MMS Plans to Begin Selling Royalty Gas in May
The Department of the Interior's Mineral Management Service
announced plans yesterday to begin selling royalty gas production
collected in its offshore Texas royalty in-kind (RIK) pilot
program. The two-year joint initiative between the MMS and the
Texas General Land Office will use an auction process that will
take place during the regular bidweek period each month, with
deliveries starting in June.
MMS' Greg Smith said he expects about 20 MMcf/d to be offered
initially from a few 8(g) leases. "There's 52 leases in the 8(g). I
doubt that we'll take all 52 in-kind, but it's possible," said
Smith. "I think if we did there's something on the order of over 70
MMcf/d. I doubt we'll get that big. We'd have to ramp up. It all
depends on how the economics look and how the procedures are
Potential bidders will be notified at the beginning of bidweek
and will be given a couple days to place a bid. The gas to be sold
will be delivered to major Texas market points, pipeline
interconnections, hubs and gas plants from platforms offshore
Texas, on which Texas and the federal government collect royalties.
Any party interested in participating must submit an application
by May 7 and be prequalified by the MMS. Contract periods and the
size of the packages to be auctioned will be specified in each
notification of sale. Contract periods may be one month, six
months, one year or two years.
This pilot will be small in comparison to the OCS RIK pilot
covering federal leases in the Gulf that is scheduled to begin in
October, Smith added. Although the number of leases that will be
included in the larger pilot has not been determined, Smith said
the production quantities will be in the "hundreds of millions of
cubic feet per day."
For additional details see MMS' web site www.mms.gov or contact
Greg Smith at (303) 275-7102.
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