The Interior Department plans to propose several incentives aimed at helping the U.S. industry maintain production on federal land.
David O'Neal, assistant secretary for land and minerals, said Interior Sec. Manuel Lujan is reviewing proposals from the Minerals Management Service and will forward them to the White House within 30 days for final approval.
O'Neal said, "We're trying to find ways to stimulate the oil and gas industry. We're trying to look at everything we can."
The MMS incentives follow the Bureau of Land Management's rulemaking this spring to reduce federal royalty on onshore stripper well production.
POSSIBLE PROVISIONS
O'Neal couldn't disclose details of the MMS proposals but hinted they might include incentives for deepwater production on the Outer Continental Shelf and relief from platform bonding requirements.
He explained Interior wants to give industry more incentives for costly deepwater exploration and production.
"How can we encourage the industry to take these kinds of technical leaps that cost such an awful lot of money?" he asked.
He noted Australia has an incentive program for offshore exploration that allows companies to recover all their costs before paying royalty, but the royalty rate they eventually pay is higher than normal.
MMS has toughened its bonding rules to ensure that offshore platforms are removed after reservoirs are depleted.
O'Neal said, "We don't intend to pull back on our bonding requirements, but we're looking for other ways to get that done."
For example, he said, companies could be allowed to pledge certificates of deposit as a bond and keep the interest on the money.
O'Neal said Interior, in response to President Bush's order that agencies review their regulations to determine if any pose unnecessary burdens, has identified more than 100 potential rule changes. Most simply would remove outdated requirements.
OIL SUPPLY
O'Neal said MMS has received little reaction from Congress to the recent 5 year offshore leasing plan and expects no challenge to it.
He lamented environmentalists' efforts to ban offshore drilling, arguing that the nation needs all the oil and gas production it can get.
"The low price of gasoline has given people a false sense of security."
O'Neal noted most offshore oil spills are from tankers, not rigs or production platforms.
And he said the world tanker fleet is aging, increasing the chances for spills.
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