OCS revenues minus the 5 percent Coastal State production\nshare. Thus, total revenues shared in the two parts of the\nprogram would amount to 37 1/2 percent of all Federal OCS\nrevenues, the same proportion that is now shared with States in\nonshore leasing programs\n5\n- the National shares could be distributed among States on a per\ncapita basis, or by the General Revenue Sharing formula. The\nper capita basis emphasizes the idea that OCS reserves belong to\nall citizens, while the General Revenue Sharing formula makes use\nof an existing method for distributing Federal funds to States,\nalthough that method could itself become a source of controversy\nin the future\nProgram Effects\nFavorable:\n- this Option would extend a direct financial stake in OCS leasing\nand production to inland as well as Coastal States\n- it would provide some front-end money to Coastal States through\ntheir National share, which would become available to them well\nbefore the 5 percent payments started as oil was brought onshore\n- shared revenues would be of maximum value to States since they\nwould not be tied to any particular use and could be applied as\nStates saw fit\n- the Option would feature a set of sharing formulas which, once\nestablished, would be relatively easy to administer\nUnfavorable:\nFORD & LIBRARY GERALD\n- it would use a substantial amount of Federal funds, perhaps\nmore than strictly necessary to encourage prompt OCS development\n- it would not recognize any special front-end money needs of\nOCS-affected Coastal States, but would give them only the same\nNational share as other States until their 5 percent production\nshare became available\n- it would not require that money shared with Coastal States be\nused by them to ameliorate impacts, which could work against\nthe Federal interest in smooth development both on and offshore\nand might not satisfy the impact concerns of some particular\ngroups who could still delay leasing\n- it would result in a variable, and to a degree, unpredictable\nflow of funds to States, since OCS bonus revenues fluctuate\nconsiderably from sale to sale, though by averaging over more\nthan one year this problem can be eliminated\n6\nBudget Outlays\nThis Option would distribute 37 1/2 percent of all Federal OCS revenues\nto States, or between $530 million and $2717 million per year over the\nperiod 1975 to 1985. The 5 percent Coastal production share of this\ntotal would be $240 million to $834 million per year. The remainder to\nbe distributed among all States would amount to between $106 million and\n$2344 million per year.\nOption IV: Coastal State Production Shares, Nationally Shared Revenues,\nand Nationwide Energy Impact Aid\nDescription\nThis Option combines the 5 percent production shares and the 37 1/2 percent\nnationally shared revenues of Option III with a program of impact aid like\nthat in Option I but available to all States to meet the front-end costs\nof energy development, both off and onshore.\n- the total amount paid out would equal 37 1/2 percent of OCS\nrevenues, as in Option III, but this sum would be divided three\nways: 5 percent of the value of the oil to Coastal States, up\nto $500 million (or a like amount) for a nationwide impact grant\nfund, and the remainder of the 37 1/2 percent for National per\ncapita or General Revenue Sharing distribution\nGERALD R.FORD LIBRARY\n- front-end grants would be available to all States on a project\nor formula basis for all types of energy-related impacts\n- grants could be limited to needs not met by existing Federal\ngrant programs\nProgram Effects\nFavorable:\n- this Option has the advantages of Option III, plus the beneficial\neffects of impact-related front-end money for all States\n- it would treat all energy-related impacts consistently, without\nsingling out OCS impacts for special consideration\n- it would use OCS revenues, which are substantial, to ameliorate\nenergy impacts inland where needs may also be significant\n7\n- it permits taking advantage of the good features of both project\nassistance and no-strings-attached revenue sharing\n- it addresses expressed concerns of Western States about front-end\nenergy