House Democrat vows to address 1998-99 contracts in next Congress

Washington (Platts)--13Dec2006

US House Representative Edward Markey, Democrat-Massachusetts, vowed that
the 110th Congress, which will convene in January with a Democratic majority,
will ensure that oil companies that did not agree to the insertion of price
threshold clauses in 1998 and 1999 deepwater Gulf of Mexico federal drilling
leases will ultimately pay such royalties or face punitive action.

A handful of companies are expected to sign final agreements with the US
Minerals Management Service Thursday, inserting into their contracts
price threshold language that would require them to pay royalties on
production when prices are at historically high levels, industry sources said
Wednesday.

The US Treasury stands to lose a $10 billion in lost royalty
revenues if companies do not agree to renegotiate the deals.

Two of the major deepwater players, BP and Shell, are among the companies
that will ink deals Thursday, sources said. But other major players are said
to be staying on the sidelines.

Markey, in a statement released Wednesday evening, noted that
ChevronTexaco has indicated to him that, while the company is seeking a
"mutually acceptable resolution" to the issue of price thresholds in the lease
contracts, it has not reached a deal.

"Chevron's opportunity to fix this problem on its own has passed," Markey
wrote.

Markey and Rep. Maurice Hinchey, a New York Democrat, sponsored a bill
that would have prevented companies that failed to agree to insert price
threshold language from obtaining acreage in future federal lease sales.

The bill failed in the last Congress, which wrapped up its work last
week, partly because of intense lobbying by the oil and gas industry. But
Markey vowed that it would became law soon.

"Chevron and Big Oil's attempt to stop the US Congress from compelling
them to renegotiate these oil leases has failed," Markey said. "In January,
the newly elected Democratic Congress will ensure that these companies stop
fleecing the American people and pay their fair share to drill on public
land."

--Cathy Landry, cathy_landry@platts.com

For more news, request a free trial to Platts Oilgram News at
http://www.platts.com/Request%20More%20Information/index.xml?src=story
or subscribe now at
http://www.platts.com/infostore/product_info.php?cPath=1_29&products_id=29