As the Democratic-controlled Congress seeks to significantly restrict the royalty-in-kind (RIK) program or do away with it altogether, the Interior Department’s Minerals Management Service (MMS) said in a report to Congress that the program continues to outperform all of the objectives that the agency has set for it.

The report, which was sent to Capitol Hill last Wednesday, “demonstrates that the RIK program’s performance continues to outpace the program’s goals,” said acting MMS Director Walter Cruickshank. The RIK program, now in its third year of full operation, permits the MMS to take royalties “in kind” in the form of production (oil or gas), and competitively sell the product in the open market.

In 2006, Cruickshank reported that the program generated a revenue gain of $26.2 million over what would have been received if the government had taken its royalties “in value,” or as cash payments from producers. Additionally, there was the bonus of $2.6 million in added interest earned on RIK revenues received five to 10 days earlier than under the royalty-in-value program, he said.

This follows previous revenue gains of $18 million and $32 million in fiscal years 2004 and 2005, respectively, over what MMS would have received if it had taken its royalties as cash payments. All told, the agency saw an increase of more than $78 million for the federal coffers between 2004-2006 as a result of its RIK program, according to Cruickshank.

The report contrasts with some Democratic lawmakers’ claims that the program is rife with abuse.

A total of 75,279,559 barrels of oil equivalent, valued at more than $4 billion, was taken in kind and sold by MMS during the previous fiscal year, the agency reported.

Cruickshank said the Gulf of Mexico remains the core source area for RIK sales. As of the end of FY 2006, the MMS took in kind approximately 72% of the crude oil and 45% of the natural gas royalty volumes, produced daily in the Gulf of Mexico.

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