The Minerals Management Service has issued interim guidelines designed to streamline and simplify the royalty relief process for producers operating on the U.S. Outer Continental Shelf.
The guidelines, 2 years in development, allow a producer to compute royalties owed the government using a formula based on a fixed percentage of net receipts rather than gross receipts.
"In this way, a producer can take into account increased costs of production, processing, and transportation on older leases,'' said Cynthia Quarterman, MMS director.
If operating costs change substantially, the lessee may ask to have the royalty formula changed to assure that operator and government are treated fairly.
The guidelines are interim because changes may be required as the regulatory process proceeds and the program is evaluated.
MMS also is beginning to implement provisions of a law signed Nov. 28 that affords royalty relief to deepwater tracts in the Gulf of Mexico. The law requires MMS to issue rules within 6 months. When they are complete, applications for relief will be accepted.
Upcoming Gulf of Mexico lease sales will contain the statutory provisions for deepwater royalty relief, beginning with the April 1996 Central Gulf of Mexico sale.
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