Interior Department Hits Back at Congressional Actions on Oil Royalty System
The Interior Department is pushing back against two congressional attempts to alter the federal oil royalty system. A conference committee vote to delay a pending change in the oil royalty system and a bill to shift the system to payments in kind rather than cash have been met with strong resistance from the department. According to Cynthia Quarterman, director of Interior's Minerals Management Service (MMS), the aim was to issue a final rule on a new royalty system within a month, but this is now hindered by the congressional actions.
Key Takeaways:
- The conference committee vote to delay a pending change in the federal oil royalty system will cost the federal coffers $5.5 million a month, according to the Interior Department.
- The delay, until Oct. 1, is feared to be the first of many, according to Cynthia Quarterman, director of Interior's Minerals Management Service (MMS).
- The Minerals Management Service (MMS) has released a review of H.R.3334, a bill to mandate taking royalties in kind for oil and gas, which estimates the bill would cost the government at least $141 million a year and possibly as much as $367 million.
- The agency calculated that it would be forced to absorb at least $182 million in costs currently shouldered by producers.
- Marketing gains would add no more than about $35 million to sales prices.
- The new royalty system aims to avoid posted prices as a benchmark.
Statistics:
- $5.5 million: The estimated monthly cost to the federal coffers due to the delay of the pending change in the oil royalty system.
- $141 million to $367 million: The estimated annual cost to the government of the bill to mandate taking royalties in kind for oil and gas.
- $182 million: The minimum amount of costs that the Minerals Management Service (MMS) would have to absorb if the bill is passed.
- $35 million: The maximum added to sales prices due to marketing gains.
- 1996: The year used as a reference for the estimate of how much in royalties the new system would have generated in contrast to the existing system.
Sources:
- "TOD, 4-30-98, p.4"
- [No additional sources mentioned in the text]