Supreme Court Refuses to Review Oil Royalty Case That Could Cost U.S. $18 Billion

WASHINGTON, Oct. 5 (UPI) — The U.S. Supreme Court Monday refused to review an offshore oil royalty case that could end up costing the U.S. government $18 billion.

A federal appeals court in New Orleans ruled in January that Anadarko Petroleum Corp. does not have to pay $350 million in royalties on eight U.S. deepwater leases it holds in the Gulf of Mexico, the Oil & Gas Journal reported.

Kerr-McGee Oil & Gas Corp. originally obtained the leases. Anadarko acquired them when it bought Kerr-McGee in 2006, and argued in court that the 1995 U.S. Deepwater Royalty Relief Act waived payments until certain amounts of oil had been recovered from the leases.

The U.S. Interior Department argued that the royalties were due because oil and gas prices had risen beyond certain levels, the Journal said. The government said it could lose up to $19 billion if other deepwater producers followed Anadarko’s example.

Interior Secretary Ken Salazar issued a statement after the rejection by the high court.

“The oil and gas leases in question are leases that were issued between 1996 and 2000,” the statement said. “The department under the Clinton and Bush administrations took the position that once the price of oil and gas reaches a certain level oil and gas royalties should be collected under these deep water oil and gas. In my view, they were correct.

“We will work with all involved in the days ahead to determine the best way forward,” the statement said.

Copyright 2009 by United Press International

Categorized | Energy & Fuels, Other
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