09.06.19

Cassidy Urges Interior Department to Lower Royalty Rates for Shallow Water Drilling to Generate More Jobs, Revenue

WASHINGTON– U.S. Senator Bill Cassidy, M.D. (R-LA) on Thursday urged Interior Secretary David Bernhardt to provide royalty relief and other policies to encourage more shallow water drilling in the Outer Continental Shelf.

Shallow water oil production in the Outer Continental Shelf has declined by 75 percent between November 2000 and September 2018. Of the more than 7,000 platforms installed in shallow water Gulf regions over many decades, just 28 percent remain with many producing fewer than 300 barrels of oil equivalent each day.

The declines in shallow water drilling have had an impact on operators, contractors and oilfield service companies that support drilling. Cassidy wrote a letter to Bernhardt that royalty relief is needed to help shallow water operators stay in business. The Outer Continental Shelf Lands Act (43 USC 1337) grants the secretary the authority to set royalty rates.

 “Increased shallow water drilling increases production, which increases federal royalty payments, and creates more American and Louisiana jobs,” said Dr. Cassidy. “This begins by making a better business case for drilling.”

Cassidy says providing royalty relief for shallow water operators encourages more business activity in the Gulf by improving revenue operators need to open new wells, invest in more workers, and implement new technologies to update aging wells and infrastructure.

“I agree with President Trump: The United States should be energy dominant. Shallow water producers can play a critical role in achieving energy independence,” said Dr. Cassidy.

The text of the letter is as follows:

Dear Secretary Bernhardt:

Thank you for your continued efforts to promote America’s energy resources and achieve progress on a number of important offshore priorities.

As you know, energy resources in the Gulf of Mexico are essential to meet our nation’s growing energy demands.

While the production in the gulf continues to increase, much of it has shifted to deeper waters further offshore while activity in shallow waters has declined. For comparison, from November 2000 – September 2018 oil production in shallow waters declined approximately 75 percent and of the more than 7,000 platforms that have been installed in shallow gulf regions over many decades just 28 percent remain with many generating fewer than 300 barrels of oil equivalent each day.

These declines have impacted shallow water operators as well as contractors and oilfield service companies  that support the drilling,  production and construction activities and provide employment for thousands of employees  across the Gulf Coast.

Without incentives such as royalty relief for stakeholders to reinvest and apply the benefits of new technologies to increase production and grow revenues for aging shallow water wells and infrastructure, I am concerned these declines will continue leading to the removal  of  this infrastructure, job loss, and stranded oil and gas important to the nation’s energy security. In addition, extending the life of these shallow water wells could lead to additional future royalties and other revenues from sustained development. Future production in these gulf regions is also important in order to achieve the administration’s  ultimate goal  of achieving  greater  energy independence.

I urge you to please grant royalty relief for existing shallow  water operations in the Gulf of Mexico in ways that will not negatively impact revenues going  to Gulf Coast  states and also will provide  long term  certainty  for operators,  contractors  and oilfield  service companies  working in the shallow  waters  of the Gulf of Mexico

Thank you for your attention to this issue, and I look forward to your reply.

Sincerely,

 

Bill Cassidy, M.D.

United States Senator

CC:

Scott Angelle, Director Bureau of Safety & Environment Enforcement

Walter Cruickshank, Ph.D, Acting Director Bureau of Ocean Energy Management

 

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