Appeals court backs earlier ruling for Kerr-McGee in deepwater royalty suit

A federal appeals court affirmed on Jan. 12 a US district court's ruling that Kerr-McGee Oil & Gas Corp. should not have to pay royalties on eight Gulf of Mexico deepwater leases from 1996 to 2000 despite price thresholds imposed by the US Department of the Interior.

The company, which is now part of Anadarko Petroleum Corp., argued that it should not have to pay royalties even though natural gas produced from the leases exceeded the leases' inflation-adjusted price threshold in 2003 because volume thresholds had not been reached. Congress established the thresholds as part of the 1995 Outer Continental Shelf Deepwater Royalty Relief Act which was designed to promote OCS exploration and production in deep water.

DOI disagrees with the US Fifth Circuit Court of Appeals ruling and is exploring every option, including appealing and continuing to work with Congress to resolve the matter, a spokesman told OGJ Washington Pulse in a Jan. 13 e-mail message.

"As we have said before, if the court's interpretation of Congress's action in 1995 is correct, certain leaseholders will be able to produce massive amounts of oil and gas without paying royalties to the United States without regard to the price, perhaps amounting to one of the biggest givewaways of federal resources by Congress in modern history," he said.

An Anadarko spokesman said on Jan. 13 that the appeals court's affirmation upheld clear congressional intent to assure that producers were afforded the royalty treatment granted as encouragement to make huge investments in the deepwater GOM.

Continued value

"The Deepwater Royalty Relief Act continues to provide value for American consumers in the form of energy that we and other deepwater operators have produced as well as the jobs that have been created and government revenue that has been enhanced through taxes paid, upfront bonuses paid and record-setting lease sales," he said in an e-mailed response to an OGJ Washington Pulse telephone inquiry.

Two oil and gas trade associations on Jan. 13 also applauded the US Fifth Circuit Court of Appeals ruling. The panel of judges unanimously affirmed that Congress established only a volume, and not a price, threshold when it passed the Deepwater Royalty Relief Act, American Petroleum Institute President Jack N. Gerard said in a statement.

"That act was passed at a time of historically low crude oil prices as a means to increase production and sustain jobs in a struggling industry. It was enormously successful, helping to boost Gulf of Mexico production by 50% in less than a decade. This production, which Congress considered would likely remain in the ground for years without the royalty relief program, helps reduce our dependence on foreign oil and keep jobs at home," he said.

The decision also ensures that the federal government's executive branch does not overstep authority it receives from Congress, Independent Petroleum Association of America President Barry Russell maintained. The ruling upholds the US Constitutions system of checks and balances, he said.

"The intent of Congress with the Deepwater Royalty Relief Act was to provide an incentive for companies to obtain royalty relief based on the volumes of crude oil and natural gas produced, rather than on a price threshold. [DOI] subsequently installed a price threshold that would determine when those incentives would cease. The circuit court has now found the Interior Department's actions to be outside the scope of the law," Russell said.

Contact Nick Snow at nicks@pennwell.com

Related Articles

Shell, BG merger cleared by EU

09/03/2015 The European Commission has unconditionally approved the planned $70-billion merger of Royal Dutch Shell PLC and BG Group PLC reported in April.

Inpex submits revised plan to Indonesia for Abadi LNG project

09/03/2015 Inpex Corp., Tokyo, has submitted a revised plan of development to the Indonesian government for the Abadi LNG project in the Arafura Sea. It envis...

Judge vacates FWS listing of lesser prairie chicken as threatened

09/03/2015 A federal district judge in Texas vacated the US Fish & Wildlife Service’s listing of the lesser prairie chicken as a threatened species after ...

Appeals court rules for environmental groups in Montana lawsuit

09/02/2015 A federal appeals court ruled that three environmental groups may have standing in a lawsuit to block oil and gas leasing on federal land in Montan...

EIA: Benefits of lifting US crude export ban most evident if output rises

09/02/2015 A study released Sept. 1 by the US Energy Information Administration was apparent cause for celebration for several oil and gas industry groups, wh...

PHMSA will award $54.1 million in pipeline safety grants to states

09/02/2015 The US Pipeline and Hazardous Materials Safety Administration plans to award nearly $54.1 million in grants to support pipeline safety programs in ...

India to open 69 marginal fields for bidding

09/02/2015

To stimulate investment and increase production, India plans to open 69 oil fields for competitive bidding.

Unconventional production raises unexpected tax questions, forum told

09/01/2015 Unconventional oil and gas resource development has raised unexpected taxation questions that potentially could strain federal, state, and local go...

Rand Corp. releases NETL-commissioned energy workforce studies

09/01/2015 Rand Corp. released two energy workforce development studies commissioned by the US Department of Energy’s National Energy Technology Laboratory in...
White Papers

UAS Integration for Infrastructure: More than Just Flying

Oil and gas companies recognize the benefits that the use of drones or unmanned aerial systems (UAS) c...

Solutions to Financial Distress Resulting from a Weak Oil and Gas Price Environment

The oil and gas industry is in the midst of a prolonged worldwide downturn in commodity prices. While ...
Sponsored by

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by
Available Webcasts


Operating a Sustainable Oil & Gas Supply Chain in North America

When Wed, Oct 7, 2015

Short lead times and unpredictable conditions in the Oil & Gas industry can create costly challenges in supply chains. By implementing a LEAN culture of continuous improvement you can eliminate waste, increase productivity and gain end-to-end visibility leading to a sustainable and well-oiled supply chain.

Please join us for this webcast sponsored by Ryder System, Inc.

register:WEBCAST


The Resilient Oilfield in the Internet of Things World

When Tue, Sep 22, 2015

As we hear about the hype surrounding the Internet of Things, the oil and gas industry is questioning what is different than what is already being done. What is new?  Using sensors and connecting devices is nothing new to our mode of business and in many ways the industry exemplifies many principles of an industrial internet of things. How does the Internet of Things impact the oil and gas industry?

Prolific instrumentation and automation digitized the industry and has changed the approach to business models calling for a systems led approach.  Resilient Systems have the ability to adapt to changing circumstances while maintaining their central purpose.  A resilient system, such as Maximo, allows an asset intensive organization to leverage connected devices by merging real-time asset information with other critical asset information and using that information to create a more agile organization.  

Join this webcast, sponsored by IBM, to learn how about Internet of Things capabilities and resilient systems are impacting the landscape of the oil and gas industry.

register:WEBCAST



On Demand

Taking the Headache out of Fuel License and Exemption Certificates: How to Ensure Compliance

Tue, Aug 25, 2015

This webinar, brought to you by Avalara, will detail the challenges of tax document management, as well as recommend solutions for fuel suppliers. You will learn:

-    Why it’s critical to track business partner licenses and exemption documents
-    The four key business challenges of ensuring tax compliance through document management
-    Best practice business processes to minimize exposure to tax errors

register:WEBCAST


Driving Growth and Efficiency with Deep Insights into Operational Data

Wed, Aug 19, 2015

Capitalizing on today’s momentum in Oil & Gas requires operational excellence based on a clear view of what your business data is telling you. Which is why nearly half* of oil and gas companies have deployed SAP HANA or have it on their roadmap.

Join SAP and Red Hat to learn more about using data to drive process improvements and identify new opportunities with the SAP HANA platform running on Red Hat Enterprise Linux. This webinar will also show how your choice of infrastructure impacts the performance of core business applications and your ability to achieve data-driven insights quickly and reliably.

*48% use SAP, http://go.sap.com/solution/industry/oil-gas.html

register:WEBCAST


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected