1998 Year of the Ocean Ocean Energy and Minerals 



to encourage development of new and improved technology for energy resource 

 production, which will eliminate or minimize risk of damage to the human, marine, and 

 coastal environments; and 



to provide opportunities for state and local government participation in policy and 

 planning decisions made by the federal government relating to exploration for, and 

 development and production of, minerals on the OCS. 



OCS Deep Water Royalty Relief Act (Pub. L. 104-58) 



The OCS Deep Water Royalty Relief Act (DWRRA), contained in Pub. L. 104-58, provides new 

 incentives to lease and develop in certain Gulf of Mexico deep water areas. Specifically, the 

 DWRRA amends the Secretary of the Interior's discretionary authority to grant royalty relief to 

 include producing and non-producing leases in order to promote development, increase 

 production, or encourage marginal production of certain deepwater leases in the Gulf of Mexico. 

 The DWRRA also contains three other major provisions related to leases issued as a result of 

 sales held before and after the date of the DWRRA's enactment. The following is a summary of 

 these three other major provisions: 



Section 303 establishes a new bidding system that allows the Secretary to offer tracts 

 with royalty suspensions for a period, volume, or value of production. 



Section 304 mandates that all tracts offered by November 22, 2000 in deep water in 

 certain areas of the Gulf of Mexico must be offered under the new bidding system 

 permitted by the DWRRA. The Secretary must offer such tracts with a specific minimum 

 royalty suspension volume based on water depth. 



Existing (pre-Act) leases may apply for royalty suspensions for new production in deep 

 water in certain areas of the Gulf of Mexico. This production does not qualify for royalty 

 suspensions if the Secretary determines that the new production would be economic in 

 the absence of royalty relief Otherwise, the Secretary must determine the volume of 

 production on which no royalty should be due in order to make the new production 

 economically viable. 



There has been a revitalization of oil and gas exploration and development in the Gulf of Mexico 

 and, with the advent of new deep water drilling technologies, a dramatic intensification of 

 interest in developing the frontier deep water areas. Oil production should increase as much as 

 70-100 percent by the year 2000, with exploration pushing beyond the exclusive economic zone 

 and product pipeline networks extending well off the continental shelf and down the continental 

 slope. 



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