NCPA - National Center for Policy Analysis

The Fiscal Impact of the Offshore Drilling Moratorium

April 27, 2011

Due to declining production at existing wells and bureaucratic delays on new wells in the Gulf of Mexico since the Deepwater Horizon oil rig blowout in 2010, the federal government is forfeiting revenues of more than $4.7 million per day.  The losses will grow significantly if the federal government does not sell new drilling leases in the Gulf of Mexico this year, says Rob Bluey, director of the Center for Media and Public Policy at the Heritage Foundation and an adjunct scholar with the National Center for Policy Analysis' E-Team.

The lack of new leases ultimately means the government will collect less rent.  The number grows even larger when royalty payments are coupled with a lack of Gulf lease sales and fewer rental payments.  Those three components -- royalties, leases and rent -- make up a sizable amount of revenue each year. 

For example:

  • In 2008, the offshore industry paid $237 million in rent, $8.3 billion in royalties and $9.4 billion for bids on new leases.
  • By comparison, last year those numbers dropped to $245 million in rent, $4 billion in royalties and just $979 million in lease bids.

The Obama administration has dismissed the financial impact of less production, but the economic forecasting firm IHS Global Insight estimates that royalties, lease bids and rent payments amounted to more than $6 billion in 2009.  Federal, state and local taxes related to the offshore oil and gas operations in the Gulf totaled $13 billion.  That $19 billion pot of money could go a long way toward deficit reduction, says Bluey.

Source: Rob Bluey, "The Fiscal Impact of the Offshore Drilling Moratorium," National Center for Policy Analysis, April 27, 2011.

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