A Concerted Effort

Industry’s motive for pushing royalty-in-kind is no secret, according to both contemporary oil executives’ testimony and a post-facto chronology prepared by David T. Deal. Deal, now a consultant, was then a leading petro-lobby lawyer who for more than 30 years moved between positions with the federal government and his job at the American Petroleum Institute. Deal pointed out that in 1997, when Minerals Management Service began its “protracted and contentious” attempt to make new oil valuation rules, industry responded with a concerted effort to substitute royalty-in-kind for valuation.

“The oil valuation program gave tremendous focus and tremendous impetus within the industry to please find a simpler way, and R-I-K particularly became the simpler way,” said Larry Nichols, president and CEO of Devon Oil, in his Congressional testimony for mandatory federal in-kind royalties. Fred Hagemeyer of Marathon Oil Company testified at the same hearing that “the industry has pulled together to focus on this particular issue [royalty-in-kind]” and that valuation was a “catalyst.”   Casper independent oil baron and former politician Diemer True, speaking for himself and the Independent Petroleum Association of America, wholeheartedly agreed.

Wyoming oil-and-gas men and women who were also state legislators in 1997 quickly made royalty-in-kind an option for the state. To empower Gov. Geringer to accept the state’s share of federal royalties “in kind,” Riverton oilman Eli Bebout (Nucor Oil and Gas, NEW Corporation), then a Republican state representative,vi sponsored the Federal Mineral Royalties Taking in Kind Act in the House. The bill’s Senate sponsor was Casper oilman Bill Hawks, who had been a partner of Guy C. Burton, Jr. in the drilling company Burton/Hawks Inc. Guy C. Burton was the husband of Rejane “Johnnie” Burton, whom Geringer had appointed head of the Wyoming Department of Revenue in charge of minerals valuation and severance tax collection. Geringer signed the bill, one of the first of its kind in the country, into law in March 1997, the same month Minerals Management came to Wyoming to workshop Royalty-in-Kind.

Cynthia Quarterman, director of Minerals Management Service, by this time had doubts about taking oil royalties in-kind, although the Wyoming oil program was going ahead anyway thanks to the enthusiasm of state officials.

“Considering that lessees cannot deduct marketing costs under the federal in-value system, we believe that implementation of an oil RIK program would actually lose revenue,” Quarterman testified to the House Resources Subcommittee that summer, “because MMS would need to pay these costs under an RIK program […] In summary, we are not convinced that crude oil RIK is in the best interests of the United States.”

Nevertheless, Minerals Management Service soon announced that its new royalty-in-kind program comprising three “demonstration pilots,” would begin

in October 1998 and last up to September 2004, taking in-kind oil in Wyoming and in-kind gas from two areas in the Gulf of Mexico. MMS said it expected the pilots would provide “operational experience” in running such a program and in “evaluating the feasibility of a permanent royalty-in-kind program.”

This less-than-whole-hog approach did not satisfy RIK’s proponents in Congress.  In March 1998, U.S. Representatives Mac Thornberry of Texas and co-sponsor Barbara Cubin of Wyoming, both Republicans, introduced the Royalty Enhancement Act of 1998, H.R. 3334, requiring Minerals Management Service to take all oil and gas royalties in kind. Cubin, chairwoman of the House Resources Subcommittee on Energy and Mineral Resources, conducted numerous hearings on the bill.

“Did we take advice from the oil and gas industry in the preparation of this bill? Absolutely.vii Yes, we did,” Cubin announced in opening remarks at a mid-March hearing on the bill before her subcommittee.

Born in Salinas, California and educated as a chemist at Creighton University, a Jesuit institution in Omaha, Nebraska, Barbara Cubin won election to the U.S. House in the Republican landslide of 1994. At the time she touted term limits and the Contract with America and announced, at a House Republican newcomers’ party honoring Rush Limbaugh as a “Majority Maker,” that she was not a “femiNazi.”viii

Cubin had served in the Wyoming House from 1987 to 1993, and in the State Senate the year after. Her long career—she broke her term-limits promise and successfully ran seven times for the U.S. House—clearly demonstrates that Wyoming voters do not mind a little raunch in their politicians.  She said she owed her political life to Diemer True.

“Were it not for Diemer,” Cubin told Cheyenne’s Wyoming Tribune-Eagle when she announced her seventh Congressional campaign in 2006, “I wouldn’t be here.”

Undoubtedly, she spoke the truth. Diemer True of Casper was almost synonymous with the Wyoming Republican Party in the 1990s, and his support was–and some say still is–critical to any GOP member seeking an important nomination.  He was himself a veteran of the hustings:  True was a state representative (1973-76) and spent 16 years in the senate, retiring as president in 1992.  He chaired the state Republican Party committee from 1992 to 1996, and has been Wyoming Republican National Committeeman since 1998.  He has been friends since boyhood with Dick Cheney, and most of the lower-wattage Wyoming players in this drama—Barbara Cubin, Johnnie Burton, Cynthia Lummis—claim True not only as a political ally, but as a personal friend.

“I have known Diemer True since the late Sixties/early Seventies,” Johnnie Burton wrote in an e-mail to WyoFile.  “I have interacted with him and his wife in many settings: social, business, educational and political. I value the Trues’ friendship.”

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