Week in News: December 11 – 17, 2006 U.S. Supreme Court rules against oil and gas industry in royalties case International Herald Tribune; December 11, 2006; http://www.iht.com/articles/ap/2006/12/11/business/NA_FIN_US_Oil_Royalties.php Oil firms celebrate Gulf gain Houston Chronicle; December 12, 2006; http://www.chron.com/disp/story.mpl/business/energy/4395321.html Democrats promise yearlong spending resolution Greenwire; December 12, 2006; http://www.eenews.net/Greenwire/2006/12/12/#3 Democrats added to Energy, Transportation panels E&ENews PM; December 13, 2006; http://www.eenews.net/eenewspm/2006/12/12/#5 OPINION: Castles in the Sand New York Times; December 13, 2006; http://www.nytimes.com/2006/12/13/opinion/13pilkey.html CEOs, ex-military leaders present plan to bolster energy security Greenwire; December 13, 2006; http://www.eenews.net/Greenwire/2006/12/13/#1 EDITORIAL: Ships That Don’t Dare to Sail New York Times; December 14, 2006; http://www.nytimes.com/2006/12/14/opinion/14thu1.html Bipartisan House group seeks DOJ review of flawed royalty waivers E&ENews PM; December 14, 2006; http://www.eenews.net/eenewspm/2006/12/14/#1 House Dems vow early focus on 'royalty relief' E&ENews PM; December 14, 2006; http://www.eenews.net/eenewspm/2006/12/14/#2 OPINION: Pacts Americana? New York Times; December 15, 2006; http://www.nytimes.com/2006/12/15/opinion/15kaye.html Interior deals on flawed leases fail to quell critics Greenwire; December 15, 2006; http://www.eenews.net/Greenwire/2006/12/15/#1 Transocean Drillship Sets Water-Depth Completion Records Rigzone; December 15, 2006; http://www.rigzone.com/news/article.asp?a_id=39035 New coalition aims to chart course on energy Greenwire; December 15, 2006; http://www.eenews.net/Greenwire/2006/12/15/#4 OPINION: States like Texas deserve payday for offshore energy Senator Kay Bailey Hutchison; Houston Chronicle; December 18, 2006; http://www.chron.com/disp/story.mpl/editorial/outlook/4408937.html U.S. Supreme Court rules against oil and gas industry in royalties case International Herald Tribune; December 11, 2006; http://www.iht.com/articles/ap/2006/12/11/business/NA_FIN_US_Oil_Royalties.php WASHINGTON: 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 (€3.1 million) and $780,000 (€591,940) 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. 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. The industry's arguments "are insufficient to overcome the plain meaning" of federal law, said the decision by Justice Samuel Alito. The justices normally do not publicly disclose the reason for not participating in cases, though Chief Justice John Roberts participated in the case as a federal appeals court judge. When the dispute between the Interior Department and the companies began a decade ago, it involved Amoco Production Co., Atlantic Richfield Co. and Vastar Resources, ARCO/Vastar, according to court papers filed in the case. In 2001, Amoco Production Co. and Vastar Resources Inc. merged and formed BP America Production Co. Atlantic Richfield Co. is wholly owned by BP America Inc. ___ The case is BP America v. Watson, 05-669. Gulf States Hit Pay Dirt Offshore Washington Post; December 12, 2006; http://www.washingtonpost.com/wp-dyn/content/article/2006/12/11/AR2006121101326.html Back in June, former Louisiana senator John Breaux warned Sen. Mary Landrieu (D-La.) not to get greedy in lobbying to get their state a big chunk of oil and gas royalties from federal waters. "Harry Truman offered us almost half, and we ended up with nothing," he said. Breaux was recalling that in 1949, Gov. Earl Long was so determined to get all of the oil and gas royalties from drilling off his state's shores that he turned down an offer from Truman that would have put a portion of that revenue into Louisiana's coffers. Louisiana ended up with nothing, and since then the Treasury has collected $160 billion from offshore oil and gas production all over the United States. The last bill passed by the 109th Congress, early Saturday morning, ended up giving Louisiana, Texas, Alabama and Mississippi a good bit of what was turned down half a century ago. The legislation opens about 8 million acres in the Gulf of Mexico to oil and gas drilling, and U.S. industrial consumers of natural gas hope it will boost supplies and moderate prices. But the bill's landmark aspect was a deal that diverts 37.5 percent of federal royalties from future drilling to the four Gulf of Mexico states -- the same percentage Truman offered Long. The accord could ultimately be worth $650 million a year for Louisiana, the biggest beneficiary. "This was the best Christmas present I could ever, ever have gotten or that the state of Louisiana could have gotten," Landrieu said in an interview yesterday. Foes of the legislation fear it will lure states opposed to offshore drilling such as California, Virginia, Florida and North and South Carolina into supporting exploration off their shorelines in return for a gusher of new revenue. "A lot of folks don't want the revenue sharing because they're afraid that people won't be as opposed" to offshore drilling, Breaux said in June. Landrieu says the legislation will help Louisiana restore coastal wetlands and take measures to protect such energy infrastructure as ports, pipelines and oil refineries. To ease congressional concerns that Louisiana will treat the royalties as a windfall for general spending, the state has amended its constitution to restrict use of the money to those purposes. Unlike Long, who asserted state ownership over waters up to 37 miles from shore, Landrieu merely asserted state "partnership" with the federal government. While she initially sought half of federal royalties, she later agreed to put 12.5 percent of federal royalties into a conservation fund to be used for all 50 states, a move that was designed to blunt environmental objections to new drilling. Opponents of the bill call it fiscally irresponsible and say that any royalties from drilling in federal waters, which begin three miles from shore and extend up to 200 miles out, belong to the federal government. Those are the boundaries Congress drew in 1953 and the Supreme Court affirmed. Given the size of the federal budget deficit and future Social Security and Medicare obligations, many lawmakers say the federal government is in no position to give away big revenue streams. "According to estimates, the bill will drain $170 billion from the federal treasury over the next 60 years," said Rep. Lois Capps (D-Calif.), a member of the House Energy and Commerce Committee, during last week's floor debate. "This is a great deal for these four states, and I certainly understand why they support it. What I don't understand is why my colleagues from the other 46 states would agree to it." Capps added that "the offshore waters of the Gulf Coast belong to all Americans, as do the Pacific and Atlantic oceans, the Great Lakes and other public lands. Mr. Speaker, we have record deficits as far as the eye can see, and it is simply irresponsible to add billions more in new debt through legislation like this." Environmentalists have also fought the measure. "We believe that tying coastal restoration funding to money derived from new offshore drilling . would simply exacerbate the problem," said Carl Pope, executive director of the Sierra Club. "There is agreement that oil and gas drilling in the Gulf of Mexico has contributed to the destruction and loss of Louisiana wetlands. Thus, we don't see the logic in funding restoration when the trade-off is incentives for new drilling that would jeopardize other coastal areas." In marshaling arguments for the legislation, Landrieu bridged the gap between proponents of unlimited offshore drilling and foes of all offshore drilling. She noted that the federal government gives states 50 percent of royalties for minerals, oil and gas taken from federal land. And she argued that the Gulf Coast states suffered environmental degradation from serving as a base for the petroleum industry. After hurricanes Katrina and Rita hit the region in 2005, the Gulf Coast states were also able to tap into sympathy and concerns over the country's energy infrastructure. Because of the way legislation is scored for budgetary purposes, the money diverted from the Treasury does not show up in the bill's cost estimates.