Kerr-McGee Lawsuit : A Raid on the Treasury

November 1, 2007
03:52 PM
This week, by favoring Kerr-McGee Oil & Gas Corp. (now Anadarko) in its lawsuit against the Interior Department, a district court in Louisiana dramatically expanded the amount of royalty-free oil and gas that will be produced from Federal offshore leases in the Gulf of Mexico.  The company had challenged the authority of the Federal government to impose price thresholds for collecting royalties on certain oil and gas leases in the Gulf.
Senate Energy Committee Chairman Jeff Bingaman deeply disagrees with the court’s decision.  He was here when the Deepwater Royalty Relief Act was written and passed in 1995.  His recollection of Congressional intent is vivid: he knows that the law was not to allow royalty-free oil regardless of price.  He criticized this lawsuit when it was filed, and the litigation was discussed in the Senate Energy Committee’s very first hearing in this Congress, back in January.  Here is his reaction, in his words:
“This is a sad day for the American public.  We are continually reminded in Congress of critical national needs that cannot be met because of a lack of Federal funding.  Ordinary Americans are paying prices for oil and gas that might rise to unprecedented levels.  Oil and gas companies already have every fiscal incentive imaginable to produce more.  Yet this court decision will result in the oil and gas industry being able to tap billions of dollars of the public’s natural resources for free, with none of their resulting income shared with the American public, and with a billion-dollar refund from the U.S. Treasury on top of that.  It will not increase supply or lower the price that Americans pay for their energy.  It will simply create a huge hole in our Treasury at a time when royalty revenues are needed to pay for important priorities, including national security.”
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