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US gas rights payments not rising with prices: report

January 23, 2006

WASHINGTON (Reuters) – The payments that energy companies
are required to make for the right to pump oil and gas on
federal property have not kept pace with soaring industry
prices and profits, The New York Times reported in Monday’s
edition.

The report said the federal government collected little
more money last year than it did five years ago from the
companies that tapped more than $60 billion worth of American
oil and gas reserves.

A three-month investigation by the newspaper found that if
royalty payments in fiscal 2005 for natural gas had risen in
step with market prices, the government would have received
about $700 million more than it actually did, the report said.

According to the newspaper, federal regulations allowed
companies producing natural gas to provide the U.S. Interior
Department with much lower sale prices than they reported to
their shareholders.

Sales prices are the crucial determinant for calculating
government royalties, the newspaper said.

Industry executives deny any wrongdoing and argue that the
disparities stems from different rules for calculating the sale
prices for paying royalties and the sale prices for informing
shareholders, the report said.

Natural gas prices nearly doubled between 2001 and 2005,
but the $5.15 billion in gas royalties for 2005 was less than
the $5.35 billion in 2001, the newspaper said.

It said that when oil and gas are combined, royalties were
about $8 billion in 2005, almost the same as in 2001.

The newspaper said that because much of the information
about specific transactions is kept secret, it remains unclear
to what extent, if at all, the weakness in royalty payments
stems from deliberate cheating or from issues with rules for
payments.


Source: reuters



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