Program

Oil Royalty Relief – Deep Water

Category

Energy - Fossil Fuels

Subsidy Type

Undervalued Asset

Committees of Jurisdiction

House Natural Resources Committee

$1,141 FY 16 Budget Score (in mil.)
$13,644 FY 16-25 Budget Score (in mil.)

Oil and gas companies that drill on public lands or in federal waters pay royalties for the oil and gas they extract. The amount of royalties they pay depends on the amount extracted, the market price for oil and gas, and the royalty rate.Typically, the government sets limits on the amount of oil and gas exempt from royalties and reinstates royalty payments when oil and gas prices rise above certain levels, known as “price thresholds.” The Deepwater Royalty Relief Act of 1995 (DWRRA) allowed the Secretary of the Interior to waive royalty payments for new leases in the outer continental shelf (OCS) of the Gulf of Mexico (GOM) from 1996-2000. Leases issued before 1996 or after 2000 can also apply for royalty relief on case-by-base basis. Partly because the Minerals Management Service (MMS) issued leases in 1998 and 1999 that failed to include price thresholds, DWRRA has cost the federal government billions of dollars in forgone royalties.

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