US Minerals Management Service Director Walt Rosenbusch faces an oil royalty rule controversy that, in many ways, is beyond his control.
Last week, reporters questioned Rosenbusch, who took office 6 months ago, about the rule at a press conference, but restrictions in the Administrative Procedures Act limited him to very general replies.
The oil industry and MMS have been at odds for more than 3 years over the frequently revised rule. Industry wants a simple rule that values oil production at the lease. MMS says lease prices don't reflect the true value of the crude, which is determined downstream.
The issue is stalemated, and oil-state congressional representatives have attached moratoriums to Department of the Interior spending bills to ensure that MMS does not issue the rule as proposed.
Rosenbusch would not comment on the extent of MMS's differences with producers, observing that the oil "industry is not monolithic" in its attitude toward the rule, and "not all issues are of equal importance" to all companies.
Can a compromise be struck? Rosenbusch replied he is an optimistic person, "And I'd like to believe there's a way to resolve all these issues."
He said the royalty rule controversy needs to be ended. "It's not positive for industry. It's not positive for MMS."
Other issues
Rosenbusch said, somewhat surprisingly, that MMS had no plans to revive its gas valuation rule. Industry had expected a gas rule to follow the oil royalty rule.
He said in early November that MMS will resume what have been "positive negotiations" with Mexico over ownership of some acreage in the Gulf of Mexico (OGJ, Apr. 13, 1998, Newsletter). He added that the two nations appear "very close to a conceptual agreement."
Rosenbusch indicated that MMS may oppose an extension of the successful 1995 Deepwater Royalty Relief Act when it expires in November 2000. The law allows companies reduced royalties on development of expensive deepwater tracts and has spurred an exploration boom in the deep Gulf.
He said MMS is discussing the extension and potential changes with industry. But he added that relatively few deepwater leases remain to be leased, and, "We believe it essentially has done what it was expected to do."
Moratorium
Meanwhile, to the disappointment of oil lobbyists, House-Senate conferees have decided to halve the 1-year moratorium against the royalty rule. The 1-year delay was in the Senate version of the Interior appropriations bill.
The conference committee voted to continue the moratorium until the General Accounting Office can report to Congress on the royalty dispute, or for 6 months, whichever comes first.
The American Petroleum Institute responded, "We hope this process will lead to the issuance of a new regulatory proposal and to improvements in the royalty collection system.
It said, "The proposed rule, and the government's strained interpretation of the one currently in force, violates the lease contracts signed by oil producers and the government.
API said MMS should recognize that existing law requires royalties to be based solely on the value of production at the lease.
