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Selectively Reducing Offshore Royalty Rates in the Gulf of Mexico Could Increase Oil Production and Federal Government Revenue

RCED-85-6 Published: May 10, 1985. Publicly Released: May 17, 1985.
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Highlights

Pursuant to a congressional request, GAO examined steps the federal government could take to encourage environmentally sound enhanced oil recoveries (EOR) in the Outer Continental Shelf OCS of the Gulf of Mexico.

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of the Interior The Secretary of the Interior should instruct the Director of the Minerals Management Service (MMS) to initiate action that would allow for royalty reduction on EOR projects in OCS of the Gulf of Mexico where it would result in both increased production and increased federal government revenue. In doing this, the Director should: (1) establish guidelines that facilitate industry preparation of royalty reduction proposals and government's evaluation of these applications; (2) permit timely evaluation of royalty reduction proposals that is early enough in the productive life of a well or reservoir to permit industry to implement EOR effectively, but late enough for the government to have sufficient data to evaluate the need for royalty reduction, usually during the last few years of conventional production; and (3) allow royalty reductions on a project-by-project basis while maintaining the existing royalty for the remainder of the lease data.
Closed – Implemented
MMS established royalty reduction guidelines in the fall of 1986.

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Topics

Natural Resources and Environment
Offshore oil drillingOil pollutionOil resourcesPetroleum legislationRoyalty paymentsOil pricesCarbon dioxideNatural resourcesCrude oilEnergy conservation