development costs, and encourages them to undertake energy\ndevelopments of National interest\nUnfavorable:\n- the timing of the flow of OCS revenues into the nationwide impact\naid fund would bear no necessary relationship to the demands on\nthat fund from inland energy development activities\n- the impact aid fund would have the same administrative problems\nas the fund in Option I, but on a larger, nationwide scale\n- combining all three elements in one proposal may make it too\ncomplex to be appealing\nBudget Outlays\nFORD & LIBRARY GERALD\nThe total amount to be shared with States would be identical to\nOption III. The only difference would be that some percent of Federal\nrevenues, perhaps up to a ceiling such as $500 million per year, would\nbe earmarked for States experiencing energy development impacts. An\nimpact fund of 10 percent of Federal revenue up to $500 million per year\nwould leave between $0 and $1844 million per year for nationally shared\nrevenues.\n8\nTable 1\nPROJECTIONS OF OCS PRODUCTION, VALUE AND FEDERAL REVENUES\nValue of Oil\nFederal Revenues\nOil Production\nProduction\n(millions of dollars)\n(millions of\n(millions of\nYear\nbarrels)\ndollars)\nBonus\nRoyalty (16-2/3%)\nTotal\n1975\n447\n$ 4,792\n$6,000\n799\n$6,799\n1976\n476\n5,103\n6,000\n851\n6,851\n1977\n506\n5,424\n6,000\n904\n6,904\n1978\n601\n6,443\n6,000\n1,074\n7,074\n1979\n696\n7,461\n6,000\n1,244\n7,244\n1980\n791\n8,480\n-\n1,413\n1,413\n1981\n944\n10,120\n-\n1,687\n1,687\n1982\n1,097\n11,760\n-\n1,960\n1,960\n1983\n1,250\n13,400\n-\n2,234\n2,234\n1984\n1,403\n15,040\n-\n2,507\n2,507\n1985\n1,557\n16,691\n-\n2,782\n2,782\nAssumptions:\nGERALD FORD LIBRARY\n1. Production at levels corresponding to Project Independence Report.\n2.\nOil priced at $8 per barrel and gas priced at $0.70 per thousand\ncubic feet, giving a total value 1.34 times the value of oil\nproduction.\n3. 16-2/3 percent royalty collected on all production from Federal\nOCS lands.\nTable 2\nSUMMARY OF PAYMENTS TO STATES UNDER FOUR OPTIONS\n(millions of dollars)\nOption I\nOption II\nOption III\nOption IV\nCoastal\nCoastal\nPro-\nPro-\nPro-\nNationwide\nState\nState\nduction\nduction\nNational\nduction\nEnergy\nNational\nYear\nImpact Aid\nImpact Aid\nShares\nTotal\nShares\nShares\nTotal\nShares\nImpact Aid\nShares\nTotal\n1975\n680\n680\n240\n920\n240\n2310\n2550\n240\n500\n1810\n2550\n1976\n685\n685\n255\n940\n255\n2314\n2569\n255\n500\n1814\n2569\n1977\n690\n690\n271\n961\n271\n2318\n2589\n271\n500\n1818\n2589\n1978\n707\n707\n322\n1029\n322\n2331\n2653\n322\n500\n1831\n2653\n1979\n724\n724\n373\n1097\n373\n2344\n2717\n373\n500\n1844\n2717\n1980\n141\n141\n424\n565\n424\n106\n530\n424\n106\n--\n530\n1981\n169\n169\n506\n675\n506\n127\n633\n506\n127\n--\n633\n1982\n196\n196\n588\n784\n588\n147\n735\n588\n147\n--\n735\n1983\n223\n223\n670\n893\n670\n168\n838\n670\n168\n--\n838\n1984\n251\n251\n752\n1003\n752\n188\n940\n752\n188\n--\n940\n1985\n278\n278\n834\n1112\n834\n209\n1043\n834\n209\n--\n1043\nDefinition of options:\nOption I\n-- Coastal State Impact Aid at 10 percent of Federal OCS revenues.\nOption II\n-- Coastal State Impact Aid at 10 percent of Federal OCS revenues.\n-- Coastal State Production Shares equal to 5 percent of the value of oil landed in each State.\nOption III\n-- Coastal State Production Shares equal to 5 percent of the value of oil landed in each State.\n-- National Shares to all States equal to 37.5 percent of OCS revenues less 5 percent of the value\nof oil landed.\nOption IV\n--- Coastal State Production Shares equal to 5 percent of the value of oil landed in each State.\n-- Nationwide Energy Impact Aid equal to 10% of OCS revenues not to exceed $500 million per year.