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September 16, 2020
Federal Offshore Oil and Gas Revenues During the
COVID-19 Pandemic
Since March 2020, the Coronavirus Disease 2019 (COVID-
Notes: Royalties reflect sales in the previous month. Bonus payments
19) pandemic and accompanying recession have reduced
may reflect lease sales from earlier months.
demand for oil and natural gas, resulting in lower prices and
Because the pandemic and accompanying recession began
decreased production. These changes affect revenues paid
midway through the fiscal year, their effects would be less
to the federal government from oil and gas leasing on the
pronounced when comparing FY2020 to date (October-
U.S. outer continental shelf (OCS). Federal revenues from
July) with the same period in past fiscal years (Figure 2).
OCS oil and gas include bonus bids from lease sales, rents
paid prior to production on leases, royalties collected during
Figure 2. Federal Offshore Oil and Gas Revenues for
production, and other fees .
Partial Fiscal Year (October-July), 2016-2020
A portion of federal offshore oil and gas revenue is shared
with coastal states under the Outer Continental Shelf Lands
Act (OCSLA; 43 U.S.C. §§1331-1356b) and the Gulf of
Mexico Energy Security Act of 2006 (GOMESA; 43 U.S.C.
§1331 note). The revenues also fund multiple federal
programs and contribute to the General Fund of the
Treasury.
Data from the Department of the Interior’s (DOI’s) Office
of Natural Resources Revenue (ONRR) generally show
lower federal offshore oil and gas revenues during April-
July 2020 as compared with the April-July period in recent
years (Figure 1). The April-July data largely reflect
activities in March-June, because royalties—which
constitute the majority of revenues—come from sales in the
previous month. Each year’s revenues reflect a mix of
Source and Notes: See Figure 1. Al years show October-July.
factors influencing oil and gas leasing, prices, and
production, and the pandemic is a prominent (though not
Bonus Bids
necessarily exclusive) factor in 2020.
DOI’s Bureau of Ocean Energy Management (BOEM) has
held one offshore oil and gas lease sale (Lease Sale #254)
Figure 1. Federal Offshore Oil and Gas Revenues for
during the period in which the United States has been
April Through July, 2016-2020
affected by COVID-19. This sale took place in March 2019
for leases in the Gulf of Mexico region. Like other sales in
DOI’s offshore oil and gas leasing program for 2017-2022,
it offered all legally available unleased areas in federal
waters of the Gulf. The sale drew high (winning) bids
totaling $93 million, which compares with high bids of
$159 million (August 2019), $244 million (March 2019),
$178 million (August 2018), $125 million (March 2018),
and $121 million (August 2017) for other Gulf lease sales
in the 2017-2022 program.
BOEM postponed an additional Gulf lease sale (Lease Sale
#256) that had been scheduled for August 2020. BOEM
stated that postponement until November 2020 would allow
the agency to analyze oil and gas market changes stemming
in part from the COVID-19 pandemic.
Source: ONRR, “Revenue by Month,” at https://revenuedata.doi.gov/
downloads/revenue-by-month/. Includes bonuses, rents, royalties, and
Rents
“other revenues” for the commodity categories Oil, Gas, Oil & Gas, and
Rental payments, collected annually on active but
NGL (natural gas liquids). Does not include inspection fees.
nonproducing leases, typically account for a smaller portion
of total revenues than do royalties or bonuses. Operators
pay varying rental rates per acre, based on the water depth
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link to page 1 Federal Offshore Oil and Gas Revenues During the COVID-19 Pandemic
of the lease, the age of the lease, and other factors. Rental
types of relief to industry, such as authority for lease
rates have not changed in the past five years, but the
extensions and suspensions at the leaseholder’s request.
number and acreage of nonproducing active offshore leases
have varied, affecting rental payment totals. For example,
State Revenue Shares. Under the OCSLA and GOMESA,
in August 2020, BOEM reported 1,775 active but
a portion of offshore oil and gas revenues is shared with
nonproducing leases on the OCS, whereas in January 2017,
coastal states. GOMESA provides the majority of shared
there were 2,345. For April-July 2020, ONRR reported
revenues; 37.5% of revenues from qualified leases (up to a
offshore rents totaling $51 million, which compares with
specified cap) are shared among Alabama, Louisiana,
April-July amounts of $65 million for 2019, $64 million for
Mississippi, and Texas. In 2019, the four states combined
2018, $64 million for 2017, and $71 million for 2016.
received approximately $215 million under GOMESA. The
GOMESA revenues are to be used for coastal conservation
Royalties
and restoration, hurricane protection, and related activities.
