Proposed Initiatives to Encourage Domestic Production
Royalty Suspension for Deep Gas
Lease Extension Option for Subsalt
Royalty Suspension for New Deepwater Leases
Supplemental Discretionary Royalty Relief
Notes:
(Cont’d from previous slide)
- However, now we will broaden our focus to include natural gas. Recently, we announced two natural gas incentives for upcoming lease Sale 178 in the Central Gulf of Mexico.
- The first is an incentive to drill for deep gas deposits located in the shallow-water shelf area (less than 200 meters). Drilling wells deeper than 15,000 feet is an economic concern for companies, with an increased risk of failure. To provide an incentive, the Administration will suspend any royalty payment for the first 20 billion cubic feet of production from a well drilled below this depth.
- Based on our analysis and discussion with industry, it was thought that a second incentive for subsalt oil and gas was also appropriate. Therefore, we are providing a two-year extension of the five-year lease term when an operator has drilled a first subsalt well and needs additional time to determine the appropriate next drilling target. This will avoid premature expiration of the lease.