§15903 Marginal property production incentives

Summary

The Secretary must cut the royalty rate for oil or gas from very small onshore producers when market prices stay low for a long time. If West Texas Intermediate crude at Cushing, Oklahoma averages less than $15 per barrel (adjusted using the Consumer Price Index for all-urban consumers, United States city average, as published by the Bureau of Labor Statistics) for 90 consecutive trading days, oil from qualifying small properties gets a lower royalty. If natural gas at Henry Hub, Louisiana averages less than $2.00 per million British thermal units (adjusted using the same CPI measure) for 90 consecutive trading days, gas from those properties gets a lower royalty. The reduced royalty is the smaller of 5 percent or any lower rate that another law or rule already gives. The lower rate starts on the first day of the production month after the price condition is met. A “marginal property” means an onshore unit, communitization agreement, or single lease that, over the last 3 production months, averages less than 15 barrels of oil per well per day or 90,000,000 British thermal units of gas per well per day, counting only wells that produced on more than half the days in those months. The reduced rate ends on the first day of the production month after prices rise above the same thresholds for 90 consecutive trading days or if the property no longer meets the marginal test. The Secretary can make different rules, must set rules for the outer Continental Shelf by 18 months after August 8, 2005 (or report to Congress if that’s not possible), and may consider prices, costs, taxes, other programs, regional differences, energy security, and similar matters. A lessee may still take any other law that gives more relief.