US DOJ Appeals Anadarko Oil Royalties Case for Interior Dept

WASHINGTON (Dow Jones Newswires), Mar. 30, 2009

The U.S. Department of Justice Monday asked a federal appeals court to reconsider an oil royalty case that could cost the the federal government billions of dollars in lost fees.

The case could set a precedent for a large number of other leases issued in 1996 to 2000, and the federal government could lose the royalties revenues from those leases.

In January, a federal appellate court sided with Anadarko Petroleum Corp. in a closely-watched case on oil and natural gas royalties that determined the government couldn't collect revenue from eight Gulf of Mexico leases.

The DOJ, on behalf of the Interior Department, is now asking for the full appellate panel to hear the case. If the Fifth Circuit Court of Appeals in New Orleans rejects the request, the DOJ could consider filing for the Supreme Court to hear the case.

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. Kerr-McGee, now owned by Anadarko, disputes $157 million in royalties the government says the firm owes. The company argued 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 scandals that gave fodder to Democratic lawmakers who are seeking to move the country away from fossil fuel use and towards 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.  

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