\n-- National Shares to all States equal to 37.5 percent of OCS revenues less 5 percent of the value\nof oil landed and less 10% of OCS revenues not to exceed $500 million per year (no negative\npayments to States)\nGERALD\nFORD\nLIBRARY\nTable 3\nSUMMARY OF STATES' AND FEDERAL\nSHARES UNDER FOUR OPTIONS\n(millions of dollars)\nOPTION I\nOPTION II\nOPTIONS III & IV\nTotal\nFederal OCS\nStates'\nFederal\nStates'\nFederal\nStates'\nFederal\nYear\nRevenues\nShare\nShare\nShare\nShare\nShare\nShare\n1975\n6799\n680\n6119\n920\n5879\n2550\n4249\n1976\n6851\n685\n6166\n940\n5911\n2569\n4282\n1977\n6904\n690\n6214\n961\n5943\n2589\n4315\n1978\n7074\n707\n6367\n1029\n6045\n2653\n4421\n1979\n7244\n724\n6520\n1097\n6147\n2717\n4527\n1980\n1413\n141\n1272\n565\n848\n530\n883\n1981\n1687\n169\n1518\n675\n1012\n633\n1054\n1982\n1960\n196\n1764\n784\n1176\n735\n1225\n1983\n2234\n223\n2011\n893\n1341\n838\n1396\n1984\n2507\n251\n2256\n1003\n1504\n940\n1567\n1985\n2782\n278\n2504\n1112\n1607\n1043\n1739\nGERALD FORD LIBRARY\nTable 4\nREGIONAL DISTRIBUTION OF\nPRODUCTION SHARE\n(millions of dollars)\nTotal OCS Production\nYear\nTotal\nGulf of Mexico\nPacific\nAlaska\nAtlantic\n1974\n224\n215\n9\n0\n0\n1975\n240\n226\n14\n0\n0\n1976\n255\n235\n20\n0\n0\n1977\n271\n247\n24\n0\n0\n1978\n325\n267\n48\n0\n10\n1979\n373\n287\n67\n0\n19\n1980\n419\n305\n89\n0\n25\n1981\n505\n334\n116\n15\n40\n1982\n589\n359\n147\n24\n59\n1983\n670\n382\n174\n40\n74\n1984\n752\n406\n203\n53\n90\n1985\n844\n434\n234\n67\n109\nOCS Production Above 1974 Levels Only\nYear\nTotal\nGulf of Mexico\nPacific\nAlaska\nAtlantic\n1974\n0\n0\n0\n0\n0\n1975\n16\n11\n5\n0\n1976\n31\n20\n11\n0\n1977\n47\n32\n15\n0\n0 0 0 GERALD FORD LIBRARY\n1978\n101\n52\n39\n0\n10\n1979\n149\n72\n58\n0\n19\n1980\n195\n90\n80\n0\n25\n1981\n281\n119\n107\n15\n40\n1982\n365\n144\n138\n24\n59\n1983\n446\n167\n165\n40\n74\n1984\n528\n191\n194\n53\n90\n1985\n620\n219\n225\n67\n109\nTable 5\nDISTRIBUTION OF NATIONAL REVENUE SHARES\nBY STATES (OPTION III)\n1975\nAmount by\nShare by\nGeneral\nAmount by\nGeneral\nRevenue\nShare by\nPopulation\nRevenue\nSharing\nPopulation\n(millions of\nSharing\n(millions of\nState\n(percent)\ndollars)\n(percent)\ndollars)\nAlabama\n1.686\n39.058\n1.601\n37.084\nAlaska\n0.157\n3.642\n0.144\n3.332\nArizona\n0.981\n22.713\n1.020\n23.634\nArkansas\n0.971\n22.481\n1.039\n24.063\nCalifornia\n9.817\n227.361\n10.355\n239.833\nColorado\n1.161\n26.896\n1.084\n25.099\nConnecticut\n1.466\n33.948\n1.346\n31.176\nDelaware\n0.274\n6.357\n0.302\n6.997\nD.C.\n0.355\n8.233\n0.422\n9.772\nFlorida\n3.659\n84.738\n3.134\n72.587\nGeorgia\n2.281\n52.820\n2.087\n48.336\nHawaii\n0.396\n9.182\n0.437\n10.115\nIdaho\n0.367\n8.498\n0.395\n9.157\nIllinois\n5.354\n124.005\n5.079\n117.632\nIndiana\n2.533\n58.670\n2.033\n47.090\nIowa\n1.384\n32.050\n1.324\n30.666\nKansas\n1.086\n25.152\n0.922\n21.350\nKentucky\n1.593\n36.884\n1.627\n37.680\nLouisiana\n1.794\n41.541\n2.166\n50.157\nMaine\n0.490\n11.345\n0.634\n14.685\nMaryland\n1.939\n44.918\n1.987\n46.013\nMassachusetts\n2.772\n64.210\n3.256\n75.420\nMichigan\n4.310\n99.813\n4.203\n97.337\nMinnesota\n1.857\n43.009\n2.096\n48.535\nGERALD FORD LIBRARY\nMississippi\n1.087\n25.174\n1.470\n34.045\nMissouri\n2.267\n52.500\n1.923\n44.538\nTable 5\n(continued)\nDISTRIBUTION OF NATIONAL REVENUE SHARES\nBY STATES (OPTION III)\n1975\nAmount by\nShare by\nGeneral\nAmount by\nGeneral\nRevenue\nShare by\nPopulation\nRevenue\nSharing\nPopulation\n(millions of\nSharing\n(millions of\nState\n(percent)\ndollars)\n(percent)\ndollars)\nMontana\n0.344\n7.957\n0.369\n8.535\nNebraska\n0.735\n17.018\n0.668\n15.464\nNevada\n0.261\n6.048\n0.231\n5.353\nNew Hampshire\n0.377\n8.730\n0.315\n7.291\nNew Jersey\n3.508\n81.239\n3.133\n72.549\nNew Mexico\n0.527\n12.206\n0.628\n14.537\nNew York\n8.704\n201.580\n11.340\n262.641\nNorth Carolina\n2.513\n58.195\n2.432\n56.318\nNorth Dakota\n0.305\n7.063\n0.306\n7.083\nOhio\n5.114\n118.432\n4.082\n94.542\nOklahoma\n1.269\n29.390\n1.106\n25.609\nOregon\n1.060\n24.556\n1.052\n24.357\nPennsylvania\n5.672\n131.355\n5.321\n123.233\nRhode Island\n0.464\n10.738\n0.433\n10.032\nSouth Carolina\n1.299\n30.085\n1.407\n32.587\nSouth Dakota\n0.326\n7.560\n0.400\n9.255\nTennessee\n1.966\n45.536\n1.861\n43.093\nTexas\n5.620\n130.164\n4.853\n112.403\nUtah\n0.551\n12.769\n0.590\n13.664\nVermont\n0.221\n5.121\n0.309\n7.145\nVirginia\n2.293\n53.096\n2.015\n46.663\nWashington\n1.634\n37.844\n1.458\n33.764\nWest Virginia\n0.855\n19.799\n0.905\n20.966\nWisconsin\n2.177\n50.425\n2.545\n58.934\nWyoming\n0.168\n3.896\n0.158\n3.656\nGERRALO FORD LIBRARY\nOis Review Shing\nmy W.T Reduce\nDRAFT OPTION PAPER\nlety the / F and to - name\nSharing Outer Continental Shelf Revenues with States Cony.