US Supreme Court Denies Interior Dept Royalty Case Hearing
By Ian Talley, Of DOW JONES NEWSWIRES
WASHINGTON -(Dow Jones)- The U.S. Supreme Court refused Monday to consider a
Department of Interior challenge to a lower-court ruling that blocked the agency
from collecting at least $19 billion in oil fees.
The petition before the nation's highest court was the government's last legal
opportunity to claim royalties from a raft of oil contracts signed in the 1990s.
In January, a New Orleans-based federal appeals court sided with Anadarko
Petroleum Corp. (APC) in a controversial and precedent-setting case, finding the
government couldn't collect royalties from eight oil and natural gas production
leases in the Gulf of Mexico.
Though the case involved only Kerr-McGee Oil and Gas Corp. leases now owned by
Anadarko, the ruling affects dozens of other oil and natural gas companies that
had signed leases in the Gulf between 1996 and 2000. Estimates vary, but the
government said in its Supreme Court petition that the lower-court ruling could
mean at least $19 billion in foregone royalties.
The leases were signed under the Outer Continental Shelf Deep Water Royalty
Relief Act of 1995 - designed to encourage expensive offshore oil and gas
development. Anadarko argued the law specifically prevented the collection of
royalties until a minimum volume of oil and gas production had been met, while
the Interior Department said the law gave it discretion to collect fees at a
price threshold.
The case was one of several oil-royalty issues that gave fodder to Democratic
lawmakers seeking to move the country away from fossil-fuel use and toward
renewable energy.
Outside the court system, Democratic lawmakers have tried to leverage payment
of the royalties that Congress believes are owed to the government. Several
legislators have drafted bills that would prevent oil companies from winning new
leases unless they negotiated a settlement. Such punitive laws are likely to be
successfully challenged in court, however.
While those efforts have largely been dropped, Democrats are planning to cut
tens of billions of dollars in tax breaks to the oil and natural gas industry.
On another front, Interior Secretary Ken Salazar is in the process of
restructuring the royalty program, including considering raising rates for oil
companies.
By Ian Talley, Dow Jones Newswires; (202) 862 9285; ian.talley@dowjones.com
(END) Dow Jones Newswires
10-05-091031ET
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