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Cassidy says Interior will speed waiving of royalty fees for oil firms

Move would flow billions to the industry but also leave federal, state governments dry on the brink of a recession

Louisiana Sen. Bill Cassidy pushed to amend the bill to have it remove the cap on revenue from offshore drilling fees that some states get to help them maintain their coastlines.
Louisiana Sen. Bill Cassidy pushed to amend the bill to have it remove the cap on revenue from offshore drilling fees that some states get to help them maintain their coastlines. (Bill Clark/CQ Roll Call file photo)

The head of the Interior Department agreed to “quickly process” oil companies’ requests about royalty payments, according to a key Gulf Coast Republican.

At least a dozen Republicans and a Democrat from oil-producing states are calling on Interior to waive royalty payments companies hand over to the federal government, citing the coronavirus pandemic, which has knocked back demand and sent already-cheap oil and gas prices plummeting

Supporters of the waivers also cited the effects of a price war between Russia and Saudi Arabia, but that was reported to have been resolved on Thursday.

Waving royalty fees would be a multibillion-dollar windfall for the industry and also cut the federal and state governments out of revenue on the brink of a national recession. Royalties surpassed $7 billion in 2018.

Louisiana Sen. Bill Cassidy said he talked Tuesday with Interior Secretary David Bernhardt about protecting oil and gas jobs. 

“He promised to quickly process targeted royalty relief on the outer continental shelf using existing law,” Cassidy said.

The department already has established processes by which companies can apply for discretionary royalty relief,” Interior spokesman Conner Swanson said in a statement.

“We also have in place processes through which companies may apply for the suspension of operations or production,” he said. “Such requests may be granted in cases where an operator is prevented from operating or producing on a lease for reasons beyond or outside their control. Entities that believe such relief may be appropriate to promote continued energy production and development can submit an application for relief to the appropriate bureau program.”

The Bureau of Safety and Environmental Enforcement has received one “pre-application” letter about royalties, said Swanson, who did not name the company. Under federal law, the Interior secretary can unilaterally waive royalty payments on and in U.S. land and water, such as in the Gulf of Mexico.

White House meeting

President Donald Trump, whose administration is now encouraging citizens to stay at home because of the pandemic, met in person with congressional Republicans and executives from eight oil and gas companies Friday to discuss protecting the industry.

“I’m with you 1,000 percent,” Trump said. It’s a very vital business.”

The companies with representatives present were Chevron Corp., Continental Resources Inc., Devon Energy, Exxon Mobil Corp., Hilcorp Energy Co., Occidental Petroleum Corp., Phillips 66 and Energy Transfer, a pipeline company.

International oil prices are hovering around $25 a barrel, the lowest in nearly two decades, after a decline triggered in early March — after Russia and Saudi Arabia did not reach a deal to cut their output — then further aggravated by the spreading global pandemic that has has drastically lessened demand with consumers working from their homes.

A meeting on Thursday by members of OPEC and Russia was expected to result in a deal to cut production as a way to stabilize the oil markets.

Price war

Congressional lawmakers from oil-producing states pushed the administration to pressure Saudi Arabia and Russia to settle their dispute and agree to limit production as a way to shore up the industry.

According to Bloomberg News, which cited unnamed delegates to the OPEC meeting, members of the oil cartel and its allies reached a tentative deal to cut their production by 10 million barrels a day.

Lou Pugliaresi, president of the Energy Policy Research Foundation, said that while cuts of 10 million barrels a day would help a bit, he anticipates the pain in the industry to continue until after global economies have recovered from the coronavirus pandemic.

“The real problem is a catastrophic loss of demand, which is over a quarter of the world’s oil consumption,” said Pugliaresi, who served in the National Security Council at the White House under the Reagan administration. “So, this problem is going to be endemic until the world goes back to work.”

It’s unclear if that agreement is contingent upon the U.S. also cutting its production as Russia has demanded.  

The U.S. is expected to join  a G-20 meeting Friday about stabilizing oil markets.

If Thursday’s OPEC meeting deal holds, it could also make it harder for lawmakers in Congress to push a bill that would provide $3 billion for the Department of Energy to buy oil and store it in the national stockpiles as a way to soak up the overabundance.

A provision to purchase crude oil for the strategic petroleum reserve was removed from a prior relief package after Democrats objected.

On Wednesday, a group of oil-state lawmakers introduced a bill that would make the money available for the oil-reserve purchase and demanded it be included in the next federal relief package. It would be “politically hard” to pass the Standard Sales Provisions, Pugliaresi said, without combining it with some environmental provisions.

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