The U.S. Administration has been approving royalty rate cuts for producers on federal land on a case-by-case basis, with rates cut on at least 76 leases in Utah in recent weeks, Reuters reported on Thursday, citing data from a government database.
Many small oil and gas companies have been struggling with the low prices over the past two months and some have called for royalty relief to help them with costs as oil crashed to four-year lows. The U.S. Administration has dismissed the idea of an overall blanket royalty rate reduction on federal land and offshore, but it has said that it would consider applications for two-month royalty rate cuts on a case-by-case basis.
The Bureau of Land Management (BLM) has issued guidance regarding the steps oil and gas operators can take when applying for a Royalty Rate Reduction (RRR) due to COVID-19 impacts. The royalty relief is for 60 days, and in the absence of BLM action to extend it, the relief expires 60 days after an application is approved.
“Applications for relief are reviewed by career experts at the Bureau following longstanding procedures and its laws and regulations. Any relief granted is temporary, for up to 60 days,” an official at the BLM told Reuters today.
According to the database cited by Reuters, the royalty rates for companies applying for relief in Utah were slashed in many cases to 5 percent from 12.5 percent. Related: The World’s Most Controversial Oil Frontier Falls Out Of Favor With Big Banks
U.S. President Donald Trump has been keen to save the U.S. oil and gas industry, and last month he instructed his administration to look into ways to make funds available to the American oil and gas produces.
“We will never let the great U.S. Oil & Gas Industry down. I have instructed the Secretary of Energy and Secretary of the Treasury to formulate a plan which will make funds available so that these very important companies and jobs will be secured long into the future!” President Trump tweeted
a day after the front-month U.S. benchmark oil futures contract crashed by more than 300% into negative territory to settle at -$37.63 per barrel.
Since then, as oil prices rallied over the past two weeks, President Trump praised higher oil prices several times.
By Tsvetana Paraskova for Oilprice.com
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