US House bill takes aim at lawsuit challenging royalty payments

US House bill takes aim at lawsuit challenging royalty payments

Washington (Platts)--2May2006

US Representative Darrell Issa, Republican-California, Tuesday introduced
a bill to block a lawsuit he says could result in the federal government
losing billions in offshore oil and natural gas royalties.

The bill (HR 5231) would strip the federal courts of any jurisdiction
over suits involving "the application of a price threshold in determining the
volume for which suspension of royalties applies."

In March, Kerr-McGee Oil and Gas sued the Interior Department in federal
court in Louisiana, saying the firm does not owe royalties on offshore leases
it purchased between 1996 and 2000.

The leases were sold under a 1995 law that granted royalty relief until
production volume and prices reached a certain level. Kerr-McGee argued that a
2004 decision by the US Court of Appeals invalidated the methodology by
which Interior's Minerals Management Service determined the firm owed
royalties on the leases.

If Kerr-McGee prevails, Issa said in a statement, the precedent set could
result in a loss to taxpayers of $60 billion. An Issa spokesman said the
measure, which has six co-sponsors, has been referred to the House Judiciary
Committee.

A Kerr-McGee spokesman did not return a call for comment.

Separately, MMS released a report Tuesday that said deepwater production
continues to grow, with 118 projects underway in the Gulf as of March.

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