MMS announces latest royalty in-kind contracts

The US Minerals Management Service will receive more than 3.7 million bbl of oil as royalties in-kind under contracts awarded to four US producers, the Department of the Interior agency said.

Nick Snow
Washington Correspondent

WASHINGTON, DC, June 8 -- The US Minerals Management Service will receive more than 3.7 million bbl of oil as royalties in-kind under contracts awarded to four US producers, the Department of the Interior agency said.

Chevron Products Co., Shell Trading Co., ExxonMobil Oil Corp. and Marathon Petroleum Co. submitted the winning bids. They will supply some 3,726,000 bbl over 9 months, or 13,800 b/d, beginning July 1, MMS said.

The RIK program currently is under fire in Congress. Section 201 of HR 2337 would limit such royalties to purchases for the Strategic Petroleum Reserve. The bill went through markup by the House Natural Resources Committee this week and is scheduled to come to a final vote on June 13.

MMS said taking royalties in-kind allows it to generate more revenue by reselling it on the open market. The program also reduces regulatory costs and reporting costs and shortens the compliance cycle, MMS said.

In a June 5 letter to Natural Resources Committee Chairman Nick J. Rahall (D-W.Va.), Deputy US Sec. of the Interior P. Lynn Scarlet said the RIK program has generated $28.8 million in additional federal revenue. It also reduced administrative costs by 30% from royalty in-value activities, saving another $2.3 million, she said.

The bill's provision also would eliminate partnerships MMS has with several states regarding royalties in-kind and end a program under which RIK crude is used to help supply small refiners, Scarlet said.

Contact Nick Snow at nsnow@cox.net.

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