Statement of Friends of the Earth on the Kerr-McGee Oil Royalty Lawsuit
Erich Pica, 202-222-0739
Today, the Associated Press/Dow Jones reported that the Kerr-McGee Corporation filed a lawsuit with the federal court in Louisiana challenging the Department of the Interior’s rules for royalty relief. The lawsuit reportedly challenges the Department of the Interior’s inclusion of “price thresholds” in oil and gas contracts entered into between Kerr-McGee and the federal government for leases sold in 1996, 1997, and 2000. Price threshold are used to reduce or eliminate royalty relief granted to oil companies when prices reach a certain level. Currently, oil companies are not entitled to royalty relief when the price per barrel exceeds approximately $34. Current oil prices are over $60 a barrel. Contracts for leases sold in 1998 and 1999 did not contain price thresholds. If successful, the lawsuit would force the federal government to pay back oil royalties paid as a result of the threshold, as well as prevent the federal government from collecting royalties on approximately 80 percent of the federal off-shore leases in the Gulf of Mexico.
“Today’s action by Kerr-McGee represents a greedy new low for Big Oil. Not content with its nearly $1 billion profit in 2005, a whopping 250 percent increase over 2004, the company has launched a legal effort to steal money from the federal government. This will further pad Kerr-McGee’s already hefty profit margin. This lawsuit also represents the opening salvo by oil and gas companies drilling in the Gulf of Mexico to avoid paying $35 billion in royalty payments over the next five years.”