FOR RELEASE: December 14, 1995               CONTACT: Tom DeRocco
                                                   (202) 208-3985

             MMS SIMPLIFIES ROYALTY RELIEF GUIDELINES

     The U.S. Department of the Interior's Minerals Management
Service (MMS) announced today that it is issuing interim
guidelines that streamline and simplify the royalty relief
application process for producers operating Outer Continental
Shelf (OCS) leases with revenues that are inadequate to sustain
continued production.

     Culminating a two-year effort, the new guidelines enable a  
producer to compute royalties due the government using a formula
based on a fixed percentage of net receipts, rather than gross
receipts.  In this way the producer can take into account
increased costs of production, processing and transportation on
older leases.  

     "The guidelines are fair to business and government, and
good for the environment," said MMS Director Cynthia Quarterman. 
"It gives industry a straightforward set of guidelines when
applying for royalty relief on marginally producing wells and
provides the economic incentive to ensure continued production on
older oil and gas leases and sustain profitability.  By extending
production on older leases, we maintain the stream of royalties
to the federal government.

     "From an environmental standpoint, it promotes the recovery
of oil and gas resources that otherwise may be left in the ground
when a lease is relinquished, and by any definition, that's
practicing good conservation," Quarterman declared.

     "I am expecially pleased that industry and government worked
together to define the problems and come up with a new set of
guidelines that will make it easier to administer the program. 
These guidelines will replace the current case-by-case approach
and thereby add certainty to our procedures."

     "MMS wants to extend the productive life of operating leases
on the OCS, and is responding to industry's interest in a
procedure that is simple, flexible and easy to understand.  It's
also easy to apply for and administer," Quarterman said.  

     The objectives of the pilot are to:

       -  encourage additional production from continuing
operations or new investments in producing leases;

       -  ensure that any modified arrangement is equitable for
both the producer and the federal treasury and does not encourage
economically inefficient activities;

       -  clarify and streamline the current process for
considering royalty relief on existing leases;

       -  develop a program that can be implemented under current
MMS staffing constraints and regulations; and,

       -  limit administrative burdens on companies filing
applications for and managing affected leases.

     According to Quarterman, if operating costs change
substantially, the lessee may reapply to have the royalty formula
adjusted to assure that both the operator and the government are
treated equitably. 

     The guidelines are being issued as "interim" since changes
may be required as the regulatory process proceeds and as the
program is evaluated.

     MMS also announced today that it is moving forward to
implement provisions of the law signed November 28, granting
royalty relief for deepwater tracts in the Gulf of Mexico.  The
new law requires MMS to issue regulations within 180 days.  The
agency has begun to develop those regulations and will soon
announce the schedule for completing this effort.  Once these
rules are completed, operators with leases in deepwater areas of
the Gulf would become eligible to apply for relief.  In addition,
upcoming lease sales in the Gulf will contain the statutory
provisions for this relief beginning with the next Central Gulf
of Mexico lease sale tentatively scheduled for April 1996.

     MMS is the federal agency that manages the Nation's natural
gas, oil and other mineral resources on the Outer Continental
Shelf, and collects, accounts for, and disburses about $4 billion
yearly in revenues from mineral leases on federal and Indian
lands.
                              -MMS-