(This article was originally published Thursday.)
WASHINGTON (Dow Jones)--The U.S. Minerals Management Service Thursday said it had signed agreements with several oil and gas companies on controversial 1998-1999 leases that omitted royalty price thresholds.
The MMS - which has come under harsh criticism from Congress for its mishandling of the leases - said it had signed agreements with BP PLC (BP), ConocoPhillips (COP), Marathon Oil Company (MRO), Royal Dutch Shell (RDSA), and Walter Oil and Gas Corporation.
The agency said the companies would pay royalties for production from Oct. 1, 2006, instead of from when the leases were signed as many lawmakers had urged.
MMS spokesman Gary Strasburg said the lost royalties from the leases totaled around $900 million, but a recent Interior Department Inspector General's report said the royalty collection compliance program was so inefficient, the agency couldn't know how much was actually owed the government for all oil and gas royalties.
Strasburg said his department hadn't yet reached a deal with Chevron Corp. (CVX), which earlier this year announced a massive discovery part of which lies under one of the 1998-1999 leases.
Earlier Thursday, the House Government Reform Committee said it was seeking an Attorney General's opinion on whether the government has the authority to recover billions of dollars in lost oil and gas royalties. Also Thursday, House leader-elect Nancy Pelosi, D-Calif., said one of her top priorities would be to seek the unpaid royalties.
Several Democrats have been pushing to force the companies to re-negotiate or forfeit their ability to sign new leases. Such an amendment only marginally failed to be tacked on the the Offshore Continental Shelf drilling bill that passed Congress last week.
The Government Reform Committee said in its release, however, that according to legal advice from law firm Lowey Dannenberg Bemporad & Selinger, "MMS exceeded its authority in issuing the leases."
The legal analysis "concludes that the administration has the legal recourse to seek recovery of the lost taxpayer revenues."
Assistant Secretary of Land and Minerals Management C. Stephen Allred said in the MMS press release, "I am pleased at the progress we are making on resolving this issue.
"We are continuing to work to resolve this difficult problem in a manner that ensures the American taxpayer receives a fair rate of return," said Allred.
The assistant secretary said the agreements signed Thursday "are a step in the right direction," adding, "we look forward to continuing to work with Congress on this issue."
But Rep. Ed Markey, D-Mass., who has been one of the leaders of the call to force the companies to renegotiate, said, "Their too little, too late efforts to recoup only a small percentage of the billions of dollars of oil and gas royalties that the American people are rightfully owed is pitiful."
A Government Accountability Office said the royalty omission represented an estimated $10 billion in lost revenues for taxpayers.
"When the new Democratic Congress takes office in January, there will be a new cop on the beat to force every big oil company that is currently lining its pockets with taxpayer dollars come back to the negotiating table."
Strasburg said the MMS had not yet calculated how much revenue the deals would garner for taxpayers.
The companies that agreed to a deal are a fraction of the 54 companies that signed the 1998-1999 leases, representing only 17% of the total leases in question.
Other companies that signed the leases include ExxonMobil (XOM), Statoil ASA (STO), Total SA (TOT), Anadarko Petroleum Corp. (APC), Eni SPA (E), Norsk Hydro ASA (NHY) and Murphy Oil Co. (MUR).
-By Ian Talley, Dow Jones Newswires; (202) 862 9285;
ian.talley@dowjones.com;
So let me get this straight; the U.S. Mineral Management Services screws up, and congress wants to sue the oil companies for perceived back-royalties and use strong arm tactics to force them to renegotiate the leases? You think that would fly if the drilling areas were privatley owned and the privately owned company wanted to be reimbursed for making a terrible deal? I wonder how many of those that will vote for this took big oil's money in campaign contributions?