The Minerals Management Service is seeking Gulf of Mexico gas producer; to volunteer to participate in a royalty gas marketing pilot project.
Tom Fry, MMS director, said, "This project will test whether we can simplify federal royalty management procedures and achieve cost savings for MMS, the gas industry, and American taxpayers."
During the project, MMS will take gas in kind, rather than royalty payments, from volunteering producers. MMS will sell the gas to competitively chosen marketing policies.
Fry said, "We hope this new pilot will demonstrate that we can save accounting and administration time and money for MMS and the gas producing industry."
Unlike MMS' oil royalty in kind program, which is designed to assure an adequate supply of oil to small marketers and refiners, the royalty gas marketing effort will test a new approach to collecting federal revenue.
The project, which applies only to Gulf of Mexico leases, will run for 1 year beginning next January.
MMS will take the gas at the lease or at a centralized gathering point. Gas produced from leases subject to Section 8(g) of the OCS Lands Act will be excluded. After 1 year, MMS will examine the project to assess the revenue effect and determine if there are significant savings in reporting, valuing, tracking, and auditing.
MMS said the project should significantly reduce administrative costs for MMS and industry and simplify royalty collections and reporting.
"For example," Fry said, "the simplified procedure would eliminate payor reports associated with gas valuation and allowances for transportation and processing. Audits also will be simplified."
MMS pointed out that Texas and Alaska currently collect gas royalties in kind. The Texas program prompted MMS to design its pilot project.
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