API's Jack Gerard comments on termination of RIK program

Cathy Landry | 202-682-8122 | landryc@api.org

WASHINGTON, September 16, 2009 - American Petroleum Institute President Jack Gerard made the following comment on US Interior Secretary Ken Salazar’s announcement that he would terminate the royalty-in-kind program:

“The Royalty-in-Kind program, which collected $6.6 billion in oil and gas deliveries in fiscal 2008, is one of the government’s largest sources of non-tax revenue. The program is an effective means of ensuring that the American people receive fair compensation for development of federal resources.

“Terminating this straight-forward method of handling royalty payments runs the risk of raising administrative costs and adding additional layers of paperwork required to determine the value of oil and gas production. The government’s Minerals Management Service itself noted administrative efficiencies brought on by the program, and pointed out that another of benefits of RIK is the reduction in costly lawsuits tied to product valuation.

“We urge Secretary Salazar to carefully weigh the impacts his ‘fundamental restricting’ of the royalty system could have on U.S. production of oil and gas, American jobs and revenue to the government. America’s oil and natural gas industry is ready to work with the administration to improve the royalty-collection system so Americans enjoy the benefits of increased domestic development. Raising the cost of bringing much-needed domestic supplies online in the United States is not the way to achieve energy and economic security.”