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Federal Government Takes in $18M of Additional Revenue from RIK Sales in Fiscal 2004

The sales of royalty oil and natural gas through the Minerals Management Service's royalty-in-kind (RIK) program produced more than $18 million in additional revenue for the U.S. Treasury in fiscal year 2004, the Interior Department said last week.

An agency report revealed that on top of revenue gains of $17.2 million in natural gas and oil sales, an additional gain of nearly $900,000 was achieved through incremental interest earned on revenues received five to 10 days earlier than under the traditional method of paying royalties in-value, or in cash. Copies of the report are available at http://www.mrm.mms.gov.

With respect to its RIK gas sales, Interior's MMS reported that 13 of the 15 portfolios demonstrated revenue gain, while all of the four oil sales conducted in 2004 showed revenue gains.

"The returns are generally consistent with past reviews that showed MMS is achieving revenue increases of generally one to three percent more than would have been received through royalty-in-value receipts. MMS is exploring additional opportunities to build off the successes achieved in fiscal year 2004, including the potential for a modest program expansion," the agency said.

Traditionally MMS has collected royalties from energy production on federal lands and offshore waters "in-value," or as cash payments. But in the mid-1990s, it began exploring the potential to take its royalties "in-kind," or as product, and competitively selling the commodity on the open market. Producers now have the option to pay their royalties in-value or in-kind.

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