By the OGJ Online Staff
WASHINGTON, DC, Mar. 15�The US Minerals Management Service said Wednesday that its Wyoming royalty in-kind pilot program has demonstrated that taking oil production in-kind can be a viable alternative to the traditional method of taking royalties in-value.
MMS has been conducting pilot RIK projects, onshore and off, to test the circumstances under which taking oil and gas royalties in-kind, rather than in value, makes sense. The Wyoming oil RIK pilot, conducted in partnership with the state, began in the fall of 1998.
Tom Kitsos, acting MMS director, said, "This pilot program has provided the MMS with invaluable experience in operating any future RIK activities. While the Wyoming oil market is complex, the MMS and the state have demonstrated that they can initiate and operate an ongoing RIK program."
MMS said the pilot project showed RIK reduces administrative burdens for both lessees and the agency, and it provides greater certainty because it avoids valuation disputes.
But MMS said RIK does not work in every situation. It stopped offering trucked oil production from leases because of the lack of competitive bids and purchaser interest.
The MMS and the state took and sold in-kind 25-30% of the royalty barrels produced in Wyoming during an 18-month period. They sold 1.643 million bbl of federal and state oil for $27.66 million.
The MMS has published a draft report on the test and is seeking public comment by Apr. 27, after which it will make final conclusions.