Bill challenges Kerr-McGee deepwater lawsuit

A House subcommittee chairman introduced legislation aimed at heading off Kerr-McGee's challenge of an order for it to pay full royalties from deepwater leases.

May 2, 2006

Nick Snow
Washington Correspondent

WASHINGTON, DC, May 2 -- A House subcommittee chairman introduced legislation on May 1 aimed at heading off Kerr-McGee Corp.'s challenge of a US Minerals Management Service order for it to pay full royalties from deepwater leases.

Darrell Issa (R-Calif.), chairman of the House Committee on Governmental Reform Subcommittee on Energy and Resources, entitled his bill, HR 5231, the Deep Water Royalty Jurisdiction Act.

"If companies felt the Department of the Interior did not have authority to include royalty provisions, they should have said so before they signed the leases," he said.

Kerr-McGee in March sued the MMS and the Department of Interior challenging an MMS claim for royalties on production from leases covered by the Deep Water Royalty Relief Act of 1995. The suit argues that the claim on eight leases covers production below volume thresholds that should be exempt from royalty. It says the exemption isn't subject to price thresholds (OGJ, Mar. 27, 2006, Newsletter).

Issa said his bill is narrowly drawn to preclude any federal court's hearing or deciding any question pertaining to the authority Congress granted the Interior secretary to impose price thresholds on leases issued from 1995 through 2000.

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