The US Interior Department has dropped claims that Chevron 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 New York Times has reported.
The agency has ordered Chevron to pay $6 million in additional royalties but could have sought tens of millions more. The decision sets a dangerous precedent – making 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. But, the Interior Department’s Minerals Management Service said it would have been useless to fight Chevron.
“It is not in the public interest to spend federal dollars pursuing claims that have little or no chance of success,” the agency said. “M.M.S. lost a contested and controversial issue” before the appeals board. “Had we simply wanted to capitulate to ‘big oil,’ the agency would not have issued the order in the first place.”
The decision will renew renewed criticism that the Bush administration is reluctant to confront oil and gas companies and is lax in collecting 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.”