Section 203.85 - What is in an economic viability and relief justification report?This report should show that your project appears economic without royalties and sunk costs using the RSVP model we provide. The format of the report and the assumptions and parameters we specify are found in the "Guidelines for the Application, Review, Approval and Administration of the Deep Water Royalty Relief Program," U.S. Department of the Interior, BSEE. Clearly justify each parameter you set in every scenario you specify in the RSVP. You may provide supplemental information, including your own model and results. The economic viability and relief justification report must contain the following items for an oil and gas lease.
(a) Economic assumptions we provide which include:(1) Starting oil and gas prices;(3) Real cost growth or decline rate, if any;(5) Range of discount rates; and(6) Tax rate (for use in determining after-tax sunk costs).(b) Analysis of projected cash flow (from the date of the application using annual totals and constant dollar values) which shows:(1) Oil and gas production;(3) Capital expenditures;(5) Transportation costs; and(6) Before-tax net cash flow without royalties, overrides, sunk costs, and ineligible costs.(c) Discounted values which include: (1) Discount rate used (selected from within the range we specify).(2) Before-tax net present value without royalties, overrides, sunk costs, and ineligible costs.(d) Demonstrations that:(1) All costs, gross production, and scheduling are consistent with the data in the G&G, engineering, production, and cost reports (§§ 203.86 through 203.89 ) and(2) The development and production scenarios provided in the various reports are consistent with each other and with the proposed development system. You can use up to three scenarios (conservative, most likely, and optimistic), but you must link each to a specific range on the distribution of resources from the RSVP Resource Module.