July 6, 2011
By Steven Groves
It’s the year before a presidential election, so it must be time to debate the Law of the Sea Treaty (“LOST”) again. As recently as last Thursday the Chief of Naval Operations pleaded for the U.S. to join the treaty. The Obama Administration has supported Senate action on LOST since at least May 2009 when it released its Treaty Priority List.The last time LOST came up was in 2007 when the Senate Foreign Relations Committee, then chaired by Sen. Joe Biden, held hearings. But the treaty was never brought to the floor for a vote. 2011 is beginning to feel a lot like 2007.Sen. John McCain recently spoke at the Center for Strategic Studies regarding U.S. interests in the South China Sea. He called on the Senate to “decide whether it is finally time to ratify the Law of the Sea Treaty.” McCain accused China of “working within the Convention to advance fringe views that aim to deny access to international waters.” The United States, he lamented, lacks “a seat at the table” since it has not acceded to LOST.This charge is overblown, to say the least. When it comes to LOST, there is neither a table nor chairs to sit on.LOST is much more than the navigational provisions that McCain supports. The freedom-of-navigation provisions—relating to the high seas, territorial waters, international straits and archipelagic waters—represent the proverbial “baby in the bathwater.” LOST cannot be judged solely on the positive navigational provisions without regard to the negative “bathwater” provisions.One of LOST’s “bathwater” provisions, Article 82, would cause the United States to lose a significant amount of revenue. If the U.S. ratifies LOST, it would be required under Article 82 to forfeit royalties generated from oil and gas exploration on the continental shelf beyond 200 nautical miles, an area the U.S. calls the “extended continental shelf” (ECS).Under current law, oil companies are required to pay royalties to the U.S. Treasury (generally at a rate of 12½% to 18¾%) for oil and gas exploration in the Gulf of Mexico and off the Northern coast of Alaska. The Treasury retains a portion of those royalties, while the rest goes to Gulf states and the National Historic Preservation Fund.But if the U.S. was a member of LOST, it would be required to transfer a portion of that royalty revenue—now considered “international royalties”—to the International Seabed Authority, a UN-style organization created by the treaty and based in Kingston, Jamaica.How much are we talking about here? It’s difficult to estimate the volume of the oil and gas on the ECS, but the U.S. Extended Continental Shelf Task Force, an interagency project currently mapping the extent of the ECS, estimates that the ECS resources “may be worth many billions, if not trillions of dollars.”If the U.S. joined LOST, it would be required to pay “international royalties” beginning in the sixth year of production at each exploration site on the ECS. Starting in year six, it would pay 1% of the total production to the authority. Thereafter, the royalty rate increases in increments of 1 percentage point per year until year 12, when it reaches 7%. The royalty rate remains at 7% until production ceases. In sum, starting in the 12th year of production, about ½ of the revenue that would otherwise go to the U.S. Treasury would instead be sent to the authority.So who would benefit from this American largesse? The final say regarding distribution of Article 82 royalties is the “assembly,” a body made up of more than 160 countries. The United States would be powerless in the assembly, where it has only a single vote, to prevent the transfer of royalties to repugnant regimes. The assembly may vote to distribute royalties to undemocratic, despotic or brutal governments in Belarus, Burma, China or Zimbabwe—all members of LOST.Perhaps the funds will go to regimes that are merely corrupt. Thirteen of the world’s 20 most corrupt nations according to Transparency International are parties to LOST. Even Cuba and Sudan, both considered state sponsors of terrorism, could receive these “international royalties.”Those who favor U.S. accession to LOST must ask themselves why the United States should siphon off wealth from its own continental shelf for the benefit of foreign countries that cannot or will not spend the necessary resources to develop their own continental shelves. Instead of diverting U.S. revenues to such dubious purposes, the Treasury should retain any wealth derived from the U.S. ECS for the benefit of the American people.As much as McCain and others would like to keep just the “baby” navigational provisions of LOST, it is impossible to do so without swallowing the treaty’s “bathwater” provisions, including Article 82.
Steven Groves is responsible for developing and running the "Freedom Project" at The Heritage Foundation.
First appeared in Human Events
Bernard and Barbara Lomas Senior Research Fellow
Read More >>
Request an interview >>
Please complete the following form to request an interview with a Heritage expert.
Please note that all fields must be completed.
Heritage's daily Morning Bell e-mail keeps you updated on the ongoing policy battles in Washington and around the country.
The subscription is free and delivers you the latest conservative policy perspectives on the news each weekday--straight from Heritage experts.
The Morning Bell is your daily wake-up call offering a fresh, conservative analysis of the news.
More than 450,000 Americans rely on Heritage's Morning Bell to stay up to date on the policy battles that affect them.
Rush Limbaugh says "The Heritage Foundation's Morning Bell is just terrific!"
Rep. Peter Roskam (R-IL) says it's "a great way to start the day for any conservative who wants to get America back on track."
Sign up to start your free subscription today!
The Heritage Foundation is the nation’s most broadly supported public policy research institute, with hundreds of thousands of individual, foundation and corporate donors. Heritage, founded in February 1973, has a staff of 275 and an annual expense budget of $82.4 million.
Our mission is to formulate and promote conservative public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong national defense. Read More
© 2015, The Heritage Foundation Conservative policy research since 1973