\nDeveloping oil and gas reserves on the Outer Continental Shelf (OCS) will\nprovide benefits to the United States which substantially exceed the costs\nof development, including social and environmental costs. Just as accelerated\ndevelopment was an appropriate response to the greatly increased world price\nof oil, SO delay in development will be very costly to a U.S. continuing to rely\non high-priced, uncertain imports.\nHowever, coastal state concerns about OCS development could become a source of\ndelay. States are concerned about:\n- environmental damages, including possible oil spills\nFORD & GERALD LIBRARY\n- esthetic impacts\n- economic effects, including possible disorderly development,\ninjury to existing industry, and the burden of providing new\npublic services.\nAlonning\nTo meet these concerns, the Federal Government has already proposed increased\nunited to whit\nplanning money for the Coastal Zone Management Act and is considering a\nComprehensive Oil Spill Liability bill.\nIt has, however, up to now opposed providing coastal states with a share of\nOCS revenues on the grounds that -\n- OCS resources belong to all the Nation, and their revenues should\nbenefit all citizens\n- sharing OCS revenues with coastal states would reduce federal\nrevenues and require compensating adjustment elsewhere in the\nfederal budget\n- onshore development induced by offshore activities will eventually\nprovide state and local governments with an increased tax base to\nfinance necessary public facilities\n- states rights to revenues from offshore minerals leasing were\nsettled by the Submerged Lands Act which gave states complete\njurisdiction over the first three miles of seabed, but nothing\nbeyond\nGERALD FORD LIBRARY\nHowever, there are reasons for reconsidering this position.\n- there may be a valid need for federal assistance now that frontier\nOCS areas will be opened; for example, \"front-end\" money to help\nstate and local governments begin developing public facilities before\nOCS developments provide an increased tax base on which to finance\nsuch expenditures\nofficits\n- shared revenues could give coastal states a financial stake in prompt\nOCS development and would be consistent with onshore precedent where\nthe Mineral Leasing Act gives affected states 37 1/2 percent of\nfederal leasing revenues.\n- the three-mile state jurisdiction is of little revenue value to states\nin frontier areas such as the Atlantic Coast, where oil and gas reserves\nare all located farther offshore\n- congressional action on shared revenues is possible regardless of the\nAdministration position.\n2\nThere are three general approaches to establishing shared revenues:\n- ameliorate impact with project grants -- tie revenues to specific\nuses which will minimize or underwrite costs faced by states as a\nresult of OCS activity.\n- compensate for impacts with no-strings money -- provide revenues which\nare sufficient to keep coastal states from being worse off on balance\nas a result of OCS activity, and distribute these revenues\namong states in a manner approximating expected impacts, but leave\nto the states the decision as to how to use the money.\n- provide a stake in development through shared revenues -- distribute\nrevenues which exceed the expected impacts coastal states face.\nPossibly extend shared revenues to inland states so that they also\nhave a direct stake in OCS development.\nThese three approaches can be grouped into four distinct options, as follows:\nFORD & LIBRARY GERALD\n3\nOption I: Coastal State Impact Aid\nDescription\nThis option is similar to a proposal introduced recently by Senator Jackson\n(S. 521) :\n- 10 percent of Federal OCS revenues, perhaps with an annual upper\nlimit, would fund grants to coastal states to ameliorate negative\nimpacts of OCS development.\n- funds would be made available soon enough for \"front-end\" costs,\nnot delayed until actual offshore production starts\n- states could apply for grants for only a five (perhaps 10) year\nperiod, so that the program would phase out after genuine impact\naid was no longer needed\n- grants could be distributed either by formula based on general indices\nof impacts, or by project after a showing of specific impacts, or\nboth\n- grants could either require state matching or, as in S. 521, provide\nfull funding.