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THE NEW YORK TIMES: U.S. Should Share Oil Royalties with States – Shell

By REUTERS
Published: February 10, 2006
Filed at 5:07 p.m. ET
WASHINGTON (Reuters) – The U.S. government should share more of the royalties it collects from energy companies for offshore oil and natural gas drilling with the states, particularly to help rebuild hurricane-ravaged Louisiana, a top Shell Oil executive said on Friday.
Gulf Coast states that have offshore drilling collect royalties for oil and gas production in the their waters which usually extend only a few miles from shore. Any exploration beyond that is in federal waters, where the government collects royalties that go to the general treasury to pay for various programs benefiting the whole country.
Marvin Odum, who is responsible for Shell's energy exploration and production businesses in the United States and the rest of the North and South America, said he supports efforts by the Gulf Coast states and local communities to get some of the federal oil and gas revenue.
“It's certainly something that we think the government can and should push through,'' Odum said in a interview with Reuters.
Louisiana Gov. Kathleen Blanco said this week she wants the government to give the state 50 percent of the federal offshore royalties to help repair coastal wetlands left vulnerable to hurricanes due to oil industry development.
While Odum supports revenue sharing, he would not comment on how much federal royalties Louisiana or any other state should get or what they should spend it on.
“That's between the states and the federal government, that's what they need to work out,'' he said. “Whether or not Louisiana would choose to use some of that money specifically for hurricane restoration and recovery, obviously that's a great need, that would be again a government decision.''
Separately, Odum said “quite a bit'' of the $15 billion that Shell's parent company, Royal Dutch Shell Plc, plans to spend worldwide this year for oil and gas exploration and production will be targeted for the United States.
While that amount reflects higher drilling and exploration costs, he said there will still be money for new investment. ''It's a significant increase in activity worldwide,'' he said.
In the United States, he said Shell will focus on drilling for new oil in the deeper waters of the Gulf of Mexico and off the Alaskan coast, and developing natural gas resources from south Texas through the Rocky Mountain region.
The company will also invest in developing the vast oil shale resources in the Western United States, which the government estimates holds more than 1 trillion barrels of oil.
Oil shale is sedimentary rock containing organic material that can be crushed and heated to produce oil. The process is a costly one, and most U.S. oil shale projects were abandoned in the early 1980s when crude prices collapsed.
However, with oil prices expected to average above $60 a barrel in the next two years, oil shale development looks profitable again.
Odum said the company will know in about five years whether developing oil shale is commercially viable.
He said the government should open more offshore and onshore areas to drilling to help reduce U.S. reliance on foreign oil imports.
Odum declined to say whether President Bush's goal of cutting U.S. Mideast oil imports by 75 percent in 2025 could be reached.
However, he said even if more areas are opened to drilling the United States will still be heavily dependent on foreign suppliers to meet its energy needs over the next two decades. ''I think that's a reasonable case,'' he said.

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