NGI The Weekly Gas Market Report / NGI All News Access

House Lawmaker Offers Bill to Block Kerr-McGee Royalty Lawsuit

Rep. Darrell Issa (R-CA) last Tuesday introduced legislation to bar federal court review of lawsuits that he estimates could deprive the federal government of billions of dollars in royalties.

The bill (HR 5231) would prohibit federal courts from hearing or deciding any issues related to the "application of a price threshold" to determine the suspension of royalties for oil and natural gas volumes under the Outer Continental Shelf Lands Act. Absent enactment of the legislation, the U.S. Treasury could lose up to $80 billion in revenue, said Issa, chairman of the House Energy and Resources Subcommittee.

The measure would block a Kerr-McGee Oil and Gas Corp. lawsuit, which was filed in March, challenging an Interior Department order requiring the company to pay royalties on production from offshore leases issued between 1996 and 2000.

The leases were sold to Kerr-McGee leases under a 1995 royalty law, which granted producers relief from royalties for as long as production volumes and commodity prices remained under certain ceilings. The Oklahoma producer said the eight wells on which the government is trying to collect royalties are "well short of the minimum" production level of 87.5 million barrels of oil equivalent per lease, and therefore should not be subject to royalties.

Kerr-McGee also challenges whether the 1995 royalty law gives Interior the authority to set price thresholds, above which royalties on production would be collected by the federal government.

The Issa bill, which is co-sponsored by six other lawmakers, has been referred to the House Judiciary Committee.

Issa said his subcommittee is continuing its investigation into Interior's management of natural gas leases, which it began in February following the disclosure that price threshold provisions were omitted from leases issued in 1998, 1999 and 2000. The panel continues to review documents related to Interior's lease agreements in order to determine why the price thresholds were deleted and if any criminal conduct occurred, he noted.

©Copyright 2006 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.