Starting December off with a bang, the Minerals Management Service (MMS) announced last week that Western Gulf of Mexico Oil and Gas Lease Sale 204 was a success with accepted high bids valued at more than $287 million. The government agency also released fiscal year 2007 (FY2007) revenue collection and disbursement amounts.

In Lease Sale 204, the MMS awarded 274 leases. The MMS said funds from the total high bids will be distributed to the general fund of the U.S. Treasury, shared with the affected states, and set aside for special uses that benefit all 50 states. The leases were awarded following the completion of an extensive, two-phase bid evaluation process to ensure that the federal government receives a fair monetary return for the public mineral resources it makes available.

Held on August 22, the lease sale received bids on a total of 282 tracts in the Western Gulf of Mexico. Forty-seven companies submitted 358 bids with a total for high bids on all 282 tracts of nearly $290 million. MMS rejected high bids totaling more than $2.8 million on eight tracts as insufficient for fair market value.

The highest individual bid accepted on a tract was $37.59 million made by Statoil Gulf of Mexico LLC for Alaminos Canyon Block 810. This tract is in deep water (more than 2,000m) and received two bids.

BP Exploration & Production Inc. placed the most high bids at 88, for a total of more than $29.7 million. Statoil Gulf of Mexico LLC had the second largest number of accepted bids at 35, but was the biggest spender at $138.5 million. Petrobras America Inc. won 33 bids for more than $28.8 million and Devon Energy Production Co. LP won 26 bids for more than $20 million. Rounding out the top five bidders was ConocoPhillips with 24 accepted bids for more than $12.3 million.

Also last week, the MMS announced that it had collected and disbursed more than $11.4 billion for FY2007 (ended Sept. 30), which was actually a decrease of approximately $1.2 billion from the more than $12.6 billion collected during FY2006. The revenues come from energy production on federal and American Indian lands and the Outer Continental Shelf (OCS). The tally for FY2007 included a record $4.4 billion in oil royalty revenue, surpassing the $3.9 billion received the previous fiscal year. Natural gas royalties were $4.6 billion, while bonus revenues were $900 million and annual rental revenues were $267 million.

The MMS said preliminary analysis indicates several factors contributed to the change, including:

MMS noted that while the overall level of crude oil market prices has increased dramatically in recent months, that increase did not start until late September 2007, and did not have a significant affect on crude oil royalty revenues in FY2007.

The MMS said that 34 states earned more than a combined $1.9 billion during FY2007 as part of their share of federal revenues collected.

"These revenues from mineral production on federal lands play a crucial role in many state budgets," said Randall Luthi, MMS director. "The funds support everything from education to infrastructure improvements and capital projects."

Due to the lower natural gas prices and the drop in lease sale bonuses the states received $1.97 billion, which was less than the $2.2 billion paid to the states in FY2006.

During FY2007, Wyoming led all states by receiving more than $925 million as its share of revenues collected from mineral production on federal lands within its borders, including oil, gas and coal production. New Mexico's share was good for second at nearly $553 million, while the state of Utah in third received more than $135 million. Other energy-producing states sharing significant revenues included Colorado with more than $122 million; California with more than $61 million; Montana with $39.1 million; Louisiana at $24 million; Alaska at $21.7 million; and Texas, which received approximately $21.6 million. The full list is available at www.mms.gov.

The disbursements represent the states' cumulative share of revenues collected from mineral production on federal lands located within their borders, and from federal offshore oil and gas tracts adjacent to their shores. For the majority of onshore federal lands, states receive 50% of the revenues while the other 50% goes to various funds of the U.S. Treasury, including the Reclamation Fund for water projects. Alaska receives a 90% share as prescribed by the Alaska Statehood Act. States may also receive matching appropriations from the offshore oil and gas royalty-funded Land and Water Conservation Fund, the Reclamation Fund, and other special-use funds.

FY2007 also marks the first full year that MMS distributed funds from geothermal energy production directly to the individual counties where that production occurs. Luthi noted that the Energy Policy Act of 2005 mandated that 25% of receipts from geothermal energy production be disbursed directly to counties where that production occurs, in an effort to increase use of that alternative energy resource. As part of that mandate, and included in the $1.9 billion distributed overall, MMS distributed more than $4.3 million to 32 counties in the states of California, Idaho, New Mexico, Nevada, Oregon and Utah.

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