Fifth Circuit Affirms Lower Court Determination That Interior Department Was Not Authorized by Congress to Exercise Discretion to Lift Royalty Relief Based on Price Thresholds Alone

摘要

On 1/12/09 the U.S. Fifth Circuit Court of Appeals in New Orleans upheld a lower court ruling that the Federal government could not collect royalties from eight oil and natural-gas production leases held by Kerr-McGee Oil and Gas Corp., and its successor Anadarko Petroleum Corp., under a 1995 law that gave oil companies royalty relief in exchange for their oil and natural gas drilling in the Gulf of Mexico. Kerr-McGee obtained the offshore leases between 1996 and 2000 when the price of oil and natural gas was low. Royalties were waived during that time until a certain amount of oil and gas was produced and a price target was met. The U.S. Interior Department, which oversees Gulf leases, tried to impose the royalties when fossil fuel prices rose in 2003. But Kerr-McGee Corp., later acquired by Anadarko, sued to avoid paying the royalties, arguing that even though market prices had risen the volume thresholds were not met. In 2007, a federal court in Lake Charles, La., sided with Anadarko (the new owner of the leases). The Interior Department appealed, and the appellate court denied that appeal on Monday. The Fifth Circuit appeal was heard by Circuit Judges King, Dennis, and Elrod, with Judge King delivering the written opinion. Kerr-McGee Oil and Gas Corp. v. U.S. Department of Interior (No. 08-30069).