Report: Chevron may avoid $1B in payments

Incomplete lease agreements could allow oil giant to avoid paying royalties to federal government on new oil field, newspaper says.

NEW YORK (Reuters) — A group of oil companies led by Chevron Corp. that last week announced the discovery of a huge oil field in the Gulf of Mexico could avoid more than $1 billion in royalty payments to the federal government, The New York Times reported Tuesday.

The potential bonus for Chevron and its partners stems from a mistake the Interior Department made in signing offshore leases in the late 1990s for drilling in federal waters, the newspaper said.

Chevron and its partners, Devon Energy and Statoil ASA of Norway, have six leases in the Jack oil field about 175 miles off Louisiana, and two of the leases allow the firms to avoid royalties on as much as 87.5 million barrels per lease, the Times said.

The benefit, known as royalty relief, was supposed to be halted if the price of oil climbed above $36 a barrel, but that restriction was omitted on all leases signed in 1998 and 1999, including the two held by Chevron and its partners, the newspaper reported.

Reuters