U.S. Lawmakers ask Interior to Cut Offshore Oil Royalty Rates

Valerie Volcovici
Monday, March 23, 2020

Lawmakers representing U.S. Gulf coast states on Friday asked Interior Secretary David Bernhardt to temporarily cut the royalty rate oil and gas companies must pay on their offshore drilling operations to help the industry weather a market crash.

"Such an action in the short term will help mitigate a price war that is sinking prices and decreasing production,” the 14 lawmakers said in a letter to Bernhardt dated Friday and seen by Reuters. 

The congress members represent Gulf coast districts including in Texas and Louisiana. A long list of businesses has been seeking assistance from the White House and the U.S. Congress to counter the impact of the global pandemic, which has infected more than a quarter of a million people worldwide, decimating travel and forcing massive disruptions in daily life.

The economic fallout of the outbreak combined with a price war between major oil producer nations Saudi Arabia and Russia has triggered a slump in crude oil prices that threatens the once booming U.S. drilling industry. 

The American Petroleum Institute on Friday asked for additional regulatory relief from President Donald Trump, including on things like waivers for seasonal fuel requirements, a suspension of non-essential inspections and audits, and certain leasing and permitting considerations. 

The lawmakers said in their letter that Bernhardt has the authority to waive or suspend royalties on existing leases under federal laws covering the Outer Continental Shelf. There is a 12.5% royalty rate for leases in water depths of less than 200 meters and a royalty rate of 18.75% for all other leases. The rate has been unchanged for more than a century. 

A spokesperson for the Department of Interior did not immediately respond to a request for comment. Firing up offshore drilling has been a crucial part of Trump’s “energy dominance” agenda to maximize domestic production of crude oil, natural gas, and coal. 

On Wednesday, a major sale of oil and gas leases in the U.S. Gulf of Mexico generated $93 million in high bids, the lowest total for any U.S. offshore auction since 2016, reflecting caution in the drilling industry amid a steep slide in oil prices. 

(Reporting by Valerie Volcovici; Editing by Richard Valdmanis)

Categories: Energy Industry News Activity Production North America Gulf of Mexico Regulations USA

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