Energy Lawyer & Attorney : Liskow & Lewis Law Firm : Gulf Coast, Offshore

By Clare Bienvenu

In Marcy v. Rowan Cos., Inc., No. 06-31238, 2008 WL 588745 (5th Cir. 2008), the Fifth Circuit Court of Appeals affirmed the district court’s decision to dismiss a qui tam action brought under the Federal Claims Act (FCA). The action alleged that the defendants violated the FCA by concealing the discharge of pollutants from an offshore drilling unit into the Gulf of Mexico.

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By Jana Grauberger:

A recent Interior Board of Land Appeals (“IBLA”) ruling, ATP Oil & Gas Corp., 173 IBLA 250 (2008), affirms an MMS denial of a Suspension of Operations (“SOO”) where the lessee submitted an revised exploration plan (“EP”) and permit to drill (“APD”) just days before the lease’s 10-year primary term expired, but was unable to conduct lease activities before the expiration date. The lessee, ATP, acquired its interest in the lease located in the Mississippi Canyon Area, Offshore Louisiana a little more than two months before expiration of its primary term, which the IBLA described as a “risky venture.” Due to weather conditions and the limitations of ATP’s contracted drilling rig, ATP was unable to get a well drilled prior to the lease expiration date.

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By Jonathan Hunter:

On October 30, 2007, the Federal District Court for the Western District of Louisiana granted summary judgment in favor of Kerr-McGee Oil and Gas Corporation in a dispute between Kerr-McGee and the Department of the Interior over the enforceability of "price threshold" clauses that Interior inserted into deep water leases granted during the years 1996-2000. The court ruled that Interior's price threshold clauses unlawfully deprived Kerr-McGee of the statutory right to produce minimum volumes of oil and gas royalty-free, as mandated by Congress in the Outer Continental Shelf Deep Water Royalty Relief Act of 1995. CLICK here to view the decision

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MMS's August 22, 2007 Western Gulf of Mexico lease sale offered 3,338 tracts, or approximately 18 million acres, offshore Texas.  Forty-seven companies participated, submitting 358 bids on 282 tracts.  The total of all bids received was $369,496,840.  MMS Director Randall Luthi observed that “the success of this lease sale once again demonstrates industry’s commitment and interest in the Gulf.” For more information, click here.

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On June 27, 2007, the Minerals Management Service (MMS) issued its notice advising the public of its intention to prepare an Environmental Assessment (EA) for proposed OCS Lease Sale 206, which is the Central Gulf of Mexico lease sale to be held in March 2008. Notably, the EA will not include approximately 5.8 million acres located in the southeastern part of the Central Planning Area, which was made available for leasing by the Gulf of Mexico Energy Security Act of 2006. MMS believes that it would be premature to offer that area for leasing in proposed Lease Sale 206, due to the need to conduct additional environmental studies relating to the area. See 72 Fed. Reg. 35258 (June 27, 2007).

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By Jonathan A. Hunter

MMS has announced proposed amendments to its deep gas royalty relief regulations under the Energy Policy Act of 2005. The proposed rule, “Royalty Relief – Ultra-Deep Gas Wells on Outer Continental Shelf (OCS) Oil and Gas Leases; Extension of Royalty Relief Provisions to OCS Leases Offshore of Alaska, 1010–AD33,” would extend existing deep gas royalty relief provisions to more OCS leases, provide additional royalty relief for certain wells on OCS leases in the Gulf of Mexico (GOM), and expand authority to grant royalty relief to leases offshore of Alaska.  The proposed rule extends deep gas royalty relief to GOM leases in 400 meters of water (up from the current limit of 200 meters), and would increase the royalty suspension volume to 35 Bcf for qualifying ultra-deep wells at least 20,000 feet total vertical depth subsea  in less than 400 meters of water.  The additional relief will only be available in years when the annual NYMEX natural gas price is at or below $4.47/MMBtu expressed in 2006 dollars.  MMS will accept comments on the proposed rule through July 17, 2007.  Click here to read the Notice.

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By Jonathan A. Hunter

MMS has issued a proposed notice scheduling Central Gulf of Mexico Lease Sale 205 for October 3, 2007.  This will be the first  sale in the newly configured Central Gulf of Mexico Planning Area, and is the first Central GOM sale to be held in MMS’ 2007 – 2012 Outer Continental Shelf Oil and Gas Leasing Program.  The proposed sale includes approximately 5,000 unleased blocks, covering over 28.5 million acres, and ranging from 3 to 210 miles offshore.   Click here for information on obtaining the proposed notice of sale.

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