\nProgram Effects\nGERALD FORD LIBRARY\nFavorable:\n- the option would focus on ameliorating impacts of OCS development,\nand reduce them as a barrier to accelerated leasing in frontier areas\n- the amount and use of grant funds would be tied directly to impacts\n4\nmay h.\n- budget outlays would be modest by comparison with the other options\nconsidered.\nUnfavorable:\n- mere amelioration of impacts might be insufficient to lead coastal\nstates to accept OCS development\n- the grants might be opposed on grounds that OCS revenues are a National\nasset and should not be dispersed only to coastal states\n- clear identification and measurment of impacts for purposes of\nawarding grants would be administratively difficult\n- the impact rationale focuses assistance efficiently on future\nimpacts but makes no allowance for past impacts which may seem\ninequitable to states where OCS leasing has already occurred.\nFORD i LIBRARY GERALD\nBudget Effects\nImpact aid for coastal states equal to 10 percent of federal revenues would\nrange between $144 million and $727 million per year between 1975 and 1985,\nbased on current: production estimates. An annual ceiling lower than these\namounts, for example the $200 million ceiling for 1975 and 1976 proposed by\nSenator Jackson in S. 521, is an option. Revenue distribution by state would\ndepend on the project eligibility rules or the distribution formula adopted,\nbut would closely approximate the distribution of actual impacts. More\ndetailed projections of the budget effects under this option are provided in\nthe attachment.\n5\nOption II: Coastal impact aid and production shares\n7\nDescription\nIn addition to the impact grants of option I, this option includes payment\nto coastal States of 5 percent of the value of OCS oil and gas which is\nbrought on shore within their boundaries.\n- The 5 percent share of the value of oil and gas would be\napproximately equal to 37-1/2 percent of the minimum allowable\nOCS royalty; setting 5 percent as the share would therefore\nprevent the payment to the State from exceeding the share of\nroyalty income normally paid to States for onshore minerals.\n- Basing the payment on the value of oil and gas rather than on\nthe Federal royalty income itself will help prevent the level of\nroyalties from becoming a political issue.\n- If desired, the 5 percent payment could be split between the\nState bringing the oil on shore and the State refining the oil,\neither by a Federal allocation formula or by permitting States to\nreach agreements on a split among themselves.\n- The base for figuring the 5 percent payments could be limited,\nif desired, to \"new oil\" only, or to production above the level\nof a base period, say 1974.\nFORD LIBRARY & GERALD\n-6-\nProgram Effects\nFavorable:\n- The production share 5 percent payment adds to the front-end\nprogram of Option I a continuing source of funds for longer-\nterm effects.\n- Making payments dependent on taking oil ashore would give the\nStates an increased stake in OCS development off their shores,\nwhile it still targets payments on the areas which would feel\nimpacts.\nUnfavorable:\n- Like Option I, this option is subject to the objection that\nrevenues from a National resource would be distributed to only\nselected States.\n- Outlays under this option would be substantially greater than\nunder Option I.\nFORD if LIBRARY GERALD\nBudget Effects\nThis option would add to the costs of Option I an amount equal to 5 percent:\nof the value of oil produced, or between $224 million and $844 million per\nyear over the years 1975 to 1985. The total amount shared during this\nperiod would reach about $1,128 million per year at the highest. More detailed\nprojections of the budget effects under this option are provided in the\nattachment.\n-7-\nOption III: Coastal Production Shares plus Nationally Shared Revenues\nDescription\nThis option would combine the 5 percent coastal production shares of\nOption II with an additional sharing of federal OCS revenues with all\nstates.