Feds appeal ruling in oil royalties case

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The federal government on Monday asked a group of appeals court judges to overturn a ruling that could prevent the U.S. Interior Department from collecting billions in royalties on oil and natural gas leases.

In January, a smaller three-judge panel of the 5th U.S. Circuit Court of Appeals upheld a lower court ruling that said the Interior Department could not collect royalties from eight deepwater leases held by Anadarko Petroleum Corp. in the Gulf of Mexico. The leases were obtained between 1996 and 2000 by Kerr-McGee Corp., which Anadarko later acquired.

Government lawyers are now asking for an "en banc" review of the case, bringing it before the entire New Orleans-based 5th Circuit. A court spokesman said the circuit has 17 active judges.

At issue is interpretation of a 1995 federal law designed to provide a break from royalties at a time when oil and natural gas prices were extremely low. The law waived all royalty payments until a specific amount of oil and gas was produced.

The Interior Department has contended it had the authority to lift the royalty relief once prices reached a certain level. The law became particularly prickly as oil prices rose and oil companies began posting huge profits.

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