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Project on Government Oversight

Letter From Coalition Of 24 Organizations: to David Guzy, Chief, Rules & Regulations Staff, Royalty Management Program, MMS

Related Content: Oil & Gas Royalty Revenue
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January 31, 2000

Alaska Wilderness League
American Federation of Government Employees
American Federation of State, County
& Municipal Employees (AFSCME)
American Lands Alliance ** American Oceans Campaign
American Rivers **Better Government Association
Common Cause ** Consumer Federation of America
Council of Chief State School Officers ** Friends of the Earth
Government Accountability Project ** Greenpeace
Mineral Policy Center ** Native American Rights Fund
Natural Resources Defense Council ** Navajo Nation
Ozone Action ** Project On Government Oversight
Public Citizen Critical Mass Energy Project
Public Employees for Environmental Responsibility
Service Employees International Union
Taxpayers for Common Sense ** U.S. PIRG



David S. Guzy, Chief
Rules & Publications Staff
Royalty Management Program
Minerals Management Service
P.O. Box 25165, MS 3021
Denver, CO 80225

Attn: Further Supplementary Proposed Rulemaking Establishing Oil Value for Royalty Due on Federal and Indian Leases

Dear Mr. Guzy:

The undersigned organizations urge the Minerals Management Service (MMS) to finalize the Indian and Oil Valuation Rules for implementation as soon as the Congressional moratorium is lifted on March 15, 2000.

In general we believe these proposed rules will better protect the interests of the taxpayers, Indian tribes and the environment than existing royalty collection policies. In particular, we support MMS' use of openly-traded index or spot prices and gross proceeds methodologies rather than industry-created "posted prices" when determining the value of oil. The oil industry has shortchanged the federal government and Indian tribes by as much as $2 billion under posted pricing methodologies according to conclusions reached by the House Government Reform Committee in 1996.

Whistleblowers joined by the Justice Department in litigation over these issues argue in their complaint that companies have systematically sold oil at below-market value with the intent of shortchanging the federal government and Indian tribes of royalties. Their litigation alleges that since 1988, oil companies have submitted more than 500,000 false or fraudulent oil royalty payment claims to the federal government. Since the last public comment period, oil companies have announced nearly $300 million in settlements or near settlements with the Justice Department over these allegations. Policy reforms are sorely needed to prevent future underpayments and litigation of this kind.

We hope this is the last time the Federal and Indian Oil Valuation Rules are re-opened for comment. As Susan Kladiva of the GAO testified in Congress in May, 1999 regarding their review of MMS' rulemaking process: "...the General Accounting Office is not too prone to be complimentary of agencies when we do work...we [GAO] believe that they've [MMS] been deliberate and that they have taken all due care to include the positions and to respond to the positions that have been put forth by the states, as well as the industry...So it appears to be a long time. But we believe that it has been thoughtfully approached."

We do too. We urge MMS to implement the Indian and Oil Valuation Rules starting in March in order to avoid any further loss of royalty revenue.


Adam Kolton, Arctic Campaign Director
Alaska Wilderness League
Beth Moten, Legislative Director
American Federation of Government Employees (AFGE)
Charles M. Loveless, Legislative Director
American Federation of State, County and Municipal Employees (AFSCME))
Steve Holmer, Campaign Coordinator
American Lands Alliance
Ted Morton, Policy Director
American Oceans Campaign
Ann C. Mills, Vice President
American Rivers
J. Terrence Brunner, Executive Director
Better Government Association
Scott Harshbarger, President
Common Cause
Travis Plunkett, Legislative Director
Consumer Federation of America
Gordan M. Ambach, Executive Director
Council of Chief State School Officers
Courtney Cuff, Legislative Director
Friends of the Earth
202-783-7400 x207
Louis Clark, Executive Director
Government Accountability Project
Gary Cook, Director of Climate Campaign
Alan Septoff, Reform Campaign Director
Mineral Policy Center
202-887-1872 x205
John E. Echohawk, Executive Director
Native American Rights Fund
Kathleen E. Scheg, Legislative Director
Natural Resources Defense Council
Perry Shirley, Assistant Director
Minerals Department
Navajo Nation
John Passacantando, Executive Director
Ozone Action
Danielle Brian, Executive Director
Project On Government Oversight
Wenonah Hauter, Director
Public Citizen Critical Mass Energy Project
Jeff Ruch, Executive Director
Public Employees for Environmental Responsibility
Skip Roberts, Legislative Director
Service Employees International Union
Ralph DeGennaro, Executive Director
Taxpayers for Common Sense
Anna Aurilio, Staff Scientist

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