Royalties constitute the majority of offshore oil and gas
To the extent that offshore revenues are reduced due to
revenues. The revenues from royalties reflect the royalty
impacts from the COVID-19 pandemic, disbursements to
rate defined in offshore leases, applied to the oil and gas
states under GOMESA would decline accordingly. The
produced from these leases, valued at market prices . While
severity of these effects on program funding and state
offshore royalty rates have been relatively stable, changes
budgets would depend on the portion of total revenue
in oil and gas prices and production cause royalty amounts
coming from federal disbursements and on other factors.
to fluctuate regularly. Most recently, effects of the
pandemic have reduced oil and gas prices and production,
To address any effects of COVID-related revenue decreases
resulting in lower federal royalty collections.
on state programs, and to augment state funding more
generally, some have suggested that Congress could amend
ONRR’s offshore oil and gas royalty collections for April-
GOMESA to provide a higher state percentage share and/or
July 2020 totaled $752 million, compared with April-July
remove the funding cap. Conversely, others might support
royalty collections of $1.748 billion for 2019, $1.486
reducing the GOMESA state revenue share to preserve
billion for 2018, $1.053 billion for 2017, and $788 million
funding for federal programs that also may be affected by
for 2016. (The totals include royalties on natural gas
revenue decreases. For further discussion, see CRS Report
liquids.) The 2020 amount is 57% lower than that for the
R46195, Gulf of Mexico Energy Security Act (GOMESA):
same months in 2019 and 49% lower than in 2018. It is
Back ground, Status, and Issues.
closer (5% lower) to the royalties for the same months in
2016, a year in which oil prices were comparatively low,
Revenues for Federal Programs. Offshore oil and gas
due in part to increases in global production.
revenues provide most or all of the funding for several
federal land conservation and restoration programs,
Issues for Congress
including the Land and Water Conservation Fund (LWCF;
Royalty Relief for Industry. In response to the financial
54 U.S.C. §§200301 et seq.), the Historic Preservation Fund
difficulties facing the oil and gas industry during the
(HPF; 54 U.S.C. §303102), and the newly established
pandemic, some U.S. oil and gas producers and some
National Parks and Public Land Legacy Restoration Fund
Members of Congress have asked DOI to offer royalty
(LRF; for more information, see CRS In Focus IF11636,
relief on federal oil and gas leases—a temporary reduction
The Great American Outdoors Act, P.L. 116-152).
or waiver of royalties. Some other Members have opposed a
comprehensive royalty relief program for federal oil and
Some have expressed concern about whether FY2020
gas producers. DOI has stated that affected producers may
revenues will be sufficient to fund these programs. The
apply individually for discretionary (“special case”) royalty
HPF and LWCF receive disbursements up to specified
relief using existing processes (30 C.F.R. §203.80),
annual amounts: $150 million for the HPF and, for the
clarifying that DOI is not pursuing a new program of
LWCF, up to $900 million under the LWCF Act and up to
blanket royalty relief in response to the pandemic.
$162.5 million under GOMESA. Given that FY2020
offshore oil and gas revenues have exceeded $3 billion
Some stakeholders have sought measures to make royalty
through July (Figure 2), the FY2020 revenues may be
relief more comprehensive or to expedite the application
sufficient to meet these funding commitments, even after
process. They contend that obtaining royalty relief more
state revenue sharing under GOMESA and the OCSLA.
quickly could help producers avoid having to shut in wells
The LRF is to receive a percentage share of all federal
for financial reasons. Some other stakeholders oppose
energy revenues (from onshore and offshore conventional
broadening or expediting royalty relief during the
and renewable energy) that remain in the Treasury as
pandemic. They point out that the OCSLA (43 U.S.C
miscellaneous receipts after other distributions under law.
1337(a)(3)) authorizes royalty relief to promote increased
Based on prior years, the majority of these receipts likely
production, which could be seen as being at odds with the
would come from offshore oil and gas leasing. A decrease
pandemic situation of oversupply. They also argue that the
in offshore revenues in FY2020 stemming from the
federal government needs offshore oil and gas royalties to
COVID-19 pandemic could mean the miscellaneous
fund key state and federal programs. Some bills in the 116th
receipts would be insufficient to allow for the maximum
Congress (e.g., H.R. 6289, H.R. 6707, H.R. 7781, S. 3488,
LRF distribution of $1.9 billion in FY2021. The totals that
S. 3611) would repeal DOI’s authority in the OCSLA to
would be available are as yet uncertain, as is the question of
grant discretionary royalty relief. In contrast, other
how or if the pandemic might affect subsequent years’
legislation (e.g., S. 4041) would mandate offshore royalty
revenues for the LRF.
reductions during the pandemic and would provide other
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Federal Offshore Oil and Gas Revenues During the COVID-19 Pandemic
Laura B. Comay, Specialist in Natural Resources Policy
IF11649
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