Rahall Pans Effort to Extend Gulf Leases to Recoup Lost Royalties

Giving oil companies an extension on their Gulf of Mexico leases to institute price thresholds and recoup lost royalties is a nonstarter for the chairman of the House Natural Resources Committee.

Rep. Nick Rahall (D-W.Va.) said the proposal floated by the Interior Department in the Senate is not strong enough to get companies to play ball. "I think we ought to be more forceful," Rahall said in an interview yesterday. "We ought to be more demanding of what the taxpayers are owed."

Sens. Dianne Feinstein (D-Calif.) and Pete Domenici (R-N.M.) are working on separate plans for a three-year extension to entice companies to renegotiate. Interior Secretary Dirk Kempthorne endorsed those efforts earlier this week, but the Bush administration has not submitted a legislative proposal to Congress (Greenwire, March 20).

Rahall supports legislation the House passed in January that would block companies holding 1998-1999 leases from buying new offshore leases unless they agree to price thresholds or pay new fees.

Only six companies have volunteered to renegotiate the 1998 and 1999 leases signed without price thresholds, and Interior officials believe the remaining 40-plus companies are waiting to see how Congress acts. At a House hearing yesterday, Minerals Management Service Director Johnnie Burton speculated company negotiators are under pressure not to deal with Interior at all.

"They tell me they are under pressure from stockholders, their board of directors, their executives, about giving up money they do not owe," Burton said.

The concept of granting lease extensions came up during discussions with oil companies, including Chevron and Devon, MMS stated in written comments Wednesday to the House Natural Resources Committee. "Presumably, by making a concession such as allowing some leases to be extended, companies could go back to stockholders and show they received some benefits in the negotiation," the letter states.

Interior has been under fire over its efforts to address the late 1990s deep water leases that allow royalty waivers regardless of energy prices. The mistake, if uncorrected, could eventually cost the Treasury an estimated $10 billion in lost royalties. It has already resulted in nearly $1 billion in foregone royalties, according to MMS estimates.

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