Deal would let Interior change oil royalty collection system

Tuesday, November 16th 1999, 12:00 am
By: News On 6

The government would be allowed to raise more money from oil producers who drill on public lands under a compromise between White House and congressional negotiators.

Inserted in a year-end budget package still being completed, the deal would break an impasse between Congress and the Interior
Department and allow Interior's Minerals Management Service to implement a new royalty collection system after March 15.

The deal would roll back a measure approved overwhelmingly by the Senate in September that would have kept the new rules frozen for another year.

Sen. Kay Bailey Hutchison views the new fee structure as punitive to oil producers and persuaded Congress in the last two years to block its implementation. She expressed disappointment Tuesday over the compromise.

"The shortened moratorium does not change the fundamental fact that the proposed rule ... is complicated and unworkable and goes
beyond the clear intent of Congress," said Mrs. Hutchison, R-Texas.

Critics of the congressional freeze welcomed the compromise as a victory for taxpayers.

"It is a known fact that the oil companies have been undervaluing the worth of this oil, thereby cheating the taxpayers of hundreds of millions of dollars over the years," said Sen.
Barbara Boxer, D-Calif., who has repeatedly battled Mrs. Hutchison over the issue. "This has been a struggle for years, but it appears as if we have finally won the battle for the people."

Said Rep. Carolyn Maloney, D-N.Y.: "This agreement will end the sweetheart deal which lets oil companies shortchange American
schoolchildren, states and Indian tribes of millions of dollars in royalty payments each year."

The government collected $1.2 billion last year from the 12.5 percent royalty for oil taken from public lands and offshore tracts, mainly in the Gulf of Mexico. Of that, $559 million was
shared with 35 states that have oil holdings.

The Interior Department began three years ago writing royalty regulations to replace the current system, which lets oil companies set arbitrary values at wellheads, with one pegging the value to a fair market indicator.

The proposal to replace it prompted an outcry from oil producers and their defenders on Capitol Hill. They contend the proposed
royalty system, which would collect $66 million more a year, overstates oil's value and is too complicated.