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RCED-85-6 1 (1985-05-10)

handle is hein.gao/gaobabfbk0001 and id is 1 raw text is: R E~Ai'to be rc-., --, 1 * Jy .the offie *t C RELEASED BY THE COMPTROLLER GENERAL Report To The Chairman, Committee On Energy And Natural Resources United States Senate OF THE UNITED STATES Selectively Reducing Offshore Royalty Rates In The Gulf Of Mexico Could Increase Oil Production And Federal Government Revenue The U.S. government leases large areas in the Outer Continental Shelf in the Gulf of Mexico for the development of oil resources and receives royalties on the oil produced. Conventional methods of oil recovery have recovered or are expected to recover about half of the 16 billion barrels of oil discovered in this area. Other oil recovery methods, collectively known as enhanced oil recovery (EOR), could potentially increase produc- tion by about 1 billion barrels of oil. EOR in the Gulf is expensive and does not appear to be economically justified in most cases. Under existing economic conditions and federal policies, GAO's review indicates that utilizing EOR methods will probably produce only about 10 percent of the additional recoverable oil. However, financial incentives in the form of royalty reductions could increase both oil production and federal government revenue if applied on a project-by-project basis. Universal applications of royalty reduction for EOR, however, while achieving increased oil production, would not increase federal government revenue. GAO recommends that the Department of the Interior's Minerals Management Service initiate action that would allow for selective royalty reductions for EOR projects in the Gulf in instances where both total oil production and federal government revenue will increase. U126953 <T ( O GAO/RCED-85-6 q'0cOU N' \ , @I MAY 10., 1985

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