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MMS Plans to Begin Selling Royalty Gas in May

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 working."

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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