Offshore Energy’s Fair Share

Mark Green
Posted October 24, 2019

As the New York Times launches another attack on congressionally mandated support for U.S. offshore development in the Gulf of Mexico, some facts are in order:

• The Deep Water Royalty Relief Act enacted by Congress in 1995 was designed to help spur deep water offshore production as the U.S. faced increasing dependence on imported oil – and the courts found that its intent is clear. Background on the act here and here.
• The false claim that there is a royalty relief “loophole,” asserted by the Times and others, omits the fact that between 2000 and 2018 natural gas and oil companies paid more than $122 billion to the government in high bids, royalties and rents. Add to that tens of billions the industry spent to develop those leases, creating jobs and boosting local and regional economies – a significant part of industry’s $1.3 trillion overall support for the U.S. economy.
• Today, U.S. Gulf production is setting records, averaging 1.8 million barrels per day (b/d) in 2018 and expected by the government to reach 1.9 million b/d this year and 2 million b/d in 2020. This production generates millions in revenue-sharing dollars for coastal states, as well as the Land and Water Conservation Fund, which supports state conservation and outdoor recreation projects all across the country. 

Bottom line: Congress took clear action to support U.S. deep water production, and without that support the U.S. probably would not be producing offshore oil in record amounts today.

API spokesman Ben Marter said pulling back congressionally enacted incentives would be unfair:

“The courts have ruled there was nothing ambiguous about the 1995 act. Those who would require the companies that took Congress at its word to now pay royalties retroactively are engaging in a dangerous game of bait-and-switch.”

Also dangerous is perpetuating a myth, propounded by opponents of natural gas and oil (with regular assistance from the Times), that our industry is cheating U.S. taxpayers. The myth’s clear intent is to undermine American energy progress that has made the U.S. the world’s leading producer of natural gas and oil – strengthening our security, boosting our economy and increasing our global energy leadership.

Offshore development is critically important to America’s energy security, requiring billions in investments over a horizon that can extend decades. The graphic below shows the benefits to government and company costs/benefits over that horizon:

 U.S. offshore oil and natural gas production is integral to America’s energy present and future. Deep water royalty relief has supported that production. Americans benefit from offshore development every day in the form of reliable, affordable energy that is foundational to our economy and security.