Minerals Management Service Director Cynthia Quartermanestimated the federal government would lose $500 million/year if aroyalty-in-kind programs were instituted for oil and gas producers.The projected revenue loss plus her claim that MMS already has thelegal authority to collect royalties in kind were reasons cited forthe agencies opposition to legislation recently proposed by Rep.Mac Thornberry (R-TX) that would replace the current gross proceedsroyalty collection program with RIK.

Thornberry accused Quarterman of having a “completely negative”view of his bill. “It’s safe to say that, yes,” Quarterman told theHouse Energy and Minerals Management Subcommittee Thursday.Quarterman conceded MMS had not fully analyzed the bill but itbelieves it will have “substantial” economic and legalrepercussions for the industry. She “strongly believes”implementation of the bill would be “unwise.” Thornberry thenremarked that he was disappointed in the tone of her remarks.Subcommittee Chairman Barbara Cubin (R-WY) chided Quarterman forher testimony calling it “nonspecific” and “vague.” She askedQuarterman to come back for the March 31 hearing to give morespecific information on how RIK would affect the federal governmentand the energy industry.

Billy Tauzin (R-LA) said the MMS was “looking more and more likethe IRS. If the government doesn’t get some of the money it is notentitled to, I have no problem with that.”

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