Gulf of Mexico Lease "Price Threshold" Conditions Held Unlawful
A unanimous panel of the United States Court of Appeals for the Fifth Circuit has held that the United States Department of the Interior violated the Outer Continental Shelf Deep Water Royalty Relief Act (“RRA”) by imposing price threshold conditions that require federal lessees to pay royalties when commodity prices rise. Kerr-McGee Oil & Gas Corp. v. U.S. Dep’t of Interior, __ F.3d __, 2009 WL 57883 (5th Cir. Jan. 12, 2009). Relying on its 2004 decision in Santa Fe Snyder Corp. v. Norton, 385 F.3d 884 (5th Cir. 2004), the court held that Section 304 of the RRA unambiguously entitled Kerr-McGee to unconditional royalty relief on minimum volumes of production.
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