Offshore drilling

The Biden administration has proposed a five-year offshore leasing plan with options that range from no new lease sales to up to 11 lease sales. 

The Louisiana Mid-Continent Oil & Gas Association is urging President Donald Trump to protect the offshore drilling industry by suspending or reducing royalty payments.

In a letter sent to Trump on April 2, LMOGA said immediate action needed to be taken to deal with the declining demand for oil brought on by the coronavirus pandemic along with falling prices due to the glut generated by Saudi Arabia and Russia.

“Our American ingenuity built the energy renaissance our country has enjoyed, and we firmly believe our industry is resilient and will recover from these current crises,” said Tyler Gray, LMOGA President. “However, we find ourselves in a circumstance where there is a need for urgent and bold action.”

Earlier this week, Reuters reported one unnamed oil company had asked the U.S. Department of the Interior for royalty payment relief. U.S. Sen. Bill Cassidy, R-Baton Rouge, said he met with Interior Secretary David Bernhardt to discuss the issue. “He promised to quickly process targeted royalty relief on the outer continental shelf using existing law,” Cassidy said in a statement. 

Along with the cut in payments, LMOGA is asking for a 3-year extension of the primary term of non-producing federal oil and gas leases in the Gulf of Mexico to allow companies to better map out their spending and work plans for the years ahead and preserve cash to maintain liquidity in the short term. Extending decommissioning obligations associated with current and expired leases was also recommended, along with protecting infrastructure that is inactive because of storage capacity limits.  

A survey by the Louisiana Oil and Gas Association found more than 23,000 jobs in the industry are at immediate risk of being lost in the next three months. As many as 16,800 of the 33,650 oil and gas wells operating in Louisiana could be shut in.

OPEC and Russia have agreed to cut oil production by 10 million barrels a day until July, then have an 8 million barrel a day cut until the end of the year. 

The number of offshore rigs in Louisiana as of Friday was 17, down from 23 a year ago, according to data from the State Department of Natural Resources. The total number of rigs in the state was 43, down from 65 a year ago. 

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