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Energy bill includes royalty relief
Larry Persily Petroleum News Juneau Correspondent
Alaska officials are optimistic that the federal energy bill will include two provisions intended to encourage oil and gas development in the National Petroleum Reserve-Alaska and offshore in federal waters.
“To my knowledge there is no opposition to either one,” said John Katz, director of the state’s lobbying office in Washington, D.C.
The provisions would allow the Secretary of the Interior to reduce the royalty on NPR-A leases and also extend leases beyond their initial term to give companies additional time to explore for oil and gas.
A similar provision would allow the secretary to grant royalty relief for federal waters offshore of Alaska. “That authority has been used in the Gulf of Mexico in a very beneficial way to generate interest,” Katz said.
Congress is not scheduled to return to work from its Columbus Day holiday recess until Oct. 14, at which time the House-Senate energy bill conference committee will resume the job of trying to put together a compromise package before Congress is scheduled to adjourn in November. Provisions in draft bill The committee’s draft bill includes both the NPR-A and offshore royalty relief provisions, which would apply mostly to marginal fields that might not be developed under full royalty payments, Katz said. The Interior secretary would judge each royalty relief application under criteria set out in the law.
The draft bill also includes standards for the secretary to use in deciding when to grant lease extensions. “The provision recognizes that it just takes longer to explore for (Alaska) oil and gas resources,” Katz said.
Federal royalty is generally 12.5 percent, and the energy bill does not specify a minimum or a maximum for royalty relief in either NPR-A or offshore fields. Although oil has been discovered in NPR-A and more exploration is planned, no oil or gas is being produced from the area.
Alaska’s share of any federal royalties, bonuses and rentals in NPR-A is 50 percent. The state would share in any reduction in royalty payments approved under terms of the legislation. The state’s share of federal offshore royalties ranges from nothing to 27.5 percent, depending on how far the property is from state lands. Heavy oil credits possible Meanwhile, the state is still working to convince conference committee members to include one other Alaska provision in the energy bill. Alaska wants an existing $3 per barrel federal tax credit for marginal oil fields expanded to cover heavy oil on the North Slope.
“We think that would help stimulate the development of the massive heavy oil resources,” Katz said. The bill does not include the provision, which is among the several issues still under review by members of congressional tax committees.
Alaska would like to see the existing tax credit program amended to remove any volume limits on per-well heavy oil production and extended to cover production for five years. Existing law limits the credit to 33 barrels per day per well. “That restriction makes no sense in the Alaska context,” Katz said.
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