Kerr-McGee sues Interior over some GOM royalties

Kerr-McGee has filed a federal-court lawsuit against the U.S. Department of the Interior, claiming the department has violated the law by demanding the Oklahoma City-based oil company make royalty payments from some properties in the Gulf of Mexico.

The suit was filed March 17 in the Western District of Louisiana. It is in response to the Interior Department’s claim, made about two months ago, that Kerr-McGee and 40 other oil and natural gas producers made improper claims of more than $500 million in royalty relief in 2004.

Kerr-McGee is one of only a few of the companies that have balked at paying its royalties. The company said it has set aside about $108 million in case it must pay the royalties.

The company said the federal Deep Water Royalty Relief Act of 1995, which was designed to encourage deepwater drilling, protects them from having to pay the royalties. The Interior Department counters that producers must pay royalties if market prices climb above certain limits.

A Kerr-McGee attorney said the case will last about 18 months

—The Associated Press