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               Researh Sevice






Offshore Royalty Relief: Status During the

COVID-19 Pandemic



Updated May 13, 2020

U.S. oil and gas producers face financial challenges stemming from demand reduction, oversupply, and
commodity price drops during the COVID-19 pandemic. Some Members of Congress have asked the
Department of the Interior (DOI) to offer royalty relief on federal oil and gas leases-a temporary
reduction or waiver of the royalties that companies pay the federal government on production from these
leases. Some other Members have opposed a comprehensive royalty relief program for federal oil and gas
producers. DOI has stated that affected producers may apply for royalty relief individually using existing
options, clarifying that the Department does not plan to pursue a new program of blanket royalty relief at
this time.


Existing Offshore Royalty Relief Options

For offshore oil and gas production, the Outer Continental Shelf Lands Act (OCSLA; 43 U.S.C
1337(a)(3)) broadly authorizes the Secretary of the Interior to reduce or eliminate royalties in order to
promote increased production on the lease area. The law also contains provisions (43 U.S.C
1337(a)(3)(C)) that apply to leases in specified geographic areas (primarily certain deepwater areas of the
Gulf of Mexico). Implementing regulations are issued by DOI's Bureau of Safety and Environmental
Enforcement (BSEE; 30 C.F.R. Part 203) and Bureau of Ocean Energy Management (BOEM; 30 C.FR.
Part 560). Both BSEE and BOEM administer different types of royalty relief, as specified in a 2011
memorandum of agreement.
BOEM is responsible for automatic royalty relief, meaning incentive-based relief provisions that are
contained in lease agreements issued by BOEM. This includes most deepwater royalty relief, stemming
from the Outer Continental Shelf Deepwater Royalty Relief Act of 1995 (DWRRA; P.L. 104-58), which
authorized BOEM to provide for specified volumes of royalty-free production-in some cases subject to
price thresholds-on certain leases issued after the act's passage for tracts in water at least 200 meters
deep in most parts of the Gulf of Mexico, in order to promote development of these areas. Under the
Energy Policy Act of 2005 (P.L. 109-58), BOEM also implements automatic royalty relief for shallow-
water deep gas leases, applicable to wells drilled beyond certain depths in waters less than 200 meters
deep for the purpose of natural gas production.

                                                               Congressional Research Service
                                                               https://crsreports.congress.gov
                                                                                    IN11380

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