Domenici proposes compromise on 1998, 1999 deepwater leases

US Sen. Pete V. Domenici (R-NM) reported plans to propose 3-year extensions of federal Gulf of Mexico deepwater leases issued in 1998 and 1999 without price thresholds if the leaseholders agree to new terms including such a provision.

Nick Snow
Washington Correspondent

WASHINGTON, DC, Mar. 21 -- US Sen. Pete V. Domenici (R-NM) reported plans to propose 3-year extensions of federal Gulf of Mexico deepwater leases issued in 1998 and 1999 without price thresholds if the leaseholders agree to new terms including such a provision.

During a Senate Interior Appropriations Subcommittee hearing on Mar. 20, Domenici, who is chief minority member of the Energy and Natural Resources Committee, said he is open to other ideas to bring leaseholders to the negotiating table, but added that offering an extension in exchange for price thresholds deserves a closer look.

Noting that the omission of price thresholds in the original leases could cost the federal government as much as $10 billion, Domenici said, "I recognize that this will not entirely solve the problem and make the Treasury 100% whole, but the bottom line is that this was a major mistake by [administration of former President Bill Clinton] that has already cost the government nearly $1 billion. As I have said, I am open to other solutions that would withstand legal challenges, but we must act soon."

US House members have proposed either prohibiting holders of deepwater leases without price thresholds from participating in future federal lease sales if they are unwilling to voluntarily renegotiate terms, or requiring them to pay "resource conservation fees" to make up royalties which would be suspended under the original leases.

The US Minerals Management Service has tried to get holders of such leases to voluntarily renegotiate terms. Six have signed new agreements already, C. Stephen Allred, assistant Interior secretary for lands and minerals management, told the Senate Energy and Natural Resources Committee on Jan. 18.

At the Senate appropriations subcommittee hearing, US Sec. of Interior Dirk A. Kempthorne said he would work with Domenici and other senators to reach a solution. He also pledged that President George W. Bush's administration would not omit price thresholds from oil and gas leases.

Contact Nick Snow at nsnow@cox.net.

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