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Project on Government Oversight




America's Top Oil-Producing States Agree: Interior's Rule Urgently Needed

August 1, 1999 


Senator Kay Bailey Hutchison (R-TX) has vowed to re-attach an amendment known as the oil royalty moratorium to the Department of Interior appropriations bill in the coming days. The moratorium would stop Interior from implementing a rule that prevents royalty-evasion by 40 of the largest oil companies drilling on federal and Indian lands. Officials who manage and collect oil royalties for state governments nationwide have repeatedly expressed their support for the new regulations. Public education programs are often shorted when the federal government fails in its duty to collect and share royalties with oil-producing states.


"The approach taken by MMS [Department of Interior's Minerals Management Service] to simplify the calculation of royalty value under its proposed rulemaking...will better protect Alaska's interests."

-Memo from John Shively, Commissioner of the Alaska Department of Natural Resources to John Katz, Director of State/Federal Relations for Alaska, April 27, 1998


"The Department's comprehensive proposal is the logical alternative to posted prices."

-Letter from Charlie Daniels, Arkansas Commissioner of State Lands and others to Senators Lott and Daschle, July 29, 1999


"The major integrated oil companies have long fought this rational process, advocating that royalties should be based on prices they pick which are almost invariably below market prices.... The proposed regulations do not work to the detriment of independent oil producers....I urge you and your committee to support these regulations as a logical solution to the undervaluation caused by prices posted by the major oil companies."

-Statement of James McCabe, Deputy City Attorney for the City of Long Beach, Trustee for the State of California to the House Subcommittee on Government Management


"This delay is costing taxpayers $5 Million per month."

-Letter from Mark Davis, Minerals Director, Colorado State Board of Land Commissioners and others to Senators Lott and Daschle, July 29, 1999


"The current Federal regulations place a high degree of reliance on posted field prices...current Federal regulations make it difficult to capture true market value....To sum up, DNR is supportive of MMS' attempt to value...production in a more certain, timely, and accurate manner than provided for in the current regulations."

-Public Comment letter from Jack C. Caldwell, Secretary, Louisiana Department of Natural Resources to MMS, May 28, 1997


"MMS has conscientiously evaluated the comments received from all parties and made appropriate changes to the proposed regulations. MMS has been open to industry's concerns and has made substantial efforts to accommodate industry. As a result, MMS has incorporated compromises into the latest proposal which are major concessions to industry. At this time, Montana believes that the rule is ready to and should be finalized."

-Public Comment letter from Wanda Fleming, Supervisor, Federal Royalty Program, Montana Department of Revenue to MMS, July 23, 1998

New Mexico

"It is our fervent hope that Congress will act so as not to extend the current moratorium prohibiting the Department of Interior from issuing a final rulemaking....The New Mexico State Land Office works primarily for education through our various educational beneficiaries. Therefore, finalization of the federal oil valuation regulations and any increases in crude oil revenues which would result from revised oil valuation methodologies would directly benefit education funding in this state."

-Public Comment letter from Ray Powell, Commissioner of Public Lands for the State of New Mexico to MMS, April 12, 1999

"We offer the question, when can the federal government expect to receive its fair share?...the State of New Mexico can only hope that the federal regulations being proposed can be finalized and published in the near future."

-Public Comment letter from State of New Mexico Tax Secretary, John Chavez, to MMS, April 27, 1999

North Dakota

"The Department's Minerals Management Service (MMS) has been eminently fair in proposing its new regulations."

-Letter from Robert J. Olheiser, North Dakota Commissioner of University and School Lands and other Western States Land Commissioners to Senators Lott and Daschle, July 29, 1999


"MMS is to be congratulated for its new proposed pricing regulations....We agree with the total abandonment of posted prices to value federal royalty oil....We are pleased with MMS's decision to move to marked based indicia of the value of federal royalty crude oil."

-Public Comment letter on Proposed MMS Rules Re Valuation of Federal Royalty Oil, Commissioners of the Land Office for the State of Oklahoma, April 25, 1997

South Dakota

"The proposed MMS regulations are very reasonable."

Letter from Curt Johnson, South Dakota Commissioner of School and Public Lands and others to Senators Lott and Daschle, July 29, 1999


"I don't know what in the world Senator Hutchison was thinking.... Her actions amount to a multi-million dollar give away to the big oil and gas corporations at the expense of the schoolchildren of Texas....Here in Texas I've sued the big oil companies to make sure they're paying their fair royalty to the school fund....I can promise you I never would have told Sen. Hutchison her actions were in the best interests of the state, because they clearly are not."

-Statements of Gary Mauro, Commissioner of the Texas General Land Office in a press release responding to news of Senator Hutchison's first oil royalty rider, May 8, 1998


"The department's proposed regulations would ensure that oil companies would pay no more and no less than fair market value for federal royalty oil."

-Letter from Jennifer M. Belcher, Commissioner of Public Lands, State of Washington to Senator Gorton, September 3, 1998


"Posted prices are unilaterally set by individual oil companies less than market value of those crudes. In contrast, the market prices proposed by MMS to value royalty crude...are publicly reported on a daily basis."

-Letter from Douglas LaFollette, Wisconsin Secretary of State and others to Senators Lott and Daschle, July 29, 1999 

Founded in 1981, the Project On Government Oversight (POGO) is a nonpartisan independent watchdog that champions good government reforms. POGO's investigations into corruption, misconduct, and conflicts of interest achieve a more effective, accountable, open, and ethical federal government.

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