Two US House Government Reform Committee leaders have demanded that the Department of the Interior develop a new plan to recover an estimated $2 billion of lost royalties from deepwater Gulf of Mexico leases issued in 1998 and 1999.
Committee Chairman Thomas M. Davis (R-Va.) and Energy and Resources Subcommittee Chairman Darrell E. Issa (R-Calif.) made their demand following US Minerals Management Service Director Johnnie Burton’s recent statement that MMS did not have the power to recover royalties, which have already been lost. “This is absurd. That money belongs to the federal government and must be collected just as any other unduly conferred on a private citizen,” the two lawmakers said in a Sept. 26 letter to Interior Sec. Dirk A. Kempthorne.
While deepwater Gulf of Mexico leases issued before and after 1998 and 1999 contain price thresholds when holders would begin to pay royalties, leases during those two years did not. Burton has said this apparently was the result of a communications breakdown within MMS, adding that an investigation now under way by DOI Inspector General Earl E. Devaney should provide a more definitive answer.
Burton also has said that some holders of the 1998 and 1999 leases may be reluctant to renegotiate because they based their operating budgets on the absence of royalties. Davis and Issa disagreed. “The intent of all parties was clear at the outset. Oil companies testified that they bid on the leases as if price thresholds were included, and with the understanding that it was the department’s policy to include them,” they said in their letter.