US working on payment delay for energy royalties

President Donald Trump's administration is working on a rule that will cite the coronavirus pandemic as the basis for allowing some producers on federal land to delay paying royalties to the government.

The US Office of Natural Resources Revenue (ONRR), which is responsible for collecting federal energy and mineral royalties, sent the rule to the White House for internal review on 20 May, according to a public notice. The rule could mark a new effort by the administration to blunt the effect of coronavirus on the energy sector.

"ONRR Reporting and Royalty Payment Delay Related to Coronavirus Disease 2019," according to a notice published by the White House.

It is unclear whether the royalty delay would be broadly available to oil and gas producers, or whether it would only be targeted toward a small subset of royalty payments, which have totaled $5.3bn so far in fiscal 2020. The US Interior Department did not respond to a request for comment. ONRR said it does not comment on "draft rules" before they are published.

A wide-scale delay in royalty payments could offer near-term relief to independent producers and others that are short on cash, as a result of a collapse in oil prices that began in March and a decision by some operators to shut in their production. Interior has already started to approve royalty relief to onshore producers on a case-by-case basis, cutting royalty rates to as little as 2.5pc from 12.5pc for production in May and June.

Oil industry officials and public interest groups said they have heard little to nothing about the rule. But some industry officials expect it could address a looming 1 July deadline for onshore operators to retroactively recalculate and pay royalties dating back to 2017, as a result of a court ruling last year that blocked ONRR from rolling back a more stringent royalty valuation rule.

"At a time when companies are barely hanging on during this crisis, that retroactive reporting is a needless distraction," Western Energy Alliance executive director Kathleen Sgamma said. "A delay to the requirement is indeed significant and very much appreciated."

By Chris Knight