Federal oil and gas leases would cost less during supply shortages

Federal lease royalties would be reduced during a certified supply shortage. The rules cover oil and gas leases on federal land, including offshore leases. A small well produces no more than 15 barrels of oil or 90,000 cubic feet of gas per day. For onshore leases, the royalty rate would be the lower of the lease rate or 8 percent. For offshore leases, the Interior Secretary must offer relief if it is likely to increase or speed production, extend production from an existing field, avoid shut-ins, or reduce consumer energy costs. Royalty relief would not change safety, cleanup, or other environmental duties. A shortage certification lasts 180 days and may be extended for periods of up to 180 days. The zero royalty rate for small wells runs for 24 months from the first certification; the 50 percent cut for added production runs for its first 36 months.

Federal lease payments and some application fees would be reduced, waived, or delayed during a certified shortage. The payment rules apply to federal oil and gas leases and to nonessential fees for permits and related approvals for production work. A lessee seeking a rental reduction must certify that the savings will support production activity. The minimum bid for a federal oil or gas lease would be $2 per acre. A recipient must certify that relief will support domestic production, upkeep, avoiding shut-ins, lower delivered energy costs, or related jobs and services. These payment and fee rules apply during a certified supply shortage period.

The Interior Secretary would decide complete requests for royalty relief within 30 days. The process covers royalty relief applications for federal leases in designated supply-constrained basins. The Energy Secretary, consulting the Interior Secretary, must identify the basin as constrained because more production could increase supply, address production limits, or reduce fuel prices. If the Interior Secretary misses the deadline, the application would count as approved for 24 months. The 30-day deadline starts when a complete application is submitted. A missed-deadline approval lasts 24 months.

The Interior Secretary would extend certain federal oil and gas leases by two years when operations were delayed for a listed reason. The extension covers the primary term of an oil or gas lease when production, drilling, completion, or related operations were delayed. Listed reasons include federal permitting or authorization delays, protests, lawsuits, supply-chain disruptions, and unavailable field services. The catch-all applies to another cause outside the lessee's reasonable control. The extension would not require extra lease payments beyond amounts otherwise due. The two-year extension applies during a certified supply shortage period.