As part of its proposed $10.7 billion budget for fiscal year (FY) 2009, the Department of Interior Monday called on Congress to repeal provisions in the Energy Policy Act of 2005 that extend royalty relief for offshore oil and natural gas producers for five years.

“With the current pricing of oil and natural gas, we don’t think it’s necessary,” said Gary Strasburg, a spokesman for the Minerals Management Service (MMS), which oversees oil and gas activities on the Outer Continental Shelf.

At the same time, Interior requested that Capitol Hill lawmakers pass legislation this year that would make permanent the requirement that producers pay a $4,000 processing fee when applying for an oil and gas drilling permit. The FY 2008 omnibus appropriations bill, signed by President Bush in December, gave Interior’s Bureau of Land Management (BLM) the authority to collect the $4,000 fee for one year ending Sept. 30, 2008. If the fee is made permanent, the agency estimates that it would collect $34 million annually.

The MMS will make an additional 48 million acres available for exploration and development in Alaska’s Chukchi Sea and Beaufort Sea, as well as the eastern Gulf of Mexico during FY 2009, Strasburg said. The budget sets aside $8.5 million for MMS to carry out offshore lease sales under the five-year plan during the period.

Development of the additional acreage could produce 10 billion barrels of oil and 45 Tcf of natural over the next couple of years, said Deputy Interior Secretary Lynn Scarlett.

Interior further noted that it anticipates holding a lease sale in the Arctic National Wildlife Refuge (ANWR) in 2010. It estimates that as much as $7 billion could be raised in leasing fees from producers.

The Bush administration proposes to set aside 1.5 million acres of ANWR’s coastal plain for oil and gas development. Republicans have been trying to push this controversial measure through Congress for years, but they have always been met with stiff opposition from Democrats.

The proposed $10.7 billion budget for Interior is $388.5 million less than the enacted level of $11.1 billion for FY 2008. The budget allocates $307.1 million for MMS in FY 2009, an increase of $10.3 million from the FY 2008 enacted budget. It proposes $1.002 billion for BLM in FY 2009, $5.7 million less than the FY 2008 enacted level.

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