US Interior Secretary To Review Controversial Leases To Oil Cos
February 20 2009 - 6:16PM
Dow Jones News
U.S. Interior Secretary Ken Salazar said Friday that changes
regarding oil companies' leases would likely be part of a
comprehensive energy bill Congress is drafting.
Salazar, speaking to reporters, also said his department was
considering how to recoup billions of dollars in revenues the
government believes it's owed by oil companies because of
controversial leases in the Gulf of Mexico that were signed in the
late 1990s but omitted royalty price thresholds.
"We're going to take a look at those 1998-1999 leases. I'm not
sure if it's going to be done through legislation or settlement
discussions, but it is something we're considering," he said.
Government auditors say the omission could ultimately cost tens
of billions of dollars in lost royalty revenues if the companies
and the administration reach a settlement.
Many of the companies have been willing to pay royalties on
future production, but some Democratic lawmakers have tried to pass
legislation that would prevent the government signing new leases
with the firms if they don't again negotiate.
Six companies - including BP PLC (BP), Royal Dutch Shell (RDSA),
ConocoPhillips (COP) and Marathon (MRO) - originally agreed to pay
royalties on the leases for production from October 2006. But
negotiations have stalled, particularly after a court ruling in
favor of the oil industry, and the firms only represented a
fraction of the total lease owners.
Around 40 companies representing 80% of the production haven't
agreed to re-negotiate the leases, including Exxon Mobil Corp.
(XOM), Total SA (TOT), Chevron Corp. (CVX) and Anadarko Petroleum
Corp. (APC), according to Interior Department data. Democrats have
been seeking royalty payments for all output from the leases.
Salazar has said one of the royalty changes he's considering
doing away with is the royalty-in-kind, or RIK, policy and other
programs. The RIK allows companies to pay their royalties to the
government in oil rather than cash.
"Maybe as we deal with the royalty-reform issue, we might be
able to create the kind of revenue stream that will allow funding
of landmark conservation funds" and other programs, Salazar had
said earlier this month.
Another possible target is the deep-water royalty relief
program. Industry officials say they're concerned, and such reform
could prevent new development, particularly in more costly offshore
areas.
-By Ian Talley, Dow Jones Newswires; 202-862-9285,
Ian.talley@dowjones.com