[Federal Register Volume 63, Number 23 (Wednesday, February 4, 1998)]
[Notices]
[Page 5815]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-2706]


-----------------------------------------------------------------------

DEPARTMENT OF THE INTERIOR

Minerals Management Service


Announcement of Minerals Management Service Public Meeting on Oil 
Royalty-In-Kind Pilot Program in Wyoming

AGENCY: Minerals Management Service, Interior.

ACTION: Notice of public meeting.

-----------------------------------------------------------------------

SUMMARY: The Minerals Management Service (MMS) will hold a one-day 
public meeting to discuss issues involved in developing and 
implementing a royalty-in-kind (RIK) pilot program for crude oil 
produced from Federal leases in Wyoming. The meeting will be open to 
the public without advance registration.

DATES: The meeting will be held on February 24, 1998, from 9:00 a.m. 
until 4:00 p.m., Mountain time.

ADDRESSES: The meeting will be held at the Hilton Inn Casper, 800 North 
Poplar Road, Casper, Wyoming 82601, telephone (307) 266-6000.

FOR FURTHER INFORMATION CONTACT:
Mr. Bonn J. Macy, Minerals Management Service, 1849 C Street, NW, MS 
4230, Washington, D.C. 20240-000; telephone number (202) 208-3827; fax 
(202) 208-3918; e-mail Bonn.M[email protected].

COMMENTS: Written comments on the meetings or the issues discussed 
below should be addressed to Mr. Bonn J. Macy at the address given in 
the FURTHER INFORMATION section above.

SUPPLEMENTARY INFORMATION: MMS is developing three RIK pilot programs 
based on the recommendations in our 1997 RIK Feasibility Study, 
including an onshore crude oil RIK pilot in the State of Wyoming, an 
offshore natural gas RIK pilot in the 8(g) waters off the State of 
Texas, and an offshore Gulf of Mexico natural gas RIK pilot. The 
subject of this notice is MMS's planning process for the oil RIK pilot 
in Wyoming. The objective of the Wyoming crude oil pilot program, as 
with all three pilots, is to test the effectiveness of the RIK concept 
for collecting Federal oil and gas royalties. MMS seeks to produce an 
RIK structure that reduces the administrative burden of royalty 
collection for both industry and government without creating a negative 
impact on Federal royalty revenue.

    MMS, in collaboration with the State of Wyoming, intends to develop 
and implement a pilot program to take Federal crude oil royalties from 
Federal leases within the boundaries of the State of Wyoming as a share 
of production (i.e., ``in-kind''). MMS intends to sell in the oil 
markets the production it receives in the pilot. MMS is currently 
planning to begin the pilot on October 1, 1998. The duration of the 
pilot program will be at least 2 years. Federal lessees in Wyoming will 
be directed to deliver royalty volumes in-kind for leases and 
associated communitization/unit agreements MMS selects to be involved 
in the pilot program. For all other leases or agreements, payors will 
continue paying royalties based on current requirements.
    The MMS implementation team is currently studying production and 
marketing issues relevant to Wyoming crude oil. Based on this study and 
our previous work on the RIK concept, we will shortly develop a few 
specific RIK models for possible implementation. MMS believes that 
timely public comment and input on the issues in Wyoming are critical 
to the development of a successful pilot that realizes the full 
potential of the RIK concept. We therefore strongly encourage the 
public to participate in the February 24 public meeting in Casper, 
Wyoming and comment both on material discussed at the public meeting 
and the content of this Notice.
    The MMS implementation team seeks to assess, through the design of 
the pilot, the impacts of a number of different lease variables such as 
gravity, sulfur content, transportation method, royalty rate level, and 
lease productivity. The team also intends to test the effectiveness of 
different strategies for RIK production. MMS seeks to quantitatively 
isolate the effects of these variables on Federal revenues realized and 
administrative burden.
    Written public comment on MMS's implementation of a crude oil RIK 
pilot in Wyoming should be sent to the contact name and address given 
in the FURTHER INFORMATION section. Written statements submitted to MMS 
will become part of the meeting record and can be read, by request, at 
the Casper, Wyoming, public meeting.
    In addition to general comments on the implementation of a crude 
oil RIK pilot in Wyoming, MMS specifically requests comments on the 
following issues and questions:
    1. Through the pilot, we plan to isolate and assess the effects of 
the lease variables such as gravity, sulfur, transportation method, 
royalty rate level, and lease productivity. Are there additional 
variables we should study?
    2. Are there any circumstances that would mitigate against a 
starting date of October 1, 1998?
    3. How much advance notice would lessees require before MMS takes 
royalties in-kind?
    4. Should we set a minimum volume threshold for leases below which 
the RIK approach is not advisable?
    5. Should we set a royalty rate threshold below which the RIK 
approach is not advisable?
    6. Are there are special considerations when including large 
communitization and unit agreements in an RIK program?
    7. Are there any special considerations for leases with trucked 
crude?
    8. To compare RIK pilot performance, should we continue to audit 
the producers' shares or use receipts from leases that pay royalties on 
value that are located in the same geographic areas as pilot RIK 
leases?
    9. How should MMS address imbalances with operators? Is it a 
potential problem?
    10. What are the relevant valuation benchmarks (i.e., spot prices, 
indices, other?) that could provide MMS with a reasonable measure of 
Wyoming oil RIK pilot revenue performance?
    11. What should be the duration of a sales contract for marketing 
Federal RIK oil?
    12. What would be the minimum advisable volume for an RIK oil sales 
contract?
    At the public meeting, MMS may present its plans for the Wyoming 
oil RIK pilot program as a draft ``work-in-progress.'' One or more 
potential models for RIK may be offered for public discussion and 
comment as to their feasibility and effectiveness. MMS urges the public 
to participate in these important discussions.

    Dated: January 29, 1998.
Walter D. Cruickshank,
Associate Director, for Policy and Management Improvement.
[FR Doc. 98-2706 Filed 2-3-98; 8:45 am]
BILLING CODE 4310-MR-M