MMS Awards First Royalty-In-Kind Crude Contracts

The U.S. Minerals Management Service (MMS) has awarded the first four contracts to deliver royalty-in-kind crude to the Strategic Petroleum Reserve to ChevronTexaco, Williams, Equiva and ExxonMobil. The contracts involve approximately 60,000 barrels per day of royalty oil from federal offshore properties in the Gulf of Mexico. ``The four initial contracts under this initiative were awarded...for a one-year term to exchange seven packages of offshore royalty oil in return for delivery at Gulf Coast market centers of similar quantities of crude oil to the Department of Energy,'' according to the MMS.

The royalty-in-kind oil is the first phase of the Bush administration's plan announced last November to fill its emergency oil reserve to its capacity of 700 million barrels. The U.S. oil industry for years has pushed to convert some of its cash royalty payments on federal leases to royalty-in-kind transfers. Energy firms generally pay a royalty fee ranging from 12.5 percent to 16.66 percent on the value of each barrel produced from federal lands.