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Interior Dept. wants to lower royalties that offshore oil, coal companies pay

March 5, 2018

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Last week the Interior Department’s Royalty Policy Committee issued a recommendation suggesting that Interior Secretary Ryan Zinke lower royalty rates for offshore oil and gas drilling on seabed owned by the US government. If Zinke approves the recommendation, royalties from offshore drilling would drop from 18.75 percent to 12.5 percent, the lowest royalty rate permitted by the federal government.

Given the relatively low price and abundance of oil in the world market today and the expense of executing new offshore drilling operations, the committee’s recommendation could make it more attractive for drilling companies to consider bidding for offshore oil leases. Zinke announced earlier this year that he would make up to 90 percent of US federal waters open to oil drilling, but there has been considerable pushback from states and muted enthusiasm from companies that will have to undertake years of ramp-up before they see marketable oil.

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