Three US senators to write Gulf lease legislation

Washington (Platts)--20Mar2007

The Democratic chairman of a Senate subcommittee responsible for US
Department of Interior funding and two Republicans on the panel Tuesday said
they would jointly prepare legislation to induce oil and natural gas producers
with flawed Gulf of Mexico leases to renegotiate them and receive in return
three-year extensions of the agreements.

Senator Dianne Feinstein of California said she would accept an earlier
recommendation by Interior that Congress offer extensions to companies that
agree to allow Interior to insert provisions in 1998-99 leases cutting off
royalty relief when oil and gas prices rise to certain levels. Contrary to its
customary practice, Interior's Minerals Management Service failed to include
such price thresholds in leases written during those two years.

"It would be my intention then to draft legislation along the lines
suggested," Feinstein said at a hearing held by the Interior, Environment and
Related Agencies Subcommittee on Interior's fiscal 2008 budget request.

The subcommittee's top Republican, Senator Larry Craig of Idaho, and
panel member Pete Domenici, Republican-New Mexico, said they would join
Feinstein in drafting such legislation for consideration by the Appropriations
Committee or the Energy and Natural Resources Committee. Domenici is the
ranking Republican on the energy panel.

"I think it would give the companies an opportunity to step forward,"
Craig said. Added Domenici: "I think an awful lot [of the companies] will be
willing to sign on."

Feinstein pledged to act after Interior Secretary Dirk Kempthorne
repeated assertions by his department that the more than 40 companies with
leases lacking price thresholds are unlikely to consider changes in the
agreements until they see if Congress will act on the matter. In 2006,
Interior struck deals with six companies to apply such provisions for
production occurring as of October 1, 2006.

--Bill Loveless, bill_loveless@platts.com