Anadarko Wins Landmark Gulf Royalty Relief Case

A federal judge in Louisiana has ruled in favor of Anadarko Petroleum Corporation in what could be a precedent-setting case against the U.S. government's ability to collect royalties from Gulf of Mexico energy producers. The government granted royalty relief to a host of Gulf drillers beginning in 1995, at a time when production was sagging and prices were low. The U.S. Minerals Management Service [MMS] claims it retains the right to tax Gulf producer earnings on leases granted between 1996 and 2000 in a case where prices recover, such as presently. Anadarko, which said $157 million was at stake, took the government to court over its attempt to collect back royalties. Anadarko argued it took a big chance by operating in the Gulf during a time of low demand and prices, and now deserves to reap the benefits of that risk-taking. On Wednesday, U.S. District Judge Patricia Minaldi ruled against the MMS, claiming the agency's "action is unlawful because it contradicts the plain, unambiguous text of the [1995] statute." Wednesday's ruling may set a precedent for other Gulf energy companies to resist the government's attempts to collect royalties on contracts signed under the premise of royalty relief.

Sources: Press release, Wall Street Journal, Dow Jones Newswires, Reuters
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