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Oil Firms Disputing U.S. Royalty Bills

Power: Government sees a long legal battle over fees for production on federal lands.

January 31, 1997|From Bloomberg News

WASHINGTON — Interior Department officials said Thursday that they expect lengthy litigation with big oil companies over disputed royalty payments for oil produced on federal lands in California before 1980.

The department's Minerals Management Service has sent out bills totaling $385.4 million to a number of oil companies; all have appealed.

"The lawyers will ultimately decide" how much of the estimated underpayments the government eventually collects, said MMS Director Cynthia Quarterman.

The dispute stems from the prices companies used to calculate royalties. The government says royalty payments were based on artificially low prices. Oil companies dispute the charges and say the government can't collect after so much time.

Shell Oil Co. owes the most, $176 million, the government says. Oryx Energy Co., Mobil Corp. and USX-Marathon Oil Corp. owe a combined $118 million, and $91 million has been billed to eight other companies.

U.S. Sen. Barbara Boxer (D-Calif.) joined MMS officials at a news conference to denounce what she called deadbeat companies. California schools would get between $75 million and $80 million if all the bills were paid, she said.

"I urge all Californians to write or e-mail these companies and demand that they pay our schools what they owe," Boxer said.

MMS has proposed changing the way oil royalties are valued so as to avoid similar problems in the future. "We expect a large number of comments" on the proposal, and hope to refine it based on those, Quarterman said.

Mobil spokesman Chris Springham said the company had cooperated with the government but "we've challenged certain actions because they are beyond the legal authority" of the MMS.

Shell said, "Our position is the MMS is asking for records that have no relevance to the application of their regulations."

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