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MMS Sells 485,400 MMBtu/d Through Gulf RIK Program

The Minerals Management Service (MMS) said it sold 485,400 MMBtu/d of gas through its Gulf of Mexico royalty-in-kind (RIK) program in a competitive auction. The gas was produced from federal leases in the Gulf and was sold to 13 companies during the spring RIK gas sale that was concluded March 10.

The gas will be delivered to 13 offshore Gulf pipeline systems under seven- and 12-month terms with delivery beginning April 1. Combined with packages sold in an earlier sale last year, MMS will be delivering 625,000 MMBtu of federal royalty gas every day starting April 1.

"The sale was extremely competitive," said MMS Director Johnnie Burton. She said MMS received a total of 126 bids for the 16 individual gas sale packages. "Taking this royalty gas in-kind ensures that the federal government and taxpayers receive a fair market value for this critical energy resource."

Companies awarded sales packages included large integrated producers, marketing companies, affiliates of local distribution companies/utilities, and an industrial end-user, according to MMS.

This latest sale is part of the MMS' new five-year RIK program started last summer. Citing revenue increases of 1-3% more than cash royalties, Interior Secretary Gale Norton announced an expansion of the program last year, calling for the agency to accept and remarket about 1.3 Bcf/d of its natural gas royalties by 2009. She said the five-year business plan would increase government revenues and decrease administrative costs associated with managing royalties. MMS has a goal of bringing in $50 million in net revenue from RIK through 2009.

The plan was the culmination of six years of pilot testing and validation of the approach. MMS found that taking gas in kind rather than in cash achieved business efficiencies, diminished conflict with oil and gas producers and achieved revenue increases comparable to what would have been received had it taken the royalties in cash.

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