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

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.

Sincerely,