\n- the additional national sharing would be 37 1/2 percent of all\nfederal OCS revenues minus the 5 percent coastal production share.\nThus, total revenues shared in the two parts of the program together\nwould amount to 37 1/2 percent of all federal OCS revenues, the same\nproportion that is now shared with states in onshore leasing programs.\n- the national shares could be distributed among states on a per capita\nbasis, or by the General Revenue Sharing formula. The per capita\nbasis emphasizes the idea that OCS reserves are owned by all citizens,\nwhile the General Revenue Sharing formula makes use of an existing\nmethod for distributing federal funds to states. which also\nand\nProgram Effects\nGERALD FORD LIBRARY\nFavorable:\n- this option would extend a direct financial stake in OCS leasing\nand production to inland as well as coastal states\n- it would provide some front-end money to coastal states through\ntheir national share which would become available to them well\nbefore the 5 percent payments would start as oil was brought onshore\n8\n- it would feature a set of sharing formulae which, once established,\nwould be relatively easy to administer.\nUnfavorable:\n- it would take a substantial amount of federal revenues, perhaps\nmore than necessary to encourage prompt OCS development\n- it would not recognize any special front-end money needs of OCS-\naffected coastal states, but would give them only the same national\nshare as other states until their 5 percent production share became\navailable\n- it would not require that money shared with coastal states be used\nby them to ameliorate impacts which would allow states flexibility\nin deciding how to use funds but might not satisfy the impact concerns\nof some particular groups\n- it would result in a variable, and to a degree, unpredictable flow\nof funds to states, since OCS bonus revenues fluctuate considerably\nfrom sale to sale\n- distributing national shares by the General Revenue Sharing formula\nmight reduce the debate over an appropriate distribution formula by\nusing an existing mechanism, but could embroil the OCS sharing program\nin an unrelated controversy over the merits of General Revenue\nSharing.\nfull\nFORD i LIBRAR, CERALD\nBudget Effects\nThis option would distribute 37 1/2 percent of all federal OCS revenues to\nstates, or between $890 million and $2,707 million per year over the period\n9\n1975 to 1985. The 5 percent coastal production share of this total would be\n$224 million to $ 844 million per year. The remainder to be distributed\namong all states would amount to between $117 million and $2,353 million per\nyear. More detailed projections of the budget effects under this option are\nprovided in the attachment.\nFORD & LIBRARY GERALD\n10\nOption IV: Coastal Production Shares, Nationally Shared Revenues, and\nNationwide Energy Impact Aid\nDescription\nThis option combines the 5 percent production shares and the 37 1/2 percent\nnationally shared revenues of Option III with a program of impact aid like\nthat in Option I but available to all states to meet the front-end costs of\nenergy development, both off and onshore.\n- the total amount paid out would equal 37 1/2 percent of OCS revenues,\nas in Option III, but this sum would be divided three ways: 5 percent\nof the value of the oil to coastal states, $500 million (or a like\namount) for a nationwide impact grant fund, and the remainder of the\na\n37 1/2 percent for national per capita distribution\n- front-end grants would be available to all states on a project or\nformula basis for all types of energy-related impacts\nProgram Effects\nGERALD FORD LIBRARY\nFavorable:\n- this option has the advantages of Option III, plus the beneficial\neffects of impact-related front-end money for all states\n- it would treat all energy-related impacts consistently, without\nsingling out OCS impacts for special consideration\n- it would use OCS revenues, which are substantial, to ameliorate\nenergy impacts inland where needs may also be significant but\n11\nstate revenues from federal leasing are either smaller or\nnon-existent\n- it permits taking advantage of the good features of both project\nassistance and no-strings-attached revenue sharing\n- it addresses expressed concerns of Western States about front-end\nenergy development costs.