USG royalty fixes would be prospective: MMS' Burton

Washington (Platts)--21Sep2006

The US Minerals Management Service would collect royalties prospectively
from oil and natural gas companies willing to accept changes in controversial
Gulf of Mexico leases they received in 1998 and 1999, MMS Director Johnnie
Burton said Thursday at a Platts Energy Podium event in Washington.

Burton said "18 to 20" companies have contacted MMS regarding the
possibility of discussing changes in leases from that period, which lack
customary provisions limiting royalty relief when oil prices increase to
certain levels. "About 10 of those companies have come into the building" to
discuss their leases, she said.

The mistake has triggered a controversy in Congress over the prospect
that taxpayers are foregoing billions of dollars in royalty revenue at a time
when oil prices have been unusually high. House and Senate committees, as well
as the Department of Interior's inspector general, are investigating the
lapse.

Burton told reporters that MMS, in striking any deals with leaseholders
to change their agreements, would charge them for royalties going forward. "We
will make it prospective," she said. "From the time you sign the deal you will
pay royalties." Burton said asking companies to pay royalties on production
that occurred before changes were made in leases would be unfair.

MMS is "very close" to deals with BP and Shell that would insert price
thresholds into their 1998 and 1999 lease contracts, she said.

To date, the government has lost about $1.3 billion in royalties on
volumes produced as a result of the 1998-99 leases, Burton said. The
congressional Government Accountability Office has estimated that the error
could ultimately cost the government $10 billion.

To hear a recording of the news conference, visit www.energypodium.platts.com


 

Copyright © 2005 - Platts

Please visit:  www.platts.com

Their coverage of energy matters is extensive!!.