US DOJ Petitions Supreme Court in Anadarko Royalty Case

WASHINGTON (Dow Jones Newswires), Jul. 14, 2009

The U.S. Department of Justice on Monday appealed to the Supreme Court to reject a lower-court ruling that blocked the Interior Department from collecting as much as $10 billion in oil fees.

In January, a federal appellate court sided with Anadarko Petroleum Corp. (APC) in a controversial and precedent-setting case, finding the government couldn't collect royalties from eight oil and natural gas production leases in the Gulf of Mexico.

Though the case involved only Kerr McGee leases now owned by Anadarko, the ruling affects a raft of other oil and natural gas companies that had signed leases in the Gulf between 1996 and 2000. Estimates vary, but the government said it could mean $10 billion in royalties never recovered.

The leases were signed under the Outer Continental Shelf Deep Water Royalty Relief Act of 1995 -- designed to encourage expensive offshore oil and gas development. Anadarko argues the law specifically prevented the collection of royalties until a minimum volume of oil and gas production had been met, while the DOI says the law gave it discretion to collect royalties at a price threshold.

The case is one of several oil-royalty issues that gave fodder to Democratic lawmakers who are seeking to move the country away from fossil-fuel use and toward renewable energy.

Interior Secretary Ken Salazar has said he will restructure the royalty program, raising rates for oil companies and revenues for the federal government.  

Copyright (c) 2009 Dow Jones & Company, Inc.


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Mars Freudenberg | Jul. 15, 2009
Why must companies that drill in International waters pay the U.S. government royalties? I'm not in the business, but paying the government royalties for no reason seems illogical to me. What services are the Feds providing to justify fees?

Mike Ordoyne | Jul. 15, 2009
A lease is a Binding Contract, with the Gov. or Private land owner. Water Royalty Relief Act of 1995 was designed to encourage expensive offshore oil and gas development. This Act gave our US Gulf of Mexico the Jump start that it needed to prove it self as a Major producer.

After this all the other New lease were changed to have the MMS get royalties. The deepwater area is very expensive to drill & produce Oil & Gas. Kerr McGee was a Pionneer that help get the deepwater area started as a major producer. The orginal Lease agreement should stand.

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