CHAPTER 14 a KEY EVENTS IN MMS PRODUCT VALUATION RULEMAKING 1980-1988

• Jurisdiction: United States

Royalty Valuation and Management
(Mar 1988)
CHAPTER 14a
KEY EVENTS IN MMS PRODUCT VALUATION RULEMAKING 1980-1988
David T. Deal
American Petroleum Institute
Washington, D.C.

Linowes Commission (1980-1982)

o In 1981 the time was ripe for a comprehensive review of DOI's Royalty Management Program:

— lingering concerns about program had been addressed in series of reports by GAO and DOI's own Inspector General's office in 50's-70's

— royalty stakes had risen astronomically

1920-1950	$354 million	(30 years)
1951-1960	757 million	(10 years)
1961-1970	2.5 billion	(10 years)
1971-1980	12.1 billion	(10 years)
1981-1985	24 billion	(5 years)
1981-1990	51.9 billion(est)	(10 years)

— astronomical revenues had created big business but management still in hands of petroleum scientists.

o Precipitating event, however, was accusation of oil theft and fraud on Wind River Reservation in 1980; Linowes Commission established by Secretary Watt in July 1981.

o Whatever the reasons, Linowes Commission undertook a comprehensive review of RMP and in its January 1982 Final Report, "Fiscal Accountability of the Nation's Energy Resources," arrived at some 60 recommendations directed at dealing with such things as:

— lack of site security

— no reconciliation of royalty accounts

— lax enforcement

— lack of DOI cooperation with states/Indian tribes

— uncertain valuation guidelines.

o However, all the Linowes Commission said on valuation was that DOI needed to clarify valuation guidelines promptly

MMS Proposed Order for Valuation of OCS Gas (April 1982)

o Odd event occurred...