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Proceeds From Coastal Drilling Should Be Shared With Coastal Counties, Council Member Says

A Suncor Energy oil rig in the North Sea's Buzzard field, between England and Norway.
Suncor Energy via Flickr

A member of the council that’s been appointed to advise Gov. Pat McCrory on energy production wants North Carolina’s 20 coastal counties to be guaranteed a direct cut of royalties from off-shore gas drilling.

Frank Gorham, a Nags Head-based businessman with oil and gas interests in Texas, told members of the Energy Policy Council on Wednesday that state leaders should allocate half of offshore proceeds to coastal counties because that region faces the highest environmental exposure to drilling. Coastal residents and environmental groups have opposed the construction of wells there.

“The people that are going to be impacted have every right to know whether they're going to get any benefit from it,” Gorham said. “I think you go to people and say, ‘We're going to share it with you. You have the risk. We're going to share in the positive.’”

Wednesday’s meeting in downtown Raleigh was one of the first public glimpses of what the 13-member council may recommend. The governor and the general assembly assigned it last summer to recommend policies on exploiting energy resources in the state, including wind and solar, hydraulic fracturing and offshore drilling.

The state’s Republican leadership has said they want to exploit the economic potential of natural energy resources in the state. McCrory told reporters last October: “We can either sit on the sidelines as we've done for the past 10 years or we can take proactive initiatives to get North Carolina into the energy business.”

Gorham is not the first person to suggest a revenue-sharing agreement off the coast, which is federal territory. North Carolina officials, including former Democratic Gov. Bev Perdue, have long argued the state should receive a share of royalty payments. An agreement would require congressional action.

But Gorham’s proposal calls for proceeds specifically for the coast. He said the state should get 27 percent of the federal government’s royalties for drilling three to six miles off the coast and 37 percent for drilling more than six miles off. Half of the state’s returns would be directed to coastal counties.

'The proceeds could be used for beach renourishment, dredging programs, coastal waters programs, environmental restoration or projects as determined by the counties.' - Frank Gorham

“The proceeds could be used for beach renourishment, dredging programs, coastal waters programs, environmental restoration or projects as determined by the counties,” Gorham wrote in a letter he gave the council yesterday.

John Skvarla, secretary of the Department of Environment and Natural Resources and member of the council, said at the meeting that McCrory has expressed an interest in areas near potential hyradulic fracturing sites also having royalties allotted directly. Lt. Gov. Dan Forest, who chairs the council, said the council will consider the recommendation.

Offshore drilling is at least three years away. An article in the Wilmington Star-News last November explains the hurdles:

Domestic offshore drilling is dictated by what's referred to as a "five-year plan" developed by the U.S. Department of Interior's Bureau of Ocean Energy Management. The plan through 2017 does not include the Atlantic or eastern Gulf of Mexico for offshore drilling or exploration. Talks about including additional regions were halted by the devastating Deepwater Horizon BP catastrophe in 2010 that claimed 11 lives and wreaked havoc on the Gulf Coast, particularly Louisiana and Mississippi. However, President Barack Obama's administration will begin working on the post-2017 five-year plan next year, and industry experts who support offshore drilling say North Carolina officials should work now to push for inclusion in that plan. McCrory spokesman [Ryan] Tronovitch said "conversations are ongoing between the McCrory administration and the federal government."

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