The Bush Assministration certainly loves theoil industry.
The Interior Department has dropped claims that the Chevron Corporation systematically underpaid the government for natural gas produced in the Gulf of Mexico, a decision that could allow energy companies to avoid paying hundreds of millions of dollars in royalties.
The agency had ordered Chevron to pay $6 million in additional royalties but could have sought tens of millions more had it prevailed. The decision also sets a precedent that could make it easier for oil and gas companies to lower the value of what they pump each year from federal property and thus their payments to the government.
Interior officials said on Friday that they had no choice but to drop their order to Chevron because a department appeals board had ruled against auditors in a separate case.
But state governments and private landowners have challenged the company over essentially the same practices and reached settlements in which the company has paid $70 million in additional royalties.
“The government is giving up without a fight,” said Richard T. Dorman, a lawyer representing private citizens suing Chevron over its federal royalty payments. “If this decision is left standing, it would result in the loss of tens of millions, if not hundreds of millions, of dollars in royalties owed by other companies.”
In return for the right to drill on federal lands and in federal waters, energy companies are required to pay the government a share of their proceeds. Last year, businesses producing natural gas paid $5.15 billion in government royalties.
But the Bush administration has come under fire on Capitol Hill for its record on collecting payments. While the Interior Department has sweetened incentives for exploration and pushed to open wilderness areas for drilling, it has also cut back on full-scale audits of companies intended to make sure they are paying their full share.
Administration officials knew that dozens of companies had incorrectly claimed exemptions from royalties since 2003, but they waited until December 2005 to send letters demanding about $500 million in repayments.
In February, the Interior Department acknowledged that oil companies could escape more than $7 billion in payments because of mistakes in leases signed in the 1990s. Top officials are trying to renegotiate those deals, but some Republicans and Democrats have complained that the administration is dragging its feet.
In addition, four government auditors last month publicly accused the Interior Department of blocking their efforts to recover more than $30 million from the Shell Oil Corporation, the Kerr-McGee Corporation and other major companies.