Stop press: Blanco talks sense!

Governor Kathleen Blanco of Louisiana is demanding that her state gets a share of the revenues from Gulf of Mexico oil production. She has threatened to bring a legal action to disrupt the latest licence auction if the federal government does not agree.

Despite setting mind-boggling new standards for incompetence during the Katrina debacle, on this issue, Blanco is on to something.

Quite apart from the clear constitutional principle at stake - surely the default position is that revenue belongs to the state, except where the constitution explicitly grants it to the feds - there is the practical issue of how to optimise public choice.

Why is there no offshore oil production on the California coast? Quite simply because the cost to Californian politicians of granting permission is out of all proportion to the benefits. Environmental concern in the state is very high. A spillage would have severe consequences to the politicians who authorised production. Yet there are few benefits to the state in granting permission. Jobs, certainly, but also a risk to jobs in the tourist sector. There are no state revenues, because the federal government trousers all the cash.

Florida has a long-standing policy of opposing offshore drilling, not so much because of environmentalism, but because of a hard-headed assessment of the risks an oil spill would pose to its vital tourist industry. Why would voters in Florida consent to such a risk if all the associated revenues go to the federal government?

If the US is serious about energy independence, the federal government must cede to the states the revenue from offshore production.

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