US Interior Department considers cutting royalty rate for deepwater projects

A proposal to reduce the federal government’s take from deepwater oil and gas production in the US Gulf of Mexico is making its way towards Interior Secretary Ryan Zinke’s desk for final approval.

Offshore staff

WASHINGTON – A proposal to reduce the federal government’s take from deepwater oil and gas production in the US Gulf of Mexico is making its way towards Interior Secretary Ryan Zinke’s desk for final approval, according to a report in the Houston Chronicle.

The proposal, which would cut the royalty rate by one-third, aims to encourage more drilling in the deepwater US Gulf. The cut in deepwater royalties follows a similar reduction in rates for shallow-water production as the Trump administration aims to increase US oil and gas production.

According to the report, the Interior Department’s Royalty Policy Committee has proposed that the royalty rate collected by the federal government for fields deeper than 200 ft would decrease from 18.75% to 12.5%, the same reduction that shallow-water producers received.

The royalty committee is set to decide Wednesday whether to adopt the recommendation to cut the rate. The proposal would then go to Zinke for a final decision.

“The western and central Gulf of Mexico have been leased... for decades,” the recommendation reads, according to the report. “There are substantial additional resource volumes still accessible and producible under the right leasing, fiscal and regulatory terms.”

Last year, the federal government collected $7.1 billion in royalties and fees from energy production on federal and tribal lands and waters, a little more than half its take at the peak of the last oil boom in 2014, according to the Department of Interior. Since 2010, more than half those revenues came from offshore oil and gas production.

02/27/2018

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