Feinstein Eyes Budget Process to Recoup Royalties

Sen. Dianne Feinstein (D-Calif.) wants to attach language to the Interior Departments’s fiscal 2008 spending bill that would help the federal government recoup almost $10 billion in oil and natural gas lease royalties.

At issue are leases the Interior Department’s Minerals Management Service issued in 1998 and 1999 to companies drilling for oil and gas deep beneath the Gulf of Mexico. The leases granted royalty “relief” to the companies as a way to encourage drilling in hard-to-reach domestic areas, so long as prices for the commodities remained low.

The leases — 570 of which are still active — did not include commodity price thresholds. The Interior Department says its inadvertent omission of such thresholds have cost taxpayers about $900 million amid rising oil and gas prices and record petroleum industry profits.

The omission could amount to another $9 billion in lost revenue over the next 25 years, Interior Department Assistant Secretary Stephen Allred told lawmakers yesterday during a hearing in the Senate Interior Appropriations Subcommittee.

E&E Daily