Utah Republican Representative James Hansen, the new chairman of the House Resources Committee, has asked President-elect George W. Bush and his incoming administration to expand a federal royalty-in-kind program. Hansen requested in a letter to Bush and Vice President-elect Dick Cheney that the program, which allows energy companies to give the government a portion of their oil discoveries instead of paying cash royalties, be expanded. Hansen outlined several environmental regulations put into effect by the outgoing administration that he believed should be scaled back. He asked that an Interior Department rule stipulating that oil companies must pay cash royalties on oil drilled from federal leases based on market prices, rather than on internal prices posted by the companies, be amended. Energy firms are not allowed to deduct marketing expenses from royalty payments under the rule. Hansen has suggested that Bush enlarge the government’s royalty-in-kind program in order to settle lawsuits filed by the oil industry against the rule.
Under the royalty-in-kind program, companies would give a portion of the oil drilled to the government, usually one-eighth of the oil generated from onshore leases and one-sixth from offshore leases.
The oil, Hansen said, could then be added to the Strategic Petroleum Reserve (SPR) or could be refined and used to heat federal and military buildings.
On a smaller scale, a similar program already exists to secure oil for the SPR.
Many members of Congress, both Democrats and Republicans, however, are expected to oppose any reduction in oil royalties, since the revenue generated is shared with individual states to fund local programs.
© 2001 Mena Report (www.menareport.com)