\nUnfavorable:\n- the timing of the flow of OCS revenues into the nationwide impact\naid fund would bear no necessary relationship to the demands on\nthat fund from inland energy development activities\n- the impact aid fund would have the same administrative problems\nas the fund in Option I, but on a larger, nationwide scale\n- combining all three elements in one proposal may make it too complex\nto be appealing.\nGERALD R.FORD LIBRARY\nBudget Effects\nThe total amount to be shared with states would be identical to Option III.\nThe only difference would be that some percent: of federal revenues, perhaps\nup to a ceiling such as $500 million per year, would be earmarked for states\nexperiencing energy development impacts. An impact fund of 10 percent of\nfederal revenue up to $500 million per year would leave between $ 0\nand $1,853 million per year for nationally shared revenues. More detailed\nprojections of the budget effects under this option are provided in the\nattachment.\n12\nAttachment\nThe following tables present estimated revenue payments to states for each of\nthe options discussed in the text. For each option, four alternative revenue\nstreams are projected based on the following assumptions regarding royalties\nand revenue computation:\n1. 16 2/3 percent royalty on both pre-1975 and post-1975 leases;\nrevenue sharing applies to new and old production; new production\nis defined as production in excess of 1974 levels. This case is\nlabelled \"16 2/3/16 2/3; N + 0.\"\n2. 16 2/3 percent royalty on both pre-1975 and post-1975 leases;\nrevenue sharing applies to new oil only. Labelled \"16 2/3/16 2/3;\nN.\"\n3. 16 2/3 percent royalty on pre-1975 leases, 40 percent royalty on\npost-1975 leases; revenue sharing applies to new and old oil.\nLabelled \"16 2/3/40; 2/3/40 N + 0.\"\nGERALD FORD LIBRARY\n4. 16 2/3 percent royalty on pre-1975 leases, 40 percent royalty on\npost-1975 leases; revenue sharing applies to new oil only. Labelled\n16 2/3/40; N.\"\nThe dollar amounts reported in the text pertain to the \"16 2/3/16 2/3; N + 0\"\nalternative. Each of the revenue streams also includes the state share of bonus\npayments. Bonus payments are estimated at $6 billion per year, 1975-1979,\nwith 16 2/3 percent royalty; and $2.7 billion per year, 1975-1979, with\n40 percent royalty. Oil and gas prices of $8/bbl and 70¢/MCF are used to\nestimate royalty revenues, except in Alaska where gas is assumed to have\nno value at the wellhead due to high transportation costs.\nFORD is LIBRARY GERALD\nTable 1 shows projections of the payments into the Coastal State Impact\nAid (Option I) Fund computed at 10 percent of OCS lease revenues under each\nof the four alternative assumptions described above. Payments into the Fund\ncould be limited by a ceiling such as $200 million per year.\nTable 1\nOption I\nCoastal State Impact Aid\nPayments in Millions of Dollars\nYear\n16 2/3/16 2/3; N +0 16 2/3/16 2/3; N 16 2/3/40; N+O 16 2/3/40; N\n1975\n682\n605\n685\n609\n1979\n727\n651\n779\n702\n1980\n144\n68\n216\n140\n1985\n284\n208\n580\n504\nGERALD FORD LIBRARY\nTable 2 shows the funds to be shared with coastal states under Option II\nwhich includes both coastal state impact aid and production shares.\nPart A repeats the payment schedules from Table 1 for 10 percent of the\nrevenues of OCS leases. Part B shows the projected additional payments\nto states corresponding to 5 percent of the value of oil brought onshore\nin each region. These additional payments have been computed for New and\nOld Oil together and for New Oil. Part C shows the total payments to the\ncoastal states that would result from adding the 16 2/3/16 2/3; N + O\nshare at 10 percent to the 5 percent share of the value of New and Old\nOil.