House Lawmakers Propose Changes to Improve Royalty Collections

Rep. Carolyn Maloney (D-NY) and other House lawmakers have written a letter to the Interior Department citing ways for the agency to potentially improve its collection of royalties on oil and natural gas produced from federal and tribal lands.

"We have been concerned for some time about the process by which oil, natural gas, condensate and associated natural gases are extracted from federal and tribal landholdings. Specifically, we are concerned with Minerals Management Service's [MMS] methods for collecting royalties on these oil and gas extractions, and believe that the Interior Department's inspection, auditing and enforcement activities must result in proper revenue collections," the House lawmakers said in letters to MMS Director Johnnie Burton and Bureau of Land Management (BLM) Director Colleen Clarke last week.

They called on the MMS and BLM to comment on whether 37 recommended changes could improve the accuracy of royalty accounting. Many of the proposals mirror those of Jack Grynberg, CEO of the Grynberg Petroleum Co., an oil and natural gas producer based in Denver, CO. Some of the recommended changes would:

  • Require the installation of digital meters for all federal and Native American natural gas producing properties;
  • Require that all sampling of natural gas for heating content analysis be performed monthly upstream of each gas meter;
  • Require that the control of all natural gas gathering lines and interstate pipelines revert immediately to the jurisdiction of the Federal Energy Regulatory Commission;
  • Prohibit the construction of bypass pipes that go around a gas meter. Any such construction or subsequent removal should result in penalties, including but not limited to, automatic cancellation of the lease;
  • Require the MMS and the BLM to issue rules for the measurement of volumes of natural gas at the wellhead based on independent industry standards, such as those suggested by the American Society of Testing Materials;
  • Require that gathering lines be constructed with as few angles and turns as possible before they connect with the natural gas meter;
  • Require that sales transactions be completed at "arms's length" when reporting the sale and value of natural gas, condensate and associated natural gases sold; and
  • Require the MMS and BLM to promulgate regulations prohibiting the unreasonable venting of natural gas, and to strictly enforce such provisions by requiring lessees to pay full royalties on any vented, flared or "avoidably" lost natural gas.

In addition to Maloney, the other lawmakers who signed the letter were Reps. Maurice Hinchey (D-NY), George Miller (D-CA), Thomas G. Tancredo (R-CO), Edward Markey (D-MA) and Bernard Sanders (I-VT).

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