News & Alerts
May 7, 2020 BLM OFFICE RELEASES OFFICIAL UPDATED GUIDANCE FOR ROYALTY RATE REDUCTION REQUESTSpdf
The BLM has released and posted the official guidance for operators seeking to file an application for royalty rate reductions. The guidance lists the specific steps an operator must take to submit an application. Additionally, the guidance provides a list of minimum requirements needed to file an application.
To apply for Temporary Oil and Natural Gas Royalty Rate Reduction (RRR) due to COVID-19, an operator must provide:
- A self-certification statement with supporting documentation from the operator that the lease(s) would be capable of production in paying quantities were it not for the extreme circumstances presented due to the COVID-19 pandemic.
- A simple economic analysis table that shows the lease(s) that are uneconomic at the current royalty rate, but that would be economic with the royalty rate reduction. This table needs to include the relevant market oil price (i.e. West Texas Intermediate spot price or basin level price), the royalty rate, the production capability and the operating costs (summarized for the lease).
- The request temporary royalty rate to make the lease(s) economic. BLM may reduce the royalty rate to no lower than 0.5%.
Many of the steps and requirements are the same as what was initially provided on April 21, 2020. However, the BLM has updated the timeline for which the royalty rate reduction will expire. If an operator is granted a royalty rate reduction due to COVID-19, that reduction will expire sixty (60) days from the date the BLM grants the reduction. However, if an operator is seeking a royalty rate reduction past the sixty (60) days, the operator must file another application.
The guidance for the Royalty Rate Reduction Application can be found on the BLM website or attached here: