Rep. William M. “Mac” Thornberry (R-TX) introduced legislationWednesday aimed at “completely overhauling the current system” usedby the federal government to collect royalties on oil and naturalgas production.

The bill calls for a royalty in-kind (RIK) program to be put inplace so that producers can sell a “portion” of their production tothe federal government in lieu of cash royalties, according topress aide Lou Zickar. The Interior Department “would then turnaround and hire a marketing agent to sell [the production] to thehighest bidder.” It would replace the current royalty-collectionsystem, which critics have termed unwieldy, that requires producersto pay royalties in dollars based on the estimated market value ofoil and gas produced from leases.

As a member of the House Resources Committee on Energy andMineral Resources, Thornberry has been interested in the RIK optionfor the past two year, Zickar noted. He believes it will “maximizethe revenue to the federal government,” and will eliminate much ofthe “uncertainty” that exists under the current royalty-collectionmethod.

The Independent Petroleum Association of America (IPAA) hailedThornberry’s proposal. “Revamping the U.S. royalty-collectionsystem is long overdue and a royalty in-kind program is theanswer,” said IPAA Chairman George Yates, who is president ofHarvey E. Yates. Co. of Roswell, NM. “Not only would the governmentbe sure it was receiving…its due; it would also mean a smallerand more efficient government agency.”

IPAA leaders met earlier this week with members of Congress toshow their support for the RIK program. Thornberry is the onlylawmaker so far to sponsor legislation on this issue, according toZickar.

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