This is in response to “Energy bill odds uncertain; Democrats seek cut in oil tax incentives, boost in royalties” (News, Jan. 10). I am president of an organization that represents the companies that hold 80 percent of the Gulf of Mexico shallow water leases and 75 percent of deepwater leases.
The Bush administration’s decision to lift oil and natural gas drilling bans in areas of the Gulf of Mexico and Bristol Bay, Alaska, is a step in the right direction to improving American energy security. It is now time to seriously look at additional frontier areas for safe and responsible energy development.
While the administration is taking a needed step in the right direction, it is simultaneously sending a mixed message by raising the royalty rates on new offshore, deepwater federal oil and gas leases–effectively steering capital away from future American energy investment and increasing our dependence on foreign energy sources.
In evaluating deep-water projects, independent producers perform a careful cost-benefit analysis, factoring in lease bonus payments and royalties. Under the administration’s proposed increases, royalty rates will discourage high bonus payments, and potentially discourage many American energy projects. Higher royalty rates almost always lead to fewer resources being developed. Oil and natural gas are essential components of America’s energy supply for the foreseeable future. Policies that reduce investments in American oil and gas production are a threat to American energy security.
