Producers paid the federal government more than $3 billion to acquire oil and natural gas leases under a 1995 law that promoted drilling in the deepwater Gulf of Mexico (COM) and then spent $37 billion to develop them, according to the results of two studies commissioned by the American Petroleum Institute (API).
One study by Arlington, VA-based consulting firm Advanced Resources International (ARI) sought to determine the number of deepwater leases that were awarded between 1996 and 2000 under the Deep Water Royalty Relief Act, and the production volumes and expenditures related to those leases. The second study by Lexington, MA-based IHS Global Insight examined the economic impact of producing oil and gas from the Outer Continental Shelf leases under the 1995 act.
The ARI study found that the 3,391 deepwater leases awarded during that time produced $3.1 billion in bonuses for the federal government. Using industry and federal government average drilling and lifting costs, ARI calculated that companies spent $37.4 billion to develop the wells that were drilled. And it calculated that producers paid more than $5 billion in taxes between 1996 and 2000.
The report further showed that the leases resulted in the production of more than 400 million bbl of oil and more than 3 Tcf of natural gas.
The IHS study determined that the real gross domestic product rose by an average of $4.5 billion per year as a result of oil and gas production from the leases and that employment increased by 91,000 jobs in 2005.
Despite the success of the 1995 law, Capitol Hill lawmakers are trying to “penalize” the producers who bought and developed the leases by “locking them out of future leases unless they agree to pay royalties that were legally waived [under] the 1995 law,” the API said.
“The courts have ruled there was nothing ambiguous about the 1995 act. And those who would require the companies that took Congress at its word to now pay royalties retroactively are engaging in a dangerous game of bait-and-switch,” said Erik Milto, API’s upstream director.
The1995 law gave producers royalty relief in order to promote increased oil and gas drilling in the GOM. It authorized the Department of Interior to suspend the collection of oil and gas royalties from all new and preexisting federal deepwater leases and to impose price or volume thresholds in order to determine when royalty payments should recommence.
In October 2009, the Supreme Court handed Anadarko Petroleum Corp. — and other holders of these leases — a major victory when justices refused to consider a government challenge to lower court decisions that blocked the Interior from collecting billions in deepwater GOM natural gas and oil royalties (see Daily GPI, Oct. 6, 2009). Despite the court ruling, some lawmakers have proposed that producers who refused to pay royalties be denied access to future leases or potentially be subjected to higher fees on future leases.
©Copyright 2010Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.
© 2020 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |