The NewsRoom
Release: #3597
Date: February 20, 2007
RIK Sale in
Wyoming Generates Millions
Revenue Forecast
to Increase $5 Million to $10 Million from Gas Sale
DENVER – A recent
Minerals Management Service (MMS) Royalty in Kind (RIK) gas sale in
Wyoming’s southwest region is expected to generate an additional $5
million to $10 million increase compared to royalties taken as cash
payments. Federal lease terms and statutes allow MMS to take
royalties "in kind" as product, and then sell the product
competitively on the open market, instead of taking the royalties
“in value,” or as cash payments.
The successful sale of 36
billion cubic feet of gas, which is approximately 120,000 MMBtu
(Million British thermal Units) per day, was the first from the
fields in Wyoming’s southwest region, and included enough gas to
supply more than 460,000 homes with their average gas needs for one
year.
“This sale followed months of
intense and comprehensive analysis of the Rocky Mountain gas
markets,” MMS Director Johnnie Burton said. “That analysis prompted
an expansion of the RIK program to accommodate the sale of the
royalty gas produced from Federal leases in Wyoming’s Jonah and
Pinedale fields.”
The RIK program provides
measurable benefits to both the government and the American public
by reducing regulatory costs, improving overall business
efficiencies, shortening the compliance cycle, and increasing
taxpayer returns.
“These RIK sales continue to
generate very high interest,” Director Burton said, “with the
American public reaping the benefits.” She went on to say how MMS
decided to expand the onshore RIK gas sale program, because the
analysis indicated a revenue increase was likely; a forecast proven
to be true by the results of this successful sale.
Wyoming is to receive 50 percent
of the revenues from this sale. The bidding was highly competitive
with 14 companies making offers on the four packages sold. The
winning bidders included Sempra Energy Trading Corp., UBS Energy
LLC, and Oneok Energy Marketing and Trading Co. LP. Delivery of the
gas began in January 2007 and continues through Oct. 31, 2007.
The RIK program has improved
government efficiency by reducing administrative costs by nearly 50
percent compared to managing royalties received in value. This
translated to a cost reduction of approximately $3.74 million for FY
2005 alone.
Begun as a pilot program 10
years ago, the MMS RIK program demonstrates that the government is
able to perform more like a private business and, in doing so,
increase receipts to the American public. In FY 2004, receipts to
the Treasury were increased by $18 million and again increased by
$32 million in FY 2005 through the RIK program, over what would have
been taken in as royalties as cash payments. RIK business operations
have markedly shortened the business cycle on transactions, another
significant achievement for MMS, according to Director Burton.
Relevant Web Site:
MMS Main Website
Media Contacts:
Patrick
Etchart, 303/231-3162
MMS: Securing Ocean Energy & Economic Value for
America
U.S. Department of the Interior
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