US Govt may take oil royalty fight to Supreme Court

By Tom Doggett

WASHINGTON, March 6 (Reuters) - The U.S. government, fearing the loss of up to $10 billion in old drilling royalties from oil companies, may take a dispute with Anadarko Petroleum Corp (APC.N) to the U.S. Supreme Court, Interior Secretary Ken Salazar said on Friday.

In January, the Circuit Court of Appeals in New Orleans ruled Anadarko did not have to pay $150 million in royalties for drilling on federal leases in the Gulf of Mexico issued between 1996 and 2000.

If the case stands in Anadarko's favor, other energy companies could forgo paying royalties. The Government Accounting Office estimates the government could lose up to $10 billion in royalty revenue over the life of the leases.

Salazar says the department may appeal to the Supreme Court.

"There is a good chance that we will appeal the circuit court decision to the U.S. Supreme Court, but we have not yet reached that decision," Salazar told reporters. "We're taking a review of that opinion and making a determination about how we're going to move forward."

The dispute centers on financial incentives Congress gave energy companies back in the mid 1990s when oil prices fell to $10 a barrel. To make drilling in the deeper waters of the Gulf of Mexico more profitable, royalties were waived on initial oil and natural gas production.

The Interior Department sought to end that royalty relief if oil and gas prices increased significantly, which they did.

Kerr-McGee Corp, which was bought by Anadarko in 2006, sued the department, arguing it did not have the authority to take away the royalty relief provided by Congress. The company won in the initial trial and on appeal. (Reporting by Tom Doggett; Editing by David Gregorio)