US cuts royalties for hard-hit oil, gas drillers

The Trump administration has lowered royalties for several drilling companies producing oil and gas on federal lands, according to a government database, as the industry seeks help weathering low energy prices.

The move shows drillers are taking the government up on its offer to consider royalty cuts on a case-by-case basis after rejecting industry calls for blanket relief covering all federal leases. The US Bureau of Land Management approved royalty rate cuts on at least 76 federal drilling leases in the state of Utah in recent weeks, according to the database. The cuts in many cases lower royalty rates companies must pay on the value of their production from the typical 12.5% to 5%. BLM has also approved suspensions of more than 90 leases in Wyoming, Nevada and California due to the coronavirus outbreak, the database shows. Suspensions allow companies to stop producing for up to two months without losing their leases.

The database does not yet have information for other states.

A BLM official said the bureau was following existing regulations when assessing applications for relief. “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,” the official said. One of the top beneficiaries of the royalty cuts is Wyoming-based Kirkwood Oil & Gas. Steve Degenfelder, the company’s land manager, said it had also sought relief in Wyoming, Nevada and North Dakota.

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Other companies that secured cuts include Texas drillers EOG Resources Inc and Lonesome Oil & Gas LLC. They were not immediately available for comment. Global oil prices have plunged since the start of the year due to the fallout of the coronavirus pandemic, which has triggered unprecedented government stay-at-home orders that have obliterated demand for transport fuels.


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