Barbara Cubin: “I am the chairman of the authorizing subcommittee with jurisdiction over the Minerals Management Service. MMS is the…”

“I am the chairman of the authorizing subcommittee with jurisdiction over the Minerals Management Service. MMS is the agency charged with collecting royalties from mineral lessees of the federal government. Usually, the producer pays one-eighth of the value of the oil and natural gas from the wells on the lease to MMS to satisfy their royalty obligation, but the Secretary of the Interior is able to take royalty production in kind rather than in value, if he so chooses. MMS has been conducting ``R-I-K pilot programs'' over the last several years, first for oil from leases in Wyoming and later for natural gas off the coast of Texas. Indeed, Mr. Chairman, the MMS has reported to me that royalty natural gas taken in-kind from the Gulf of Mexico has been sold to the General Services Administration for heating federal buildings, including this very Capitol building last winter. MMS is seeking to expand the scope of its natural gas R-I-K program to learn how best to add value for the taxpayer by aggregating significant volumes of gas from many leases throughout the Gulf and marketing those volumes to the highest bidders. This is known as ``market uplift'' and it is a source of added value for the government. Why? Because when lessees pay their royalty in value it is based upon the wellhead value of the oil or gas, not the greater value one can receive from transporting product and aggressively marketing one's crude oil or natural gas downstream of the lease.”