Royalty Relief Information
The two general royalty relief categories are “automatic” and “discretionary.” “Automatic” refers to royalty relief that is specified in the lease agreement when the lease is issued by BOEM, and includes Deepwater and Deep Gas royalty relief. “Discretionary” refers to royalty relief that companies can apply for under certain scenarios, and include End-of-Life and Special Case royalty relief. BSEE is responsible for discretionary royalty relief programs. BOEM encourages operators to directly contact the BSEE Regional Supervisor, Production and Development to discuss the details of any potential submittal. The royalty relief division of duties between BOEM and BSEE are described in the Royalty Relief Memorandum of Agreement.
Most deepwater royalty relief is “automatic” and, therefore, does not require an application or economic evaluation. There is also a less common deepwater discretionary royalty relief program, which requires an application demonstrating economic need.
Discretionary deepwater relief applies to "fields" with leases issued prior to passage of the Deepwater Royalty Relief Act of 1995 (i.e., November 28, 1995) in water depths 200 meters or deeper that lie wholly west of 87 degrees, 30 minutes West longitude. These leases are called pre-Act leases. By regulation, deepwater royalty relief for pre-Act leases cannot be approved for "fields" containing a current lease that produced prior to the passage of the Act.
Automatic deepwater royalty relief applies to leases issued from sales held in years 1996 through 2000 in water depths 200 meters or deeper that lie wholly west of 87 degrees, 30 minutes West longitude. These leases are called "eligible" leases. Pursuant to the decision by the United States Court of Appeals for the fifth Circuit in Santa Fe Snyder Corp., et al. v. Norton, deepwater royalty relief for "eligible leases" is no longer applicable on a "field" basis. Eligible leases may also qualify for discretionary relief under End-of-Life and Special Case Relief programs.
In addition, leases resulting from a Sale held after year 2000 may be issued with a designated royalty suspension volume on a "lease" basis. Post-2000 leases issued with a designated royalty suspension volume are called "Royalty Suspension" leases. The Lease Instrument and Final Notice of Sale specify the applicable water depth categories and royalty suspension volumes. Please refer to the regulations and guidelines listed below for more information.
"Pre-Act" Lease Information
Deep Water Royalty Relief Act "Eligible" Lease Information
"Post-2000" Lease Information
Designated Royalty Suspension Provisions –
Shallow Water Deep Gas Incentives
As stipulated in the Lease Instrument and Final Notice of Lease Sale, certain leases may be eligible for a royalty suspension volume for shallow water (< 200 meters) deep gas production. Refer to your Lease Instrument and the following:
Pursuant to 30 CFR 203.48, most of these leases have converted to the deep gas royalty relief provisions in the final rule.
In addition to leases with shallow water deep gas royalty relief provisions in their Lease Instruments, certain other leases may be eligible for shallow water deep gas royalty relief through the Deep Gas in Shallow Water Rule. For additional information, please refer to the following sources:
Discretionary Deepwater Royalty Suspension Provisions
End-of-Life Royalty Relief
End-of-life relief is applicable to producing leases regardless of water depth when it can be shown that the economic limit has been reached and relief will result in "increased production." If approved, the royalty rate will be reduced by half subject to certain stipulations. Please contact BSEE Regional Supervisor, Production and Development and refer to the regulations and guidelines listed below for more information.
Special Case Relief
Relief can be requested when our formal programs provide inadequate encouragement to increase production or development. Other conditions must also be met in order to submit an application. If you believe your situation meets the conditions for special case relief, you should submit data and arguments to the BSEE Regional Supervisor for Production and Development. If BSEE agrees you meet the required conditions, guidance will be provided concerning the application and the appropriate fee. For more details, please refer to the information listed below.