The Supreme Court ruled against the oil and gas industry Monday in a dispute over how many years into the past the government can reach to collect money for leases on federal land.
In a 7-0 decision, the court refused to limit the number of years the government can reach back to collect unpaid royalties. The ruling applies to administrative proceedings the Interior Department brought against two companies.
At issue is whether a federal law imposing a six-year time limit for the government to file lawsuits based on federal contracts also applies to administrative orders.
Ten years ago, the Interior Department's Minerals Management Service ordered BP America Production Co. and ARCO to pay $4.1 million and $780,000, respectively, to cover royalty deficiencies on coal-bed methane. The companies pumped the natural gas from wells in the San Juan Basin, which is in northwest New Mexico and southwest Colorado.
The government's administrative claim was based on royalties allegedly owed going back more than eight years from the time the Interior Department demanded the money. BP and ARCO say the limit should be six years, which would reduce the amount of royalties the Interior Department is able to claim.
BP and ARCO say unfavorable rulings in lower courts on the issue would add hundreds of millions of dollars to the royalty obligations of the oil and gas industry over the life of existing leases.
The industry's arguments “are insufficient to overcome the plain meaning” of federal law, said the decision by Justice Samuel Alito.
The justices normally do not publicly disclose the reason for not participating in cases, though Chief Justice John Roberts participated in the case as a federal appeals court judge.
When the dispute between the Interior Department and the companies began a decade ago, it involved Amoco Production Co., Atlantic Richfield Co. and Vastar Resources, ARCO/Vastar, according to court papers filed in the case.
In 2001, Amoco Production Co. and Vastar Resources Inc. merged and formed BP America Production Co. Atlantic Richfield Co. is wholly owned by BP America Inc.
The case is BP America v. Watson, 05-669.
