you're joking, right?

Chevron Could Avoid Huge Royalties on New Field
Edmund L. Andrews
NY Times, 9/12/06

A group of oil companies led by Chevron, which said last week that they had discovered a huge new oil field in the Gulf of Mexico, could avoid more than $1 billion in royalty payments to the federal government for the oil.

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

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.

Why are these corporations recieving any kind of relief & don't tell me it's to spur development. That dog won't hunt. If there is money to be made the oil companies will be there. The relief just increases their upside. How do you omit such an important clause?

The exact value of the potential break on federal payments will depend both on the price of oil and how much of it comes from the two leases. At $70 a barrel, the Chevron group could save about $1.5 billion in royalties if the government agreed that both leases were contributing to Chevron’s production.

Even before Chevron and its partners confirmed the discovery last week, the Government Accountability Office, the investigative arm of Congress, had estimated that the Treasury could lose as much as $20 billion over the next 25 years.

According to Congressional aides, the inspector general has uncovered evidence that midlevel Interior Department officials warned as recently as July that a new batch of leases could cost the government billions of dollars beyond the original misstep.

But Mr. Devaney is also expected to say that the Interior Department continues to suffer from a “lack of accountability.” Investigators have combed through 5,000 e-mail messages and are believed to have found some written as recently as this summer in which frustrated midlevel officials warned that the Interior Department had not fixed the bureaucratic and procedural problems that led to the original mistake.