Federal Offshore Oil and Gas Revenues During the COVID-19 Pandemic

Federal Offshore Oil and Gas Revenues During the COVID-19 Pandemic

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Updated March 8, 2021
Federal Offshore Oil and Gas Revenues During the
COVID-19 Pandemic
The economic effects of the Coronavirus Disease 2019
The pandemic’s impacts are less pronounced when
(COVID-19) pandemic included a reduction in demand for
comparing revenues for the entirety of FY2020 with those
oil and natural gas, resulting in lower prices and decreased
of previous fiscal years (Figure 2), given that the
production. These changes have affected federal revenues
pandemic’s widespread economic disruptions started
derived from oil and gas leasing on the U.S. outer
partway through the fiscal year.
continental shelf (OCS). Such revenues consist of royalties
on oil and gas sold from federal leases, bids at federal lease
Figure 2. Federal Offshore Oil and Gas Revenues for
auctions (known as bonus bids), rents paid prior to
the Full Fiscal Year, FY2016-FY2020
production, and other fees. Revenue amounts can fluctuate
widely from year to year owing to a mix of factors affecting
leasing, prices, and production, with the pandemic being a
significant factor during FY2020 and FY2021. Changes in
federal offshore oil and gas revenues can affect amounts
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), as well as funding for several
federal programs.
FY2020
Offshore oil and gas revenues for the second half of
FY2020 (April-September) reflect impacts of the pandemic.
Data from the Department of the Interior’s (DOI’s) Office

