The Department of the Interior’s Mineral Management Serviceannounced plans yesterday to begin selling royalty gas productioncollected in its offshore Texas royalty in-kind (RIK) pilotprogram. The two-year joint initiative between the MMS and theTexas General Land Office will use an auction process that willtake place during the regular bidweek period each month, withdeliveries starting in June.

MMS’ Greg Smith said he expects about 20 MMcf/d to be offeredinitially from a few 8(g) leases. “There’s 52 leases in the 8(g). Idoubt that we’ll take all 52 in-kind, but it’s possible,” saidSmith. “I think if we did there’s something on the order of over 70MMcf/d. I doubt we’ll get that big. We’d have to ramp up. It alldepends on how the economics look and how the procedures areworking.”

Potential bidders will be notified at the beginning of bidweekand will be given a couple days to place a bid. The gas to be soldwill be delivered to major Texas market points, pipelineinterconnections, hubs and gas plants from platforms offshoreTexas, on which Texas and the federal government collect royalties.

Any party interested in participating must submit an applicationby May 7 and be prequalified by the MMS. Contract periods and thesize of the packages to be auctioned will be specified in eachnotification of sale. Contract periods may be one month, sixmonths, one year or two years.

This pilot will be small in comparison to the OCS RIK pilotcovering federal leases in the Gulf that is scheduled to begin inOctober, Smith added. Although the number of leases that will beincluded in the larger pilot has not been determined, Smith saidthe production quantities will be in the “hundreds of millions ofcubic feet per day.”

For additional details see MMS’ web site www.mms.gov or contactGreg Smith at (303) 275-7102.

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