§15903 Marginal Property Production Incentives

Summary

Cuts the royalty rate on oil and gas from small, low-producing onshore properties when market prices stay very low. A "marginal property" here means an onshore unit, communitization agreement, or a lease not in a unit that averages less than 15 barrels of oil per well per day or 90,000,000 British thermal units of gas per well per day, measured over the most recent three months and counting only wells that produced on more than half the days in those months. If West Texas Intermediate crude at Cushing averages under $15 per barrel (adjusted using the Consumer Price Index for All Urban Consumers, U.S. city average, from the Bureau of Labor Statistics) for 90 trading days, or if natural gas at Henry Hub averages under $2.00 per MMBtu (same CPI adjustment) for 90 trading days, the royalty is reduced. The reduced royalty is the smaller of 5% or any lower rate that already applies, and it starts the first day of the production month after the price test is met. The cut ends the first day of the production month after prices rise above the thresholds for 90 days or the property no longer qualifies. The Secretary can write different rules, must set rules for the outer Continental Shelf within 18 months after August 8, 2005 (or report to Congress if not practical), and may consider prices, costs, taxes, regional factors, and similar matters. More generous relief under other laws still applies.