of Natural Resources Revenue (ONRR) show that revenues
Source: ONRR annual data query, at https://revenuedata.doi.gov/
for the second half of FY2020 were lower than revenues
query-data. See Figure 1 source notes for commodity categories.
from the comparable period in any of the past five fiscal
Royalties. Revenues from royalties constitute the majority
years and significantly lower than the comparable period in
of federal offshore oil and gas revenues. Royalty collections
FY2019 (Figure 1). For example, May 2020 revenues—
for April-September 2020 totaled $1.079 billion, compared
generally reflecting sales of offshore oil and gas in April—
with April-September royalties of $2.571 billion for 2019,
were 85% lower than those for May 2019, and June 2020
$2.381 billion for 2018, $1.554 billion for 2017, and $1.247
revenues were 71% below June 2019.
billion for 2016. (The totals include royalties on natural gas
liquids.) The April-September 2020 amount is 58% lower
Figure 1. Federal Offshore Oil and Gas Revenues for
than that for the same months in 2019, 55% lower than
April Through September, 2016-2020
2018, 31% lower than 2017, and 13% lower than 2016.
Bonus Bids. DOI’s Bureau of Ocean Energy Management
(BOEM) held two offshore oil and gas lease sales during
FY2020, both for the Gulf of Mexico region, in March and
November 2020. 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
DOI’s offshore oil and gas leasing program for 2017-2022.
Each sale offered all legally available unleased areas in
federal waters of the Gulf.
Source: ONRR, “Revenue by Month,” at https://revenuedata.doi.gov/
downloads/revenue-by-month/. Includes bonuses, rents, royalties, and
Rents. Rental payments, collected annually on active but
“other revenues” for the commodity categories Oil, Gas, Oil & Gas, and
nonproducing leases, typically account for a smaller portion
NGL (natural gas liquids). Does not include inspection fees.
of total revenues than do royalties or bonuses. The number
and acreage of nonproducing offshore leases have varied
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Federal Offshore Oil and Gas Revenues During the COVID-19 Pandemic
over the past five years, affecting rental payment totals,
payment (reflecting FY2020 revenues) has not yet been
although rental rates have stayed the same. For April-
announced. The GOMESA revenues are to be used for
September 2020, ONRR reported offshore rents totaling
coastal conservation and restoration, hurricane protection,
$58 million, which compares with April-September
and related activities.
amounts of $72 million for 2019, $71 million for 2018, $69
million for 2017, and $85 million for 2016.
The effects on state programs from any pandemic-related
revenue reductions would depend on the extent of the
FY2021
reduction and the portion of total program revenue coming
Like revenues in the latter half of FY2020, federal offshore
from federal disbursements, among other factors. To
oil and gas revenues in the first quarter of FY2021
address any such effects, and to augment state funding more
(October-December) were lower than the comparable
generally, some have suggested that Congress could amend
period in recent years (Figure 3).
GOMESA to provide a higher state percentage share and/or
remove the funding cap. Conversely, others might support
Figure 3. Federal Offshore Oil and Gas Revenues for
reducing the GOMESA state revenue share to preserve
October Through December, 2016-2020
funding for federal programs that also may be affected by
revenue decreases. For further discussion, see CRS Report
R46195, Gulf of Mexico Energy Security Act (GOMESA):
Back ground, Status, and Issues.
Revenues for Federal Programs. Offshore oil and gas
revenues provide most or all of the funding for several
federal land conservation and restoration programs,
including the Land and Water Conservation Fund (LWCF;
54 U.S.C. §§200301 et seq.), the Historic Preservation Fund
(HPF; 54 U.S.C. §303102), and the National Parks and
Public Land Legacy Restoration Fund (LRF; 54 U.S.C.
§§200401-200402).
Despite effects of the pandemic, FY2020 revenues from
Source: ONRR, “Revenue by Month,” at https://revenuedata.doi.gov/
offshore oil and gas and other statutorily mandated sources
downloads/revenue-by-month/. Also see Figure 1 source notes.
were sufficient to fund all these programs at their specified
or maximum amounts , including $150 million for the HPF,
Issues for Congress
$900 million for the LWCF under the LWCF Act, and
Royalty Relief for Industry. In response to the financial
$1.9 billion for the LRF. Under GOMESA, the LWCF
difficulties facing the oil and gas industry during the
additionally can receive up to $162.5 million from FY2020
pandemic, some producers and Members of Congress asked
offshore revenues for its state assistance program;
DOI to offer royalty relief on federal oil and gas leases—a
preliminary data indicate the available funding will not
temporary reduction or waiver of royalties. They contended
reach this cap. Some have expressed concerns about
that relief could help producers avoid having to shut in
whether future revenues will be sufficient to fully fund
wells for financial reasons. Others opposed royalty relief as
these programs, owing to pandemic effects, federal policy
a response to the pandemic’s impacts, questioning the
choices, or other factors. In a situation of insufficient
extent to which royalty relief would help mitigate impacts
funding, questions could arise as to how to prioritize the
and expressing that relief to other groups or individuals
various programs and whether to supplement current
should be prioritized. DOI stated that affected producers
funding sources with new types of funding.
could apply individually for discretionary (“special case”)
royalty relief using existing processes (30 C.F.R. §203.80),
President Biden’s Leasing “Pause.” In Executive Order
clarifying that DOI was not pursuing a new program of
14008 (January 2021), President Biden imposed a “pause”
blanket royalty relief in response to the pandemic. Some
on new federal oil and gas leases, pending a review of
legislation in the 116th Congress (e.g., S. 4041) would have
federal leasing and permitting practices and their potential
mandated offshore royalty reductions during the pandemic
climate impacts. Effects of the pause on offshore oil and
and provided other types of relief to industry, such as
gas revenues are uncertain and would depend on the length
authority for lease extensions and suspensions at the
of the pause and any longer-term changes to federal policy
leaseholder’s request. By contrast, other bills (e.g., H.R.
based on the required review. In the short term, the leasing
7781, S. 4887) would have repealed DOI’s authority in the
pause is one factor, like the pandemic, that could have some
OCSLA to grant discretionary royalty relief.
influence on FY2021 revenues. For example, BOEM has
postponed offshore lease sales based on the pause, which
State Revenue Shares. Under the OCSLA and GOMESA,
could affect FY2021 bonus bid revenues. However, effects
a portion of federal offshore oil and gas revenue is shared
of the pause on offshore royalties—which form the majority
with coastal states. GOMESA provides the majority of
of federal offshore revenues—would likely take longer to
shared revenues; 37.5% of revenues from qualified leases
emerge. For more information, see CRS Insight IN11601,
(up to a specified cap) are shared among Alabama,
Offshore Oil and Gas Leasing: President Biden’s “Pause”.
Louisiana, Mississippi, and Texas. In 2020 (reflecting
FY2019 revenues), the four states combined received
Laura B. Comay, Specialist in Natural Resources Policy
approximately $353 million under GOMESA. The 2021
IF11649
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Federal Offshore Oil and Gas Revenues During the COVID-19 Pandemic

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