A Pleasant Surprise

The past two years or so, the major oil companies have posted record-setting profits. We've tended to view those obscene figures as having come on the back of those of us who have to drive gas-powered autos, but it appears that the oil companies have also been ripping off the federal government (that is to say, all of the American public) by just not paying the royalties they owed. The U.S. Supreme Court recently disabused the oil companies of the notion that they didn't have to pay. From an AP report in the Sacramento Bee:

The Supreme Court ruled against the oil and gas industry Monday in a dispute over how many years into the past the government can reach to collect money for leases on federal land.
In a 7-0 decision, the court refused to limit the number of years the government can reach back to collect unpaid royalties. The ruling applies to administrative proceedings the Interior Department brought against two companies.

At issue is whether a federal law imposing a six-year time limit for the government to file lawsuits based on federal contracts also applies to administrative orders.
Ten years ago, the Interior Department's Minerals Management Service ordered BP America Production Co. and ARCO to pay $4.1 million and $780,000 respectively to cover royalty deficiencies on coalbed methane. The companies pumped the natural gas from wells in the San Juan Basin, which is in northwest New Mexico and southwest Colorado.

The government's administrative claim was based on royalties allegedly owed going back more than eight years from the time the Interior Department demanded the money. BP and ARCO say the limit should be six years, which would reduce the amount of royalties the Interior Department is able to claim.

Now clearly the Interior Department was lax in waiting so long to proceed with the hearings, but the point is that the money was owed, and not paid, and Interior did proceed within a time frame acceptable within the regulations in effect. One of the arguments made by the oil companies that was rejected by the justices is a classic:

BP and ARCO say unfavorable rulings in lower courts on the issue would add hundreds of millions of dollars to the royalty obligations of the oil and gas industry over the life of existing leases.

I beg your pardon? Those hundreds of millions of dollars weren't added to the royalty obligations, they are the royalty obligations, part of the contracts entered into to pump the oil and gas out of the ground.

Greedy bastards.