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Alabama's Natural Gas & Economic Future


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Manufacturing Issues
OCS Bill

OCS Bill

One of Manufacture Alabama’s key initiatives for 2006 was achieved with passage by the U. S. House and Senate of Outer Continental Shelf (OCS) drilling legislation that will open more than 8 million acres of oil and gas reserves in the Gulf of Mexico and will provide Alabama with new revenue-sharing royalties that can be used to fund infrastructure improvements.  Manufacture Alabama has been working on the OCS legislation, both directly and through the Commission on Infrastructure, for more than six months.  We are gratified that the drilling and revenue sharing provisions were approved just before adjournment of the 109th Congress.  We are particularly grateful for the hard work and leadership of members of Alabama’s Congressional Delegation whose efforts played a major role in passage of the legislation. 

The OCS legislation in one bill addresses two of the major competitive issues facing Alabama manufacturers – the need for dependable domestic sources of natural gas and petroleum products, and the need to fund essential transportation infrastructure projects.  It is believed that the 8.3 million acres of Gulf waters to be opened for exploration and production contains about 6 trillion cubic feet of natural gas and more than 1.25 billion barrels of crude oil.  New domestic sources of natural gas are especially important to manufacturers harmed by the volatility and high price of natural gas in recent years.  The revenue-sharing provisions of the OCS legislation allocate 37.5 percent of new drilling royalties among the four states – including Alabama – that allow exploration and production in federal waters off their coasts.  Currently, states receive royalties only from drilling in state waters.  Twenty percent of the revenue sharing is earmarked for coastal counties and 80 percent goes to the State of Alabama. 

The Commission on Infrastructure – which Manufacture Alabama helped form last year with Alabama House Speaker Seth Hammett and other legislative leaders – has looked at the proposed OCS royalties as a potential source of long-term financing for improvements to our state’s infrastructure system.  Manufacture Alabama is already working with Speaker Hammett and others on strategies for use of the royalties in connection with the Infrastructure Commission’s Report & Recommendations to be issued in February in advance of the 2007 Alabama Legislative Session.  We believe use of the OCS revenue-sharing monies for infrastructure improvements is in line both with the intent of Congress in passing the legislation and with Alabama’s historic allocation of offshore drilling royalties for transportation capital projects.  While it is too early to estimate how much money the OCS bill might provide Alabama in the years ahead, it will be a significant and welcome windfall.

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