By Jonathan A. Hunter

MMS has announced proposed amendments to its deep gas royalty relief regulations under the Energy Policy Act of 2005. The proposed rule, “Royalty Relief – Ultra-Deep Gas Wells on Outer Continental Shelf (OCS) Oil and Gas Leases; Extension of Royalty Relief Provisions to OCS Leases Offshore of Alaska, 1010–AD33,” would extend existing deep gas royalty relief provisions to more OCS leases, provide additional royalty relief for certain wells on OCS leases in the Gulf of Mexico (GOM), and expand authority to grant royalty relief to leases offshore of Alaska.  The proposed rule extends deep gas royalty relief to GOM leases in 400 meters of water (up from the current limit of 200 meters), and would increase the royalty suspension volume to 35 Bcf for qualifying ultra-deep wells at least 20,000 feet total vertical depth subsea  in less than 400 meters of water.  The additional relief will only be available in years when the annual NYMEX natural gas price is at or below $4.47/MMBtu expressed in 2006 dollars.  MMS will accept comments on the proposed rule through July 17, 2007.  Click here to read the Notice.