Patrick CrowInterior Sec. Bruce Babbitt has further soured his relations with the oil industry with his brash statements at a budget briefing.
Oil-state legislators have blocked the Minerals Management Service from issuing its controversial oil royalty rule until June 1, in an attempt to force more MMS-industry negotiations (OGJ, Nov. 9, 1998, p. 36; Aug. 10, 1998, p. 26).
But Interior's recent fiscal 2000 budget assumes MMS will issue the rule then, and Babbitt recently said Interior is not inclined to negotiate futher with industry. He also accused oil companies of royalty "evasion and cooking the books."
His attitude was no surprise. It's known that Babbitt rejected a Department of Energy suggestion that he relax the rule to help producers through the current depression.
In a public-relations counterattack, Babbitt later announced royalty relief for stripper wells (see story, this page).
ReactionsOil groups responded with unusual anger to Babbitt's remarks.
The American Petroleum Institute said Babbitt was "slamming the door on compromise while engaging in a recklessly worded attack on the industry that is without foundation."
API said it has tried to deal with MMS. "We believe in moving forward to solve the system that we both agree is flawed and badly in need of repair, especially at this time when extraordinarily low crude oil prices are driving some domestic producers into extinction."
The Independent Petroleum Association of America said, "By refusing even to try to work out a fair and equitable solution, Sec. Babbitt disregards the will of Congress."
Sen. Frank Murkowski (R-Alas.) said Babbitt's remarks were "unconscionable" and "symptomatic of the administration attacks on the domestic energy industry.
"The federal government should work to save marginal producers, not put them out of business. Yet that is just what Interior is doing by issuing an unfair royalty rule at a time when producers can least afford it."
RealityBabbitt's intransigence indicates the impasse may continue for the rest of the Clinton administration.
If so, Congress is likely to continue blocking the rule through the appropriations process.
Interior would need new negotiators if talks resume. Bob Armstrong, assistant secretary for land and minerals, has resigned, and MMS Director Cynthia Quarterman will be leaving soon.
Murkowski, Senate energy committee chairman, reportedly has warned Interior that he will not hold confirmation hearings for Armstrong's successor until there is movement on the royalty rule. Quarterman's successor would not be subject to Senate confirmation.
An industry lobbyist said, "The irony is that Babbitt appears to be still under the impression that the industry wants to cling to the old method of valuing royalties based on posted prices.
"Actually, he's already won 80-90% of that issue. Industry doesn't want to continue to use posted prices. How can you account for the fact that Babbitt doesn't seem to realize that? It's pretty amazing."
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