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Updated November 23, 2020
Federal Offshore Oil and Gas Revenues During the
COVID-19 Pandemic
The economic effects of the Coronavirus Disease 2019
Because the pandemic began midway through the fiscal
(COVID-19) pandemic have included a reduction in
year, its effects would be less pronounced when comparing
demand for oil and natural gas, resulting in lower prices and
available data for the fiscal year to date (October-August)
decreased production. These changes have affected
with the same period in past fiscal years (Figure 2).
revenues paid to the federal government from oil and gas
leasing on the U.S. outer continental shelf (OCS). Federal
Figure 2. Federal Offshore Oil and Gas Revenues for
revenues from OCS oil and gas include bonus bids from
Partial Fiscal Year (October-August), 2016-2020
lease sales, rents paid prior to production on leases,
royalties collected during production, and other fees .
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-
August 2020 as compared with the April-August period in
recent years (Figure 1). The April-August data largely
reflect activities in March-July, because royalties—which
Source and Notes: See Figure 1. Al years show October-August.
constitute the majority of revenues—come from sales in the
previous month. The revenue totals reflect a mix of factors
Bonus Bids
influencing oil and gas leasing, prices, and production. For
DOI’s Bureau of Ocean Energy Management (BOEM) has
2020, the pandemic is a prominent (though not necessarily
held two offshore oil and gas lease sales (Lease Sales 254
exclusive) factor.
and 256) during the period in which the United States has
been affected by COVID-19. The sales took place in March
Figure 1. Federal Offshore Oil and Gas Revenues for
and November 2020, respectively, for leases in the Gulf of
April Through August, 2016-2020
Mexico region. Like other sales in DOI’s offshore oil and
gas leasing program for 2017-2022, the sales offered all
legally available unleased areas in federal waters of the
Gulf. The sales drew high (winning) bids totaling $93
million (March 2020) and $121 million (November 2020),
which compare 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.
Rents
Rental payments, collected annually on active but
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
Source: ONRR, “Revenue by Month,” at https://revenuedata.doi.gov/
of the lease, the age of the lease, and other factors. Rental
downloads/revenue-by-month/. Includes bonuses, rents, royalties, and
rates have not changed in the past five years, but the
“other revenues” for the commodity categories Oil, Gas, Oil & Gas, and
number and acreage of nonproducing active offshore leases
NGL (natural gas liquids). Does not include inspection fees.
have varied, affecting rental payment totals. For example,
Notes: Royalties reflect sales in the previous month. Bonus payments
in November 2020, BOEM reported 1,651 active but
may reflect lease sales from earlier months.
nonproducing leases on the OCS, whereas in January 2017,
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link to page 1 Federal Offshore Oil and Gas Revenues During the COVID-19 Pandemic
there were 2,345. For April-August 2020, ONRR reported
Mississippi, and Texas. In 2020 (reflecting FY2019
offshore rents totaling $55 million, which compares with
revenues), the four states combined received approximately
April-August amounts of $66 million for 2019, $68 million
$353 million under GOMESA. The GOMESA revenues are
for 2018, $67 million for 2017, and $77 million for 2016.
to be used for coastal conservation and restoration,
hurricane protection, and related activities. To the extent
Royalties
that offshore revenues are reduced due to impacts from the
Royalties constitute the majority of offshore oil and gas
COVID-19 pandemic, disbursements to states under
revenues. The revenues from royalties reflect the royalty
GOMESA would decline accordingly. The severity of these
rate defined in offshore leases, applied to the oil and gas
effects on state programs would depend on the portion of
produced from these leases, valued at market prices. While
total program revenue coming from federal disbursements
offshore royalty rates have been relatively steady, changes
and on other factors.
in oil and gas prices and production cause royalty amounts
to fluctuate regularly. Most recently, effects of the
To address any effects of COVID-related revenue decreases
pandemic have reduced oil and gas prices and production,
on state programs, and to augment state funding more
resulting in lower federal royalty collections.
generally, some have suggested that Congress could amend
GOMESA to provide a higher state percentage share and/or
ONRR’s offshore oil and gas royalty collections for April-
remove the funding cap. Conversely, others might support
August 2020 totaled $915 million, compared with April-
reducing the GOMESA state revenue share to preserve
August royalty collections of $2.109 billion for 2019,
funding for federal programs that also may be affected by
$1.971 billion for 2018, $1.274 billion for 2017, and $1.053
revenue decreases. For further discussion, see CRS Report
billion for 2016. (The totals include royalties on natural gas
R46195, Gulf of Mexico Energy Security Act (GOMESA):
liquids.) The 2020 amount is 57% lower than that for the
Back ground, Status, and Issues.
same months in 2019, 54% lower than 2018, 28% lower
than 2017, and 13% lower than 2016.
