Louisiana Attorney General James Caldwell filed a federal suit last week in the District of Columbia to overturn a change in offshore oil royalty rules that could require the state to repay royalties and cut its anticipated future royalties.
The dispute is over oil produced in a zone beyond the state’s three-mile limit. The federal government and coastal states split the royalties paid on the oil from leases in the boundary zone.
The state’s lawsuit said the Interior Department’s recent changes to the boundary line between federal and state waters were arbitrary and capricious.
Caldwell said the change could require the state to repay $2.8 million in royalties it received over the last 25 years, and could result in lower-than-anticipated royalty revenues in the future.
The offshore revenues are dedicated by the state constitution to schools, higher education, and coastal restoration.
Garret Graves, chairman of the state Coastal Protection and Restoration Authority, said the boundary change could affect a 2008 law that increases the state’s share of the royalties to 37.5% by 2017 from 27% now.
The Legislature established the Coastal Protection and Restoration Financing Corp. in 2007 to manage the state’s increased share of royalties on oil and natural gas production from new federal leases in outer continental shelf waters in the Gulf of Mexico off Louisiana.
The corporation is authorized to issue bonds based on 100% of the royalties, but has not yet done so.
The revenues are expected to be $8 million to $10 million a year until 2017.
When the areas reach full production and the royalty rates hit their ceiling, Louisiana’s share of the revenues could reach $150 million a year.