MMS aims to collect $22 million in royalties from BP America

MMS aims to collect $22 million in royalties from BP America

The Denver-based federal agency that collects royalties on oil, gas and minerals extracted from public lands is seeking more than $32 million in unpaid royalties and interest from BP America Production Co.

In a news release Thursday, the Minerals Management Service ”” an arm of the U.S. Interior Department ”” said BP owes the money for coalbed methane production on federal property in New Mexico from June 1991 through May 2006.

“This action demonstrates that MMS is vigilant in collecting the royalties due to the federal government from energy production that occurs on federal lands,” said Johnnie Burton, director of the MMS. “And if the payments are not timely, we charge interest on top of the original debt. We take our job seriously.”

The bill includes a charge of $18.9 million for additional royalties plus $13.3 million in interest.

BP spokesman Dan Larson said the company expects to pay the money within a month. Larson said the unpaid royalties were the result of a disagreement with the MMS over the cost of separating carbon dioxide from natural gas before putting the latter into pipelines.

The MMS argued that cost should be paid by companies, while BP and others said the cost ought to be deducted from royalties they pay to the federal government. BP has been arguing the issue since 1998, taking the case to the courts. But the Supreme Court weighed in last year and let an appeals court ruling in favor of MMS stand.

“We are pleased the issue is resolved, although we are not pleased to spend the money,” Larson said.

MMS spokesman Patrick Etchart said the agency is preparing to mail similar bills to Williams Cos. and Burlington to “collect tens of millions of dollars” from those companies.

Thursday’s announcement comes even as the MMS has been criticized for its royalty collection efforts. In a report released Wednesday, the Interior Department’s inspector general said the MMS may be getting fewer royalties from companies because of weaknesses in its audits.

Royalties are fees, usually a percentage of the resource being produced in federal lands, paid in cash or in kind. The MMS later splits the money equally with the states.

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