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Royalty regulation

Royalty rule

For the fourth time, the US Minerals Management Service plans to revise its controversial rule for valuing oil produced from federal leases. For the past 3 years, MMS and producers have disputed the royalty rule revamp, which would base most royalty values on spot prices for crude. Congress, after bitter debate, recently voted to continue until Mar. 15 a moratorium that has blocked MMS from issuing the rule (OGJ, Oct. 18, 1999, p. 34). MS Director Walt Rosenbusch explained that reissuing the rule will allow all interested parties to comment on the current direction of the regulation, and "provide a forum for discussing several important issues that were raised during the most recent workshops."

Next action: MMS will hold workshops in late January to discuss the revised rule with interested parties. It plans to revise and reissue the regulation in mid-January, examine comments on the changes, and then issue a final rule shortly after Mar. 15. The rule probably would take effect 60 days later.

BP Amoco and ARCO

The US Federal Trade Commission staff reportedly has decided BP Amoco Plc's planned $38 billion acquisition of Atlantic Richfield Co. may result in higher West Coast gasoline prices if divestitures aren't required there. BP Amoco said FTC's recent approval of the Exxon Corp. and Mobil Corp. merger should help move its case. It said FTC can now focus on its deal and the required sale of Exxon's Benicia, Calif., refinery will lower industry concentration in California and improve chances for its purchase of ARCO.

Next action: BP Amoco is urging FTC to approve its acquisition of ARCO by the company's Dec. 31 goal.

Myanmar sanctions

The US Supreme Court has agreed to hear an appeal challenging a Massachusetts law disadvantaging companies from doing business with Myanmar (formerly Burma). State legislators, who objected to Myanmar's alleged human rights violations, passed a statute in 1996 adding 10% to bids that the firms submit to state agencies. Trade groups say the state is usurping federal powers granted by the US Constitution.

Next action: The court will hear the case, Natrsios v. National Foreign Trade Council, in the spring.

California leases

US Interior Sec. Bruce Babbitt has ordered that 36 leases off California continue under suspension. Babbitt ordered an environmental analysis of the impact of oil drilling off the central California coast and said the leases will continue to be suspended until that review is finished and California state agencies can file comments about it with the Interior Department.

Next action: Babbitt's decision is expected to continue the suspension of the leases for more than a year.

Gas pipeline tariffs

Gas producer associations have asked the Federal Energy Regulatory Commission to hold a forum to seek a mechanism to ensure that gas pipeline tariffs are kept current. The Pipeline Transportation Customer Coalition, representing the producers, filed comments in response to a FERC review of interstate gas transportation services. But the Interstate Natural Gas Association of America, which represents interstate gas pipelines, said pipeline rates are reasonably current. It examined the rates of 25 pipelines and found that each has filed at least one rate case or settlement in recent years.

Next action: FERC is considering the comments.

Offshore revenues

A House Resources Committee compromise has rescued legislation that would earmark most federal offshore oil revenues for conservation programs. Chairman Don Young (R-Alas.) and Rep. George Miller (D-Calif.), the ranking Democrat on the panel, struck the deal. The bill earmarks $3.025 billion of the $4 billion/year from offshore leasing and production. Coastal states would get $1 billion/year to "mitigate the various impacts of OCS activities" and finance coastal ecosystem conservation programs. The federal Land and Water Conservation Fund would get $900 million/year. Other urban park, historic preservation, endangered species, and wildlife refuge programs would get the rest (OGJ, May 24, 1999, p. 45).

Next action: The full House of Representatives will consider the bill in early 2000. Similar legislation is stalled in the Senate.

Utility lawsuit

The US Environmental Protection Agency has sued seven utilities, claiming that 17 of their power plants have unnecessarily polluted air on the Eastern Seaboard. It also ordered the Tennessee Valley Authority, a federal agency, to improve operations at seven of its plants. The suit alleges the utilities failed to install the "best available control technology," as mandated by the Clean Air Act, when they made major modifications to their plants in recent years. It said that resulted in the illegal release of tens of millions of tons of sulfur dioxide, nitrogen oxides, and particulate matter.

Next action: EPA is investigating emissions at eight other power plants, and reportedly was considering similar lawsuits against some of the 130 US oil refineries.

Oil, gas firms Y2K ready

The US oil and gas industry is confident of normal operations on Jan. 1, following its final survey of companies' Year 2000 computer readiness. The American Petroleum Institute and the Natural Gas Council said that 93% of the companies they surveyed have completed testing their computer systems to assure they will work Jan. 1. The companies represent 96% of US oil and gas demand. All said they would be Y2K ready by Dec. 31.

Next action: The associations said gasoline retailers will have extra supplies available to meet any increased demand from consumers concerned about shortages.

Olympic pipeline spill

State and federal agencies are investigating an Olympic Pipe Line Co. products pipeline rupture June 10 in Bellingham, Wash. The 16-in. pipe spilled about 250,000 gal of gasoline into a city park. It ignited and killed three persons. The National Transportation Safety Board said preliminary indications are that the pipe was damaged when water lines were laid across it in 1993-94. The Transportation Department's Research and Special Programs Administration has ordered a review of all pipeline operations in Washington state. RSPA also ordered Olympic to reduce operating pressure on its system, make some internal inspections, and to test some sections hydrostatically.

