MMS to allow transfer of electronic funds

In a step to cut the amount of paper floating through its operations the Minerals Management Service's Gulf of Mexico office announced this month that beginning in August it will allow companies bidding on offshore oil and gas leases to submit electronically the up-front good-faith payments that must accompany bids.

The MMS created in 1982 to manage oil gas and mineral resources for the nation requires oil and gas companies to pay one-fifth of the total bid the company makes on leases in the Gulf. If the bidding company wins the lease it pays the remaining four-fifths which the MMS has been receiving electronically since 1986.

The MMS has been reluctant to accept good-faith payments electronically because oil and gas companies frequently wait until the last minute to submit a bid and a computer malfunction may delay the submission of a good-faith payment posing the threat that the company may be disqualified from the bid process.

But now MMS officials believe systems are stable enough to support the new policy. "We didn't see any reason why we shouldn't attempt to do that electronically " said Jan Arbegast program analyst for the MMS. "Industry does this routinely on a daily basis." Arbegast said the use of electronic funds transfer in the August sale of leases will be optional because fuel companies may be hesitant to try the new method for the down-to-the-wire bidding.

Carol Simmons an analyst for Datapro Information Services Group said drawbacks to electronic funds transfer may convince some companies not to use it. "There's more benefit to the [seller] than to the consumer " she said explaining that the individual who sends funds electronically still must record the transaction just as if a check had been written. The individual also forfeits the "float" period associated with writing a check in which a few days may pass between the writing of a check and the transfer of money giving the buyer a little more checking-account flexibility she said.

At the heart of the funds transfer will be one of two established electronic networks used in the financial world for transferring funds: the Automated Clearinghouse or Fedwire. MMS officials said they were not certain which network would be used.

In the MMS' August sale of leases a bidder will be able to notify its bank electronically or via phone to use one of the two networks to transfer money from its account to the MMS' account which resides with the U.S. Treasury Arbegast said. MMS officials will then electronically check which companies have submitted good-faith payments. "It gets our money in the Treasury quicker " Arbegast said. "It eliminates a lot of labor at the lease sale."

The current method of processing the good-faith bid payments involves opening envelopes containing checks recording check amounts and returning receipts to bidders.

The new method will make it easier on MMS employees sorting through bids because information on the up-front bid payments will already be available in electronic form.

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