Sometimes the federal government giveth, but it taketh away just as often. Later this year, the Department of the Interior will open for leasing more blocks in the eastern Gulf of Mexico near the so-called Sale 181 area. Yet, at the same time, it will hike the royalty rate on new deepwater leases from 12.5% to 16.7%. Let's hope it knows how to administer this change by writing accurate contracts the industry can sign. It is unconscionable that some people in the Minerals Management Service knew as far back as 2000 that MMS messed up the wording in some deepwater royalty-relief leases signed in 1998 and 1999-but did nothing about it until recently, when the DOI inspector general went public with the problem. Now critics are charging the oil industry with evil behavior, when the focus should be on incompetence, if not a cover-up, at DOI. These were legal, non-negotiable, binding contracts between an oil company and the government. It is not the fault of any producer that a federal agency failed to do its job properly. Those contracts, flawed though they may be, should be respected and Congress should not penalize the oil companies or demand back royalty payments. For more on this, see the February issue of Oil and Gas Investor. For a subscription, call 713-260-6441.

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