House Democratic lawmakers ask MMS to extend comment period for oil valuation proposal

Maureen Lorenzetti
Washington Editor

WASHINGTON, DC, Sept. 11 -- Two Democratic lawmakers Tuesday asked Sec. of the Interior Gale Norton to extend the comment period on a proposal to amend controversial oil valuation rules.

The US Minerals Management Service Aug. 20 proposed industry-supported changes to its 2000 oil valuation rule that the agency has characterized as only technical adjustments (OGJ Online, Aug. 22, 2003). MMS hopes to issue a final rule in mid-October, a fairly ambitious timetable by typical Washington, DC, standards.

But Nick Rahall (D-W.Va), ranking member of the House Resources Committee, and Carolyn Maloney (D-NY), Ranking Member of the Subcommittee on Domestic Monetary Policy, Technology, and Economic Growth of the Financial Services Committee say MMS's proposed changes are too extensive and complicated to be reviewed in 30 days.

In a Sept. 9 letter, they told Norton that the MMS plan is far more expansive than a mere technical adjustment. And to prove that point, they want MMS to provide answers to 14 detailed questions that cover a myriad of assumptions the agency used when drafting its proposal.

The lawmakers want the agency to respond by Monday, unless MMS decides to extend the comment period.

"We find it difficult to ascertain precisely what data MMS used to justify these changes, therefore, we request that you provide additional information as well as the answers to these questions," the two congressman wrote.

MMS said it is reviewing the lawmakers concerns and will make a decision soon on whether to extend the comment period.

"We are in receipt of the letter(s). We appreciate all comments on the proposed rule. We are considering the requests for an extension of the comment period, and will be making a decision shortly. All comments received will be placed into the administrative record and considered as we move forward with this rule," an MMS spokesperson said.

Lawmakers showed concern over industry-supported MMS proposals to revise transportation costs, rates of return on oil pipeline investment and crude benchmarking. The two legislators, frequent critics of the administration of President George W. Bush's public land policies, lambasted MMS for what they see as inconsistencies between the proposed rulemaking and the agency's administrative record. In the letter, they asked Norton to explain the extent litigation is motivating MMS's proposed rule. Industry sued the agency over its 2000 rules and the lawsuit is still pending.

Financial impacts
The letter also said the financial impacts of revising the rule on the federal government and states appear unclear.

"MMS lists a broad range of financial impacts to the federal government and to the states. For several issues, this impact ranges the negative to the positive, a sign of uncertainty in the estimated impacts. While we understand the ambiguous nature of royalty oil that may be diverted to the [Strategic Petroleum Reserve], other factors that add to this uncertainty are troubling."

Rahall and Maloney said MMS makes broad assumptions on the amount of oil that is not sold at arm's length even thought MMS's newly revised 2014 form asks lessees to report whether sales are or not at arm's length.

They also wanted MMS to explain its reasons for supporting most of industry's requests to expanding deductible transportation costs

MMS gathered comments from industry, state groups, and other stakeholders this spring on its 2000 oil valuation rule. That information was then used by MMS when it decided to propose what it considers to be technical revisions to the way the government values oil sold between two related parties. The 2000 regulations moved away from an outdated posted price system to one in which the agency calls on lease holders to use published spot prices at benchmarked market centers.

Contact Maureen Lorenzetti at [email protected].