The
NewsRoom
Release #: 3022
Date: January 23, 2004
Secretary
Norton Unveils New Incentives to Boost Domestic
Natural Gas Production, Save Americans $570 Million a Year
(WASHINGTON) –
Interior Secretary Gale Norton today announced new incentives for
natural gas development in hard-to-reach areas of the Gulf of Mexico
that will save American consumers an estimated $570 million a year,
create as many as 26,000 jobs, and help to ensure the nation's energy
security by boosting domestic production.
As part of
President Bush’s National Energy Plan, these new incentives offer
developers royalty relief to tap into pockets of natural gas deep
under shallow waters of the Gulf of Mexico that otherwise would not be
economical to produce. The incentives should translate into more
predictable fuel bills and new jobs.
“With demand for
natural gas climbing as more American families and businesses choose
this clean-burning fuel, we must provide incentives for development of
known resources that are harder to reach,” said Norton. “These
incentives will help ensure we have a reliable domestic supply of
natural gas in the future.”
The Minerals Management Service
estimates, for example, that energy consumers and businesses in
California and Illinois would realize annual cost savings of $63
million and $24.5 million respectively.
Americans use 22
trillion cubic feet of natural gas per year. Residential consumers,
factory workers and farmers are among those feeling the pinch caused
by the gap between supply and demand for natural gas.
About half of all American homes --
around 56 million -- are heated with natural gas. Home utility bills
have soared in many parts of the country. For example, natural gas
bills in New York are expected to increase by nearly 50 percent in
February, and residential consumers in Central Ohio are paying nearly
double what they were charged for natural gas in June.
Forty percent of American industry
currently depends on natural gas, and about 90 percent of new
electricity plants to come online in the next decade will be fueled by
natural gas. Some businesses are moving natural-gas-based
manufacturing overseas, to places where gas is available at a fraction
of the price in the United States.
Farmers are paying
more to run irrigation pumps, heat greenhouses and to buy fertilizer
made with natural gas.
“We need a reliable supply of natural
gas to heat our homes, power our lives, keep our businesses operating
in the black and—in America,” Norton said. “This is one more way we
can protect American consumers and our jobs.”
The MMS estimates that the drilling and
platform upgrades associated with the extra deep gas production will
generate up to 26,000 new jobs that could be sustained for at least
the next six years.
The royalty relief incentives should
encourage industry to explore and develop deep gas accumulations in
water depths less than 656 feet, and 15,000 feet below the shelf.
“Since infrastructure and lease-specific
facilities are already in place, the Outer Continental Shelf is one of
the best available sources for additional near-term domestic natural
gas supply to meet the nation’s needs,” said Johnnie Burton, director
of the Minerals Management Service. “We believe the incentives
offered in this rule will spur industry to explore and produce these
deep, undiscovered resources.”
Recent deep gas discoveries have been made
in the gulf at
Anadarko’s Hickory platform, El Paso’s ST 204 unit, and Shell’s Alex
Discoveries.
The MMS estimates that undiscovered gas
resources of up to 55 trillion cubic feet may exist in this "frontier"
area. If converted into electricity, 55 TCF could provide nearly a
5-year supply of energy for every home in America.
The Energy Information Administration
forecasts the demand for natural gas will increase by 42 percent in
the United States over the next 20 years.
Briefly, the new incentives provide
the following:
|
A royalty
suspension on the first 15 billion cubic feet of gas produced from
depths greater than 15,000 feet and less than 18,000 feet or on the
first 25 BCF produced from 18,000 feet or deeper. A royalty
suspension volume of 15 BCF can be increased to 25 BCF from a second
successful well to 18,000 feet or deeper. Gas production from all
qualified wells on a lease participates in the full royalty
suspension volume earned by the lease.
|
|
A royalty
suspension supplement of 5 BCF (equivalent), applied to future lease
production of gas and oil from any depth, for drilling a qualifying
dry hole (unsuccessful well) at 18,000 feet or deeper. Two royalty
suspension supplements are available per lease prior to production
from a deep well. The maximum relief the lease can earn from
drilling unsuccessful and successful deep wells is 35 BCF. |
|
Eligibility of
sidetrack wells to earn royalty suspensions in amounts based on
drilling depth and sidetrack length. |
|
Price threshold
provisions that discontinue royalty relief if gas prices rise too
high. |
|
An option for
qualifying lessees to replace existing deep gas royalty relief lease
provisions with the deep gas royalty incentive terms in this final
rule. |
|
Drilling of
qualified wells must have started on or after March 26, 2003, and
production must begin within 5 years of the effective date of the
final rule. However, any royalty suspension volume or supplement
earned must be applied only to production occurring after the
effective date of the final rule, even if this production actually
started between the proposed and final rule.
|
Information
related to the final rule is available for review on the MMS Web Site
at:
http://www.gomr.mms.gov/homepg/offshore/deepgas.html. The
final rule will be published in the Federal Register and published
prominently on the MMS Web Site on January 26, 2004.
The Minerals
Management Service is the federal agency in the U.S. Department of the
Interior that manages the nation’s oil, natural gas and other mineral
resources on the Outer Continental Shelf in Federal offshore waters.
The agency also collects, accounts for, and disburses mineral revenues
from Federal and American Indian lands. MMS disbursed more than $8
billion in FY 2003 and more than $135 billion since the agency was
created in 1982. Nearly $1 billion from those revenues go into the
Land and Water Conservation Fund annually for the acquisition and
development of state and Federal park and recreation lands.
Press Kit
Secretary Norton's Presentation
DOI Radio News Announcement
Backgrounders
Deep Gas Rule Backgrounder
Biographies
Secretary Norton
MMS Director Johnnie Burton
Fact Sheets
MMS Facts
OCS Sand
and Gravel Facts
OCS Oil
and Gas Facts
Relevant Web Sites
Benefit-Cost/Small Business and Regulatory Flexibility Economic
Analyses
Appendices to Benefit/Cost Analysis For Final Deep Gas Rule
Media Contacts
Hugh Vickery
202/208-6416
Curtis Carey
202/208-3985
MMS: Securing Ocean Energy & Economic Value for America
U.S. Department of the Interior |