Next action: The US Justice Department is investigating the accident for possible criminal misconduct, which is delaying a National Transportation Safety Board inquiry. NTSB expects to issue a report next year. A Washington state task force is due to report on the accident by the end of the year.

Tanker case

The US Supreme Court has agreed to hear lawsuits challenging Washington state's regulations on oil tanker traffic off its coast. The Justice Department and tanker companies argue that only the federal government has the legal authority to regulate offshore shipping. The cases are US vs. Locke and International Association of Independent Tanker Owners vs. Locke.

Next action: The court is due to hear oral arguments in December and issue an opinion by June.

Electricity restructuring

The House Commerce Committee's energy and power subcommittee has reported out a bill opening the retail electricity market to competition. So far, 24 states have opened their retail markets to customer choice. Proponents of the bill competition and reliability in the national power grid cannot be achieved without federal deregulation legislation. Meanwhile, Sen. Frank Murkowski (R-Alas.), Senate Energy and Natural Resources Committee chairman, said his panel wouldn't move legislation until early 2000.

Next action: The House bill goes to the full Commerce Committee in early 2000, but approval there is doubtful.

California RFG

The House Commerce Committee's health and environment subcommittee has approved a bill allowing California a waiver on the use of methyl tertiary butyl ether in gasoline. The bill would allow California to phase out MTBE, if the replacement gasoline met the Clean Air Act's required toxic emissions reductions and achieved the same cuts in auto emissions.

Next action: The issue now moves to the full House Commerce Committee. Eventual passage by the House is doubtful, given the opposition of agriculture and alcohol fuels interests.

Dumping appeal

Save Domestic Oil Inc., a group of independent US producers, has appealed a Commerce Department decision to dismiss their anti-dumping petition. The appeal to the US Court of International Trade, in New York City, alleges Saudi Arabia, Mexico, Venezuela, and Iraq sold crude in the US at unreasonably low prices. The American Petroleum Institute opposes the appeal. Commerce ruled last August that the SDO petition failed to meet the legal threshold of adequate industry support, and thus the department did not consider the merits of the case (OGJ, Aug. 16, 1999, p. 31).

Next action: The court was considering briefs.

Import investigation

The US Commerce Department is studying whether rising crude and product imports are affecting national security. If it determines that they are, the Clinton Administration could take corrective actions under Sec. 232 of the Trade Expansion Act. The study must be completed by Jan. 29, 2000. A similar study in 1994, when petroleum import levels were lower, concluded imports did threaten national security, but the Clinton administration determined no special actions were needed.

Next action: Commerce has forwarded its recommendations to the White House for review. An announcement could come at any time.

Sulfur rule

The US Environmental Protection Agency plans to give small refiners more time to meet its proposed rule limiting gasoline sulfur levels. The measure would slash the sulfur content of gasoline from the current average of 330 ppm to 30 ppm between 2004 and 2006. The American Petroleum Institute said the rule would add 5

Next action: EPA plans to issue a final rule by Dec. 31.

Smog-soot rule

A federal appeals court has overturned the US Environmental Protection smog and soot standards. In a 2-1 opinion, the District of Columbia Court of Appeals said EPA overstepped its authority in drafting the rule 2 years ago because it failed to show public health concerns justified the tougher rule. The court also said EPA had assumed that Congress had given it powers that the justices said Congress could not delegate under the US constitution (OGJ, May 24, 1999, p. 39).

Next action: EPA will appeal the court's decision to the US Supreme Court.

SPR refill

The US Department of Energy was refilling the Strategic Petroleum Reserve with 13.2 million bbl of Central Gulf of Mexico federal royalty oil. DOE plans to replenish 28 million bbl that were sold in 1996 and 1997 for budgetary reasons. The four SPR sites in Louisiana and Texas have capacity for 680 million bbl and held 561 million bbl before the refill program began (OGJ, Apr. 12, 1999, p. 37).

Next action: More solicitations will be sought.

Lease operating standards

The US Bureau of Land Management has proposed a rule to reduce overlap in current oil and gas regulations and give operators increased flexibility in meeting agency requirements. The rule would allow operators to meet published industry standards rather than BLM requirements. In some cases it would allow operators to meet performance standards that would replace prescriptive rules. The rule would increase individual lease bonds from $10,000 to $20,000, and statewide bonds from $25,000 to $75,000. Nationwide bonds would remain at $150,000 (OGJ, Dec. 14, 1998, p. 28).

Next action: The rule has met some industry opposition and is pending.

Global warming

The US signed the Kyoto global warming treaty Nov. 13, 1998, as the representatives of 160 nations concluded a second round of negotiations in Buenos Aires. The Kyoto pact calls for the US to cut its emissions 7% below 1990 levels by the year 2012. At the Buenos Aires meeting, the parties agreed to a late 2000 deadline for resolving issues remaining from the meeting in Kyoto. Also, they plan to draft rules for enforcing the Kyoto pact, including penalties for noncompliance (OGJ, Nov. 16, 1998, p. 42).

Next action: The Clinton Administration does not plan to submit the treaty to the US Senate for ratification until developing nations make commitments to cut their emissions.


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