H.R. 10256: Taxpayer Relief from Big Oil Act

This bill would change how the federal government gives royalty relief to oil and gas companies, mainly in offshore and Alaska-related leasing areas.

What royalty relief means

Royalties are payments that oil and gas producers owe the government for extracting resources from federal lands or waters. “Royalty relief” reduces or removes those payments for certain projects or wells. This bill would tighten some of those rules and require more reporting.

Changes to Gulf of Mexico royalty relief

The bill would repeal a section of the Energy Policy Act of 2005 that provides certain royalty relief for Gulf of Mexico oil and gas production. It would also make any existing regulations issued under that section ineffective. In practical terms, this means that specific Gulf of Mexico royalty relief provisions would no longer apply.

Changes to Alaska royalty relief

The bill would also revise several laws affecting royalty relief for Alaska-related oil and gas production, including offshore Alaska and the Naval Petroleum Reserve in Alaska. These changes would remove or narrow language that currently governs how royalty relief can be applied in those areas, and would eliminate some existing procedural provisions. The overall effect is to reduce or simplify the legal basis for royalty relief in Alaska-related oil and gas projects.

New reporting requirements

The bill would require the Director of the Bureau of Land Management and the Director of the Bureau of Ocean Energy Management to submit a report to Congress within 90 days after enactment, and then every year after that. The report would have to cover the previous year and include:

• how many onshore and offshore royalty relief applications were submitted;
• how many were approved or denied, and the reasons for approvals;
• how many wells were approved or denied for royalty relief;
• how many approved wells produced oil or gas within six months of the application;
• the average production from approved wells;
• the length of royalty relief periods;
• the new royalty rate for approved applications; and
• estimates of how approved royalty relief affected federal revenue and production.

Standardized transportation allowances

The bill would require the Secretary of the Interior, through the Office of Natural Resources Revenue, to create or update regulations within one year to establish standardized transportation allowances for oil and gas royalty calculations. These allowances would apply to:

• each Bureau of Land Management oil and gas administrative boundary; and
• each Outer Continental Shelf planning area where oil or gas is produced.

The transportation allowance for each area could not be more than the lesser of:

• 30% of the total value of the produced oil or gas; or
• the actual and reasonable transportation costs.

In practice, this would set a federal standard for how much producers can subtract from the value of production when calculating royalties, with an upper limit based on either a percentage cap or actual costs, whichever is lower.

Relevant Companies

• XOM — Exxon Mobil could be affected through changes to offshore and federal oil and gas royalty rules.
• CVX — Chevron could be affected by changes to royalty relief and transportation allowance rules for federal oil and gas production.
• HES — Hess could be affected if its U.S. offshore oil and gas operations are subject to the revised royalty framework.
• APA — APA Corporation could be affected by changes to federal onshore/offshore royalty calculations.
• COP — ConocoPhillips could be affected by modified royalty relief rules, especially in Alaska-related operations.
• EOG — EOG Resources could be affected if federal onshore leasing and royalty calculations change.