Revenues for Federal Programs. Offshore oil and gas
revenues provide most or all of the funding for several
Issues for Congress
federal land conservation and restoration programs,
Royalty Relief for Industry. In response to the financial
including the Land and Water Conservation Fund (LWCF;
difficulties facing the oil and gas industry during the
54 U.S.C. §§200301 et seq.), the Historic Preservation Fund
pandemic, some U.S. oil and gas producers and some
(HPF; 54 U.S.C. §303102), and the newly established
Members of Congress have asked DOI to offer royalty
National Parks and Public Land Legacy Restoration Fund
relief on federal oil and gas leases—a temporary reduction
(LRF; for more information, see CRS In Focus IF11636,
or waiver of royalties. Some other Members have opposed a
The Great American Outdoors Act, P.L. 116-152).
comprehensive royalty relief program for federal oil and
gas producers. DOI has stated that affected producers may
Some have expressed concern about whether FY2020
apply individually for discretionary (“special case”) royalty
revenues will be sufficient to fund these programs. The
relief using existing processes (30 C.F.R. §203.80),
HPF and LWCF receive disbursements up to specified
clarifying that DOI is not pursuing a new program of
annual amounts: $150 million for the HPF and, for the
blanket royalty relief in response to the pandemic.
LWCF, up to $900 million under the LWCF Act. Given that
FY2020 offshore oil and gas revenues have exceeded
Some stakeholders have sought measures to make royalty
$3 billion through August (Figure 2), the FY2020 revenues
relief more comprehensive or to expedite the application
may be sufficient to meet these funding commitments, even
process. They contend that obtaining royalty relief more
after state revenue sharing under GOMESA and the
quickly could help producers avoid having to shut in wells
OCSLA. Under GOMESA, the LWCF additionally is
for financial reasons. Some other stakeholders oppose
authorized to receive up to $162.5 million from FY2020
broadening or expediting royalty relief during the
offshore revenues as mandatory funding for its state
pandemic. They note that the OCSLA (43 U.S.C
assistance program; preliminary data indicate the available
1337(a)(3)) authorizes royalty relief to promote increased
FY2020 GOMESA revenues for the LWCF will not reach
production, which could be seen as contradictory to the
this cap. With respect to the LRF, it is to receive a
pandemic situation of oversupply. They also argue that the
percentage share of all federal energy revenues (from
federal government needs offshore oil and gas royalties to
onshore and offshore conventional and renewable energy)
fund key state and federal programs. Some bills in the 116th
that remain in the Treasury as miscellaneous receipts after
Congress (e.g., H.R. 6289, H.R. 6707, H.R. 7781, S. 3488,
other distributions under law. Based on prior years, the
S. 3611) would repeal DOI’s authority in the OCSLA to
majority of these receipts likely would come from offshore
grant discretionary royalty relief. In contrast, other
oil and gas leasing. A decrease in offshore revenues in
legislation (e.g., S. 4041) would mandate offshore royalty
FY2020 stemming from the COVID-19 pandemic could
reductions during the pandemic and would provide other
mean the miscellaneous receipts would be insufficient to
types of relief to industry, such as authority for lease
allow for the maximum LRF distribution of $1.9 billion in
extensions and suspensions at the leaseholder’s request.
FY2021. The totals that would be available are as yet
uncertain, as is the question of how or if the pandemic
State Revenue Shares. Under the OCSLA and GOMESA,
might affect subsequent years’ revenues for the LRF or
a portion of offshore oil and gas revenue is shared with
other funds.
coastal states. GOMESA provides the majority of shared
Laura B. Comay, Specialist in Natural Resources Policy
revenues; 37.5% of revenues from qualified leases (up to a
IF11649
specified cap) are shared among Alabama, Louisiana,
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Federal Offshore Oil and Gas Revenues During the COVID-19 Pandemic
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