Offshore drilling, its economic viability and potential environmental impact have been hot-button topics in South Carolina in recent months. And considering this states predominately rural economy, Wilson’s rhetoric must certainly strike a chord with struggling families and minimum-wage workers shelling out roughly a day’s wages for a tank of gas. But, who really stands to gain from drilling in the waters off South Carolina’s coast? For one, according to the stipulations in the American Energy Act, the constituents in Joe Wilson’s district—Hilton Head most notably. They will see between 37 and 75 percent of lease profits (the amount the oil company pays the federal government for the right to drill, depending on an oil rig’s proximity to our coast). Coastal counties in Wilson’s district could also see up to two-thirds of royalties if a drilling site actually hits oil. 

Wilson told City Paper that drilling revenue in his district would likely be used to “...help counties under stress because of population growth.” The revenue, he said, would facilitate improvements “with water, sewer and roads, particularly the widening of [Highway] 278 in Beaufort County for evacuation.” 

Another positive side effect is that—in the years between hurricanes—a widened Hwy. 278, the main drag into Hilton Head, would further benefit the high-dollar tourism industry there. 

Wilson opted to take out personal loans for his current campaign, but, according to the Federal Election Commission’s 2008 House and Senate campaign finance report, the congressman received $5000 from Reed Development alone, a developer in Hilton Head. He raised around $30,000 from other developers and realty companies around the state, according to the report. 

To his credit, the congressman says he is a supporter of new technologies and says he is working with the development of biomass fuels and promoting alternatives. He also said he believes in conservation, noting Japan and Denmark as great examples of conservation and alternative energy use. While campaigning in South Carolina, he visited several alternative energy projects in the area to demonstrate his support and said he believes the country should tap homegrown ingenuity to create new energy sources.

 

Incentives vs. Investments

 

A latent fact about offshore drilling rarely publicized and widely unknown, even among lower-level politicians, are the associated economic incentives given to states and their local governments. Profits from drilling on the Outer Continental Shelf for oil and natural gas will provide these incentives to states within 100 miles from lease tracts. Given the proximity of proposed drilling sites—which, according to Wilson, would be 25 miles off the coast, but outside the visibility range of 12 to 14 miles—approximately 25 percent of lease profits from offshore oil rigs will go to county governments along the coast, including Beaufort County. Even if the entire state feels the impact, only the areas closest to the coast receive compensation. 

According to Section 110 of the American Energy Act (HR 6566), as early as next month, the federal government could “...share 37.50 percent of OCS [Outer Continental Shelf] Receipts derived from all leases located completely beyond 4 marine leagues from any coastline and completely within 100 miles any coastline.” 

If Wilson’s proposed drilling distance of 25 miles was to fall through and oil platforms were allowed within 4 leagues (roughly 14 miles) off the shoreline, the federal payout on the leases would rise to 75 percent. 

In addition to lease profits, if the sites produce oil, royalties are divided between adjacent and producing states, with one third going to the adjacent state (Georgia). The monies then trickle down to the coastal counties. This means coastal county governments of producing states (based on geographic center of the lease tract) share a potential for significant financial gain. It also means that the rest of the state, despite their economic status or the reverberated impact, likely won’t see a dime.  

Money from leases and royalties present local government with an inestimable opportunity. Funds could pay for renewable resource projects such as wave energy, full-scale recycling programs to create biomethane landfills for energy production, countywide home and business efficiency efforts, as well as other initiatives that demonstrate independence from not just foreign oil, but from oil period. Beaufort County could set an example of the real benefits of offshore drilling. 

Again, it remains to be seen how local legislators would allocate that potential revenue, especially considering the “No Accounting Required” clause in the Act, which states that local governments “...shall not be required to account to the Federal Government for the expenditure of such funds, except as otherwise may be required by law.”

 

Wording in the Act also suggests that oil companies have the option to buy 75 percent of drilling sites outright after their initial five-year lease expires. After the purchase, “further consultation with the states shall not be required” so long as the sale does not affect military operational needs. The implication is this: all lease and royalty profits to the state will end. Should a company chose not to drill within the timeframe of the lease or not realize any profit; or if, like many energy experts note, it should take as long as ten years to draw the oil, there will be no royalty profit seen by the state and the waters off their coast will be owned outright by oil companies.

Additionally, those corporations will not be required to submit any environmental impact statements or further environmental analysis after the initial five-year lease. 

The American Energy Act is intended, in its own words, “to bring down energy prices by increasing safe, domestic production, encourage the development of alternative and renewable energy, and promoting conservation.” It is touted by some as the answer to the nation’s energy crisis and is meant to be the foundation of energy independence. Yet, a closer examination exposes a plan heavily invested in well-established oil and drilling practices, and continued dependence on coal, and other short-lived, non-renewable resources. 

The American Energy Act allows for investment in new technology and development of renewable resources. Ninety percent of funds remaining from OCS and ANWR lease tracts are deposited into the “American Renewable and Alternative Energy Trust Fund.” The fund then allocates dollars to investments and incentives for alternative energy and refinement.

Tax incentives comprise the bulk of what are now called “conservation efforts.” They include incentives to both businesses and individual taxpayers for the production and purchase of “energy efficient” items. Most of the incentives included in the plan are extensions of incentives already in place since 2005. The extensions include: the purchase of energy efficient appliances, building/retrofitting non-business and residential property, home credit for use of solar panels, and commercial building deductions for demonstrated energy efficiency. The newest incentives include $3000 tax break for a consumer who purchases an electric plug-in car until 60,000 cars are sold, after which the six-month “phase out” period kicks in and the money kicks out. There are also incentives for battery-operated cars ranging from $200 to $2000.  

These incentives presuppose the purchasing power of the average American and the company’s capital investment capacities to create them. Yet, in a time when long-standing corporations like Ford and Chrysler are implementing large scale cutbacks, and few individuals have the ability to buy a new car or replace the windows on their houses, the people in greatest need of financial relief fall farther behind. Capital investments from the fund are significantly tied into refineries. The plan bequeaths closed military bases for the purpose of constructing refineries for oil-to-gasoline, coal-to-liquid, and biodiesel production. It also provides grants and loans for construction of such facilities.

America has a gaping wound bleeding $700 million a year and the economy is at the worst shape we’ve seen in decades. Without a doubt, the country needs an overhaul. The American Energy Act address the fundamental need of economic stimulation, but fails to lay a solid foundation for long-term energy independence.  

Since the attacks on the World Trade Center, politicians use terrorism, security and other fear-inducing ideas to push public opinion. Joe Wilson is no exception to the rule. Offshore drilling is not a matter of national security; it is economics. Billions of dollars will continue to flow out to countries like Saudi Arabia (homeland of 13 out of the 18 9/11 hijackers) and it won’t provide any relief at the pumps. The Arctic National Wildlife Refuge’s estimated 10.4 billion barrels of untapped oil would last us 500 days. 

The House of Representatives is set to reconvene this month. Should the bill be put to vote, it is likely to pass. Congressman Wilson would then have the opportunity to help demonstrate his commitment to the investment in alternative energy and promoting conservation on the shores of South Carolina as voraciously as he worked to pass the bill.

Whether Wilson’s motives are altruistic or in the interest of his financial contributors will only be revealed once drilling begins.

Sara Brainard contributed to this article.

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3.25 Copyright (C) 2007 Alain Georgette / Copyright (C) 2006 Frantisek Hliva. All rights reserved."