Washington (Platts)--28Jun2007

The US Mineral Management Service's oil and natural gas royalty program
registered a $26.2-million increase in revenue in fiscal 2006 by relying
heavily on in-kind rather than cash payments, the agency says in a report
released Thursday. 

     The RIK program has provided revenue gains now in each of its first three
full years of operation.

     MMS Acting Director Walter Cruickshank said the report shows that the RIK
program continues to "outpace" its goals of improving efficiency in the
royalty program, reducing its regulatory costs and providing a "fair return"
on federal oil and gas reserves.

     The results follow recent approval by the US House Natural Resources
Committee of a bill that would curtail the RIK program, limiting its use to
providing oil for the Strategic Petroleum Reserve. Committee Chairman Nick
Rahall, a West Virginia Democrat, and other proponents of the restriction have
questioned the value of the program. The provision is part of a bill that
House Democratic leaders plan to include in broad energy legislation scheduled
for the chamber's consideration in July.

     "In our opinion, it does not make sense to eliminate that source of
additional funding," MMS spokesman Patrick Etchart said.

     The RIK results for fiscal 2006, which ended on September 30, follow
reported revenue gains of $18 million and $32 million for fiscal 2004 and
fiscal 2005, respectively, MMS said.

     MMS took in-kind and sold more than 75.2 million barrels of oil
equivalent, worth more than $4 billion, in fiscal 2006. Most of the RIK sales
involved oil and gas in the Gulf of Mexico, the agency said. It took in-kind
72% of the oil and 45% of the gas produced in the Gulf.

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