U.S. Offers Credits to Give up Gulf Oil, Gas Leases

The Interior Department proposed giving energy companies credits for future royalties owed to the government on oil and natural gas drilling if they give up certain exploration leases in the Gulf of Mexico that are near the Florida coastline. Legislation passed by Congress mandated a moratorium on oil and gas leasing in federal waters in the eastern Gulf of Mexico that is within 125 miles of the Florida coastline and in a portion of the central Gulf that is closer than 100 miles of the state's beaches. Congress allowed energy companies to exchange existing leases in the affected areas for credits on bonuses paid to drill on other government offshore tracts or credits for royalties due on oil or gas pumped from other leases in the Gulf of Mexico.

Companies normally pay a royalty based on 16.7 percent of the oil or gas they find. The proposed regulations from the department's Minerals Management Services, which oversees offshore drilling activities, would also give a credit equal to the bonus originally paid plus subsequent rental payments to companies that relinquish their leases. About 79 leases in the affected areas are eligible for the credits, with the total bonuses and rentals paid on the leases about $60 million, according to the MMS.

The agency is talking public comments on the proposed rule changes through April 1. Source: Reuters