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Royalty Relief Triggers Record Number of Offshore Tract Bids

April 23, 1996

NEW ORLEANS (AP) _ A royalty relief bill passed last year by Congress apparently triggered a record-setting 1,381 bids for 924 petroleum tracts in the central Gulf of Mexico, federal officials said Tuesday.

The leases will be sold Wednesday in New Orleans.

After a long recession in the oil patch, the number of bids for petroleum drilling on federal tracts off Alabama, Louisiana and Mississippi has been rising.

The royalty relief bill pushed that interest even higher, said Barry Congdon, a spokesman for Minerals Management Service, the agency that oversees the lease sales.

``This exceeds the highest record for number of bids and number of tracts bid on in all federal waters at any time,″ Congdon said. ``I think the main interest is the royalty relief bill that is being implemented in this sale for the first time.″

The MMS said the previous bid record was set in December 1970 when 1,043 bids were received on 127 tracts. In May 1983, around the time of a major crash in oil prices, 1,015 bids were received on 656 tracts.

Under the government’s procedure, each of the highest bids will be evaluated for fair market value before a lease is awarded.

The royalty breaks apply to deepwater federal leases off the coasts of Louisiana, Texas, Mississippi and Alabama. In all covered areas, new leases automatically qualify for breaks if a well was drilled in a depth of 200 meters or more.

For wells drilled from 200 to 400 meters, royalties would be waived on 17.5 million barrels of oil or the natural gas equivalent. At 400 to 800 meters, royalties would be waived on 52.5 million barrels. At depths greater than 800 meters, royalties would be waived on 87.5 million barrels.

U.S. Sen. J. Bennett Johnston, D-La., who pushed the legislation, said the measure would boost the domestic petroleum industry, create jobs and increase federal income tax collections.

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