Administration Canceled RIK Program in September – But Quietly Publishes Report Confirming RIK Made $106 Million for Federal Government Last Year
“If President Obama is really serious about reducing his $1.4 trillion deficit, why on earth would his Administration end a rare federal program that actually makes money for the government”
WASHINGTON, D.C., December 3, 2009 | Emily Lawrimore or Jill Strait (202-225-2761)
The Department of the Interior just released the FY 2008 Royalty-In-Kind (RIK Report), which showed that the federal government made $106 million by taking oil and natural gas royalty in-kind. This report comes on the heels of Secretary Ken Salazar’s September announcement that the Department of the Interior would end the RIK program, despite five years of taxpayer benefits from this profitable program.
“In light of this report, Secretary Salazar must provide justification for his decision to end the RIK program that has made the American taxpayers tens of millions of dollars in additional revenue from oil and gas,”said Ranking Member Doc Hastings. “If President Obama is really serious about reducing his $1.4 trillion deficit, why on earth would his Administration end a rare federal program that actually makes money for the government? This is not only bad fiscal policy, but simply defies logic. Eliminating the RIK program instead of instituting reforms is a loss for taxpayers and costs the government money. The Administration also must explain why this report is being released in December when previous reports have been released during the summer, and why this report still hasn’t been made public on its website?”
The RIK program was established by President Clinton in order to reduce costs and create a simple system of collecting oil and gas revenues. This allowed the government to receive either royalty in-value (cash payments) or royalty in-kind (1-6 or 1-8 barrels of oil or cubic feet of natural gas directly).
The RIK program reduces administrative costs, accelerates cash flow to the government, provides flexibility to use this oil and natural gas for government use, and most importantly is only used if it returns more money to the federal government than a traditional royalty in-value program.
The Energy Policy Act of 2005 (Sec. 342) required annual reports to Congress starting in 2006, although the program had already been in operation for several years. Previous year’s results are highlighted in the FY2008 report on table 3.1, and previous year’s reports are available below:
On October 2, 2009, Ranking Member Hastings sent a letter to Secretary Salazar requesting information on the economic impacts of eliminating the program. The Secretary has yet to respond to this letter.
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