Issa Bill Would Kill Industry Royalty Relief Lawsuit

Rep. Darrell Issa (R-Calif.) has introduced legislation that would block offshore oil and gas producers from legally challenging the Interior Department's suspension of "royalty relief" for deepwater leases when prices are high.

The move comes in response to a closely watched federal lawsuit filed this year by Kerr-McGee Corp. The suit claims Interior cannot under the 1995 Deepwater Royalty Relief Act set "price thresholds" that remove the subsidy when prices rise above a certain level.

The litigation challenges the price thresholds for certain leases issued in the 1990s and 2000. Royalty relief, or waivers, were an incentive offered in the 1995 law to encourage higher risk, higher cost deepwater Gulf of Mexico production at a time when energy prices were far lower.

Issa's bill, H.R. 5231, seeks to keep challenges to the price thresholds out of the courts. It says that no court "created by an act of Congress shall have any jurisdiction, and Supreme Court shall have no appellate jurisdiction" over the price threshold question for leases issued for the five years beginning in November of 1995.

The litigation could ultimately cost the government up to $60 billion over the next 25 years if Interior's ability to impose price thresholds is successfully challenged, according to a recent draft Government Accountability Office estimate.

The bill, called the Deep Water Royalty Jurisdiction Act, was referred to the Judiciary Committee.

The government is losing further royalties because leases issued in 1998 and 1999 did not include the price threshold provisions, an omission that Issa is investigating. He chairs the Energy and Resources Subcommittee of the House Government Reform Committee.

Copyright 2006 E&E Daily. All Rights Reserved. Visit E&E Publishing for a free trial.

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