Deep Water Royalty Relief Act
Encyclopedia
The United States
Deep Water Royalty Relief Act (DWRRA) implemented a royalty
-relief program that relieves eligible leases from paying royalties on defined amounts of deep-water petroleum
production over Federal
Outer Continental Shelf
lands. After its expiration in 2000, the DWRRA was redefined and extended to promote continued interest in deep water. The Minerals Management Service
(MMS) defines a "deep-water" lease as having a minimum water depth of 200 meters (656 ft).
Under the Outer Continental Shelf Lands Act, as amended in 1978, and under the provisions of the DWRRA of 1995, relief from royalty obligations may be granted to increase production or to encourage development on certain producing or non-producing leases. Royalty relief may be applied to either active leases or to newly-offered leases directly in their fiscal terms. The primary MMS royalty relief programs include those that were required for Gulf of Mexico
deepwater leases (located in water depth greater than 200 meters or 656 feet) issued in 1996-2000 under the DWRRA. After certain sunset provisions in the DWRRA expired in November 2000, the MMS adopted a program that provides lower amounts of royalty relief to each lease. The Federal Government
has also offered royalty relief incentives since 2001 for natural gas production from certain deep wells in shallow water (15,000 feet total well depth) for newly issued leases, and commenced a similar program for active shallow water leases where drilling started on or after March 26, 2003.
The Energy Information Administration
estimates there were 18,812 billion cubic feet (Bcf) of dry natural gas proved reserves and 4144 Moilbbl of crude oil proved reserves in the Federal Gulf of Mexico as of the end of 2004. About 45 percent of the natural gas proved reserves and 79 percent of the crude oil proved reserves in the Federal Gulf of Mexico
are in deepwater areas, although not all of this is subject to royalty relief. The following sections highlight provisions in several rules and regulations under which oil and natural gas production volumes may receive royalty relief.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
Deep Water Royalty Relief Act (DWRRA) implemented a royalty
Royalties
Royalties are usage-based payments made by one party to another for the right to ongoing use of an asset, sometimes an intellectual property...
-relief program that relieves eligible leases from paying royalties on defined amounts of deep-water petroleum
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...
production over Federal
Federal government of the United States
The federal government of the United States is the national government of the constitutional republic of fifty states that is the United States of America. The federal government comprises three distinct branches of government: a legislative, an executive and a judiciary. These branches and...
Outer Continental Shelf
Outer Continental Shelf
The Outer Continental Shelf is a peculiarity of the political geography of the United States and is the part of the internationally recognized continental shelf of the United States which does not fall under the jurisdictions of the individual U.S...
lands. After its expiration in 2000, the DWRRA was redefined and extended to promote continued interest in deep water. The Minerals Management Service
Minerals Management Service
The Bureau of Ocean Energy Management, Regulation and Enforcement , formerly known as the Minerals Management Service , was an agency of the United States Department of the Interior that managed the nation's natural gas, oil and other mineral resources on the outer continental shelf...
(MMS) defines a "deep-water" lease as having a minimum water depth of 200 meters (656 ft).
Under the Outer Continental Shelf Lands Act, as amended in 1978, and under the provisions of the DWRRA of 1995, relief from royalty obligations may be granted to increase production or to encourage development on certain producing or non-producing leases. Royalty relief may be applied to either active leases or to newly-offered leases directly in their fiscal terms. The primary MMS royalty relief programs include those that were required for Gulf of Mexico
Gulf of Mexico
The Gulf of Mexico is a partially landlocked ocean basin largely surrounded by the North American continent and the island of Cuba. It is bounded on the northeast, north and northwest by the Gulf Coast of the United States, on the southwest and south by Mexico, and on the southeast by Cuba. In...
deepwater leases (located in water depth greater than 200 meters or 656 feet) issued in 1996-2000 under the DWRRA. After certain sunset provisions in the DWRRA expired in November 2000, the MMS adopted a program that provides lower amounts of royalty relief to each lease. The Federal Government
Federal government of the United States
The federal government of the United States is the national government of the constitutional republic of fifty states that is the United States of America. The federal government comprises three distinct branches of government: a legislative, an executive and a judiciary. These branches and...
has also offered royalty relief incentives since 2001 for natural gas production from certain deep wells in shallow water (15,000 feet total well depth) for newly issued leases, and commenced a similar program for active shallow water leases where drilling started on or after March 26, 2003.
The Energy Information Administration
Energy Information Administration
The U.S. Energy Information Administration is the statistical and analytical agency within the U.S. Department of Energy. EIA collects, analyzes, and disseminates independent and impartial energy information to promote sound policymaking, efficient markets, and public understanding of energy and...
estimates there were 18,812 billion cubic feet (Bcf) of dry natural gas proved reserves and 4144 Moilbbl of crude oil proved reserves in the Federal Gulf of Mexico as of the end of 2004. About 45 percent of the natural gas proved reserves and 79 percent of the crude oil proved reserves in the Federal Gulf of Mexico
Gulf of Mexico
The Gulf of Mexico is a partially landlocked ocean basin largely surrounded by the North American continent and the island of Cuba. It is bounded on the northeast, north and northwest by the Gulf Coast of the United States, on the southwest and south by Mexico, and on the southeast by Cuba. In...
are in deepwater areas, although not all of this is subject to royalty relief. The following sections highlight provisions in several rules and regulations under which oil and natural gas production volumes may receive royalty relief.