Department of the Interior: Royalty-in-Kind Oil and Gas Preferences
B-307767, Nov 13, 2006
This responds to a Congressional request for our opinion regarding the Secretary of Interior's authority, under section 342(j) of the Energy Policy Act of 2005, to "grant a preference" in the disposal of royalty oil or gas received by the United States. 42 U.S.C. 15902(j)(1). The purpose of section 342(j) is to provide "additional resources to any Federal low-income energy assistance program." Id. In this regard, Congress asked whether section 342(j) provides sufficient authority for the Secretary to provide such programs with oil and gas at a discount to fair market value.
Section 342(j) of the Energy Policy Act of 2005, 42 U.S.C. sect. 15902(j), does not authorize the Secretary of the Interior to dispose of in-kind royalty oil and gas at a discount to fair market value. Section 342(b)(3)(A) requires the Secretary to sell all royalty oil and gas taken in kind at not less than fair market value. We agree with the Department of the Interior that the phrase "grant a preference" in section 342 does not mean to grant a discount to fair market value where the same section requires sales or transfers to be at not less than market value and there is no indication that Congress intended "preference" to include a discount to fair market value.