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Royalty-In-Kind: A Win/win Solution

Fred D. Hagemeyer, Treva J. Kigar, Federal and Indian Oil & Gas Royalty Valuation and Management II (1998)

Royalty-in-kind (RIK) is a concept whose time has come. A growing interest in a comprehensive RIK program was demonstrated throughout 1997 by the oil and gas industry, the federal government, and state governments. Royalty-in-kind was a common theme in industry's comments to the proposed oil valuation regulations. Likewise, Jim Geringer, Governor of Wyoming, stated in comments to the proposed regulations. “MMS should take all its royalty in kind and have first hand knowledge of the market.”1 Public workshops held by the Minerals Management Service (MMS) in March and April were widely attended by all segments of the oil and gas industry and state representatives. MMS also released the final report of its 1997 Royalty in Kind Feasibility Study in September 1997.

RIK received considerable attention in Congress last year as the Subcommittee on Energy and Mineral Resources of the U.S. House of Representatives (Subcommittee) held oversight hearings on the subject on July 31 and September 18. The Subcommittee indicated it was committed to exploring the need for legislation to resolve royalty valuation issues and would thoroughly review royalty-in-kind as a viable solution.