\nTable 2\nOption II\nCoastal Impact Aid and Production Shares\nPart A:\n10 Percent of OCS Lease Revenues\nGEBALD FORD VIBRARY\nPayments in Millions of Dollars\nYear 16 2/3/16 2/3; N + O 16 2/3/16 2/3; N 16 2/3/40; N+O 16 2/3/40; N\n1975\n682\n605\n685\n609\n1979\n727\n651\n779\n702\n1980\n144\n68\n216\n140\n1985\n284\n208\n580\n504\n(Table 2 continued)\nPart B:\n5 Percent of the Value of Oil Landed\nPayments in Millions of Dollars\nNew and Old Oil\nYear\nGulf of Mexico\nPacific\nAlaska\nAtlantic\nTotal\n1975\n215\n9\n0\n0\n224\n1979\n287\n67\n0\n19\n354\n1980\n305\n89\n0\n25\n773\n1985\n434\n234\n67\n109\n844\nNew Oil Only\n1975\n15\n1\n0\n0\n16\n1979\n72\n60\n0\n19\n151\n1980\n92\n80\n0\n28\n200\n1985\n214\n226\n67\n104\n611\nPart C:\nTotal Payments to Coastal States\n16 2/3/16 2/3; N + O\nYear\nPayments in Millions of Dollars\n1975\n906\n1979\n1,081\n1980\n917\n1985\n1,128\nFORD LIBRARY j GERALD\nTable 3 shows the projected payments to all states that would result under\nOption III, Coastal Production Shares plus Nationally Shared Revenues.\nPart A provides the estimated payments to coastal states at 5 percent of the\nvalue of oil landed. Part B shows the estimated revenues to be shared by all\nstates computed at 37 1/2 percent of the OCS lease revenues less the 5 percent\nshown in Part A. Part C shows the total payments to all states equal to\n37 1/2 percent of OCS revenues from New and Old Oil.\nPart D and Part E show the distribution by state of the shared revenues (from\nthe 16 2/3/16 2/3; N + O alternative) The distribution in Part D follows\nthe current General Revenue Sharing formula whereas the distribution in Part E\nis proportional to current population.\nFORD\nTable 3\nOption III\nGERALD\nLIBRARY\nCoastal Production Shares plus Nationally Shared Revenues\nPayments to Coastal States in Millions of Dollars\nPart A:\n5 Percent of the Value of Oil Landed\nYear\nGulf of Mexico\nPacific\nAlaska\nAtlantic\nTotal\nNew and Old Oil\n1975\n215\n9\n0\n0\n224\n1979\n287\n67\n0\n19\n354\n1980\n305\n89\n0\n25\n773\n1985\n434\n234\n67\n109\n844\nNew Oil Only\n1975\n15\n1\n0\n0\n16\n1979\n72\n60\n0\n19\n151\n1980\n92\n80\n0\n28\n200\n1985\n214\n226\n67\n104\n611\n(Table 3 continued)\nPart B:\nPayments Shared by all States in Millions of Dollars\n37.5 Percent of OCS Revenues less 5 Percent of the Value of Oil Landed\nYear\n16 2/3/16 2/3; N + O 16 2/3/16 2/3; N 16 2/3/40; N+O 16 2/3/40; N\n1975\n2,316\n2,254\n1,080\n1,019\n1979\n2,353\n2,291\n1,296\n1,235\n1980\n117\n55\n386\n324\n1985\n229\n167\n1,340\n1,221\nPart C:\nTotal Payments to States in Million of Dollars\n37.5 Percent of OCS Revenues\nYear\n16 2/3/16 2/3; N + 0\n1975\n2,540\n1979\n2,707\n1980\n890\n1985\n1,073\nPart D:\nDistribution of Revenue Shared by all States, 1975\nGeneral Revenue Sharing Formula\n(under development)\nFORD is LIBRARY\nPart E:\nDistribution of Revenue Shared by all States, 1975\nPopulation\n(under development:)\nTable 4 presents projections of payments to states that would result under\nOption IV, Coastal Production Shares, Nationally Shared Revenues, and Nationwide\nEnergy Impact Aid.\nPart A displays the payments to coastal states of 5 percent of the value of oil\nlanded. Part B shows the funds to be shared among all states. These are\ncomputed as 37 1/2 percent of OCS revenues less 5 percent of the value of oil\nlanded and less 10 percent of OCS revenues (not to exceed $500 million). The\n10 percent of OCS revenues is the fund to be available to all states impacted\nby energy development. The total payments to all states equal 37 1/2 percent\nof OCS revenues as shown in Table 3, Part C.\nTable 4\nGERALD FORD LIBRAPT\nOption IV\nCoastal Production Shares, Nationally Shared Revenues, and Nationwide\nEnergy Impact Aid\n(in millions of dollars)\nPart A:\nYear\nGulf of Mexico\nPacific\nAlaska\nAtlantic\nTotal\nNew and Old Oil\n1975\n215\n9\n0\n0\n224\n1979\n287\n67\n0\n19\n354\n1980\n305\n89\n0\n25\n773\n1985\n434\n234\n67\n109\n844\nNew Oil Only\n1975\n15\n1\n0\n0\n16\n1979\n72\n60\n0\n19\n151\n1980\n92\n80\n0\n28\n200\n1985\n214\n226\n67\n104\n611\n(Table 4 continued)\nPart B:\nNationally Shared Revenues\n(in millions of dollars)\nYear\n16 2/3/16 2/3;N + O 16 2/3/16 2/3; N 16 2/3/40: N + 0 16 2/3/40; N\n1975\n1,816\n1,754\n580\n519\n1979\n1,853\n1,791\n796\n735\n1980\n0\n0\n170\n184\n1985\n0\n0\n840\n721\nGERALD FORD VIGRABIA"
}