The Bureau of Land Management NEWS |
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The Bureau of Land Management NEWS |
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Last updated: 04/04/03
For release: Thursday, March 5, 1998
The Bureau of Land Management has decided not to grant a royalty rate reduction for "marginal" or low-producing gas wells because such economic relief would not be "revenue neutral" for Federal taxpayers.
"Based on results from a Department of Energy economic model, the BLM found that a reduction of the royalty rate for marginal gas wells would not be revenue neutral under any reasonable scenario," BLM Deputy Director Tom Fry said today.
The Department of Energy's (DOE) economic model examined royalty-rate reduction scenarios involving low-producing gas wells ranging from 60 MCF (thousand cubic feet) to 150 MCF. The model also analyzed the effects of different gas prices on marginal production.
"The BLM found that a lower royalty rate would not stimulate sufficient tax-generating gas production to offset the Federal government's loss of royalty revenues," said Fry. "So, in fulfillment of our agency's responsibility to America's taxpayers, the BLM has decided that it cannot reduce the royalty rate for marginal gas wells."
Fry, who announced the BLM's decision at a House subcommittee's budget oversight hearing on February 26, noted that natural gas prices have recently hovered at the $2 level, which historically is the upper end of the price range. "The high price for natural gas creates an incentive for producers not to abandon marginal gas wells prematurely, which would have been the intent of a lower royalty rate."
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