2024 Royalty Reduction Program

 

The State Mineral and Energy Board has authorized the 2024 Royalty Reduction Program (RRP) as an incentive to encourage the exploration and production of the State's minerals for the public good.

 

Press Release: Louisiana State Mineral and Energy Board approves leasing incentive

Royalty relief offers temporary reduced rate to spur investment in Louisiana

Monday, July 22, 2024

BATON ROUGE – The Louisiana State Mineral and Energy Board (Board) has approved a Royalty Reduction Program (RRP) for state mineral leases issued from January 1, 2024 through the end of the year.

Eligible leaseholders are permitted to apply for a temporary reduction of up to 5.5% on the royalty burden owed for production of state-owned minerals. 

“We know Louisiana still has much to offer in production of traditional sources of energy to meet an existing demand that is still strong and growing domestically and globally,” said Louisiana Department of Energy and Natural Resources Secretary Tyler Gray, who also serves as a member of the Board. “We have an opportunity to leverage our state jurisdiction to provide some relief and a stable platform for energy investors who have had to become more cautious in the difficult energy markets of recent years. This program is intended to help bring back operators who have invested here before and to attract new companies who may need a little more incentive to make that initial investment.”

Andrew Young, Assistant Secretary for DENR’s Office of Mineral Resources and Secretary of the Board, explained that “the RRP will incentivize investment in Louisiana by decreasing the economic barriers to entry for oil and gas producers statewide.  Operators will be more inclined to invest in prospects with the promise of better short-term project economics.”

According to Young, commodity prices and other factors have caused a downturn in leasing and drilling across the state, especially in south Louisiana.  And the industry has diversified its focus to include low-carbon, alternative energy production. “We are pleased about the momentum and investment in alternative energy and carbon sequestration, which offer sustainability and new value potential for state minerals. But we also want to emphasize the strong opportunities that Louisiana oil and gas have to offer.”

The RRP is open to operators who acquire state mineral leases during the 2024 calendar year, even those whose leases predate the Board’s June 2024 passage of the program. To be eligible, production must begin with 36 months of the effective date of inland leases and within 60 months of the effective date of offshore leases. If approved by the Board, royalty reduction applies for the first 36 months after first sales of production from the lease or lands unitized therewith.

For additional information on state leasing and the RRP, interested parties should visit the Office of Mineral Resources website at

https://www.dnr.louisiana.gov/index.cfm?md=pagebuilder&tmp=home&pid=168

 

Important information regarding the program is below:

  • The 2024 RRP applies to all State Leases issued between January 1, 2024 and December 31, 2024.
  • To be eligible for royalty reduction, first sales of production from the leased premises or lands pooled or unitized therewith must commence within the first thirty-six months of the Effective Date for inland leases, and within the first sixty months from the Effective Date for offshore leases.
  • The royalty rate for a qualifying State Lease may be reduced up to 5.5% but will not allow for the royalty rate to go below 18.5%.
  • The reduced royalty will be for a term not to exceed the first 36 months from the first sales of production.
  • A lessee seeking approval for the RRP must submit a written request 2024 2024 RRP Application Form herein to the Office of Mineral Resources at 617 N. 3rd St., Lasalle Building, 8th Floor, Baton Rouge, Louisiana 70802 or P.O. Box 2827, Baton Rouge, Louisiana 70821-2827.
  • A lessee will only qualify for the RRP if all leasehold payment obligations are satisfied in a timely manner.
  • For questions, please contact Greg Roberts at 225.342.1080 or greg.roberts@la.gov.

 

2019 through 2023 Royalty Reduction Program Form and Resolutions