March 27th, 2006:

By Dino Mahtani in Lagos
Nigerian militants released the last three of nine foreign oil workers taken hostage several weeks ago but threatened more destruction to the oil industry in the world’s eighth biggest exporter.
The Movement for the Emancipation of the Niger Delta handed over two Americans and a Briton to government officials on Monday, helping to stifle upward pressure on international oil markets. But Mend, which is demanding a bigger share of the government’s oil revenues for the Ijaw, the majority tribe in the oil-producing delta, said it had chosen to release the foreigners to free up hundreds of its fighters, otherwise used for guarding hostages.
“We are not in negotiations with the Nigerian government so oil companies and their workers should not be deceived into a false sense of relief,” the group said in a statement.
The group has threatened to cut another 1m barrels on top of a reduction of more than 630,000 b/d, or 26 per cent of Nigeria’s production, resulting from attacks this year – largely directed against Royal Dutch Shell, Nigeria’s biggest producer.
Officials said the hostage release was brokered by members of FNDIC, another militant group that has operated in the delta for years and was key to an Ijaw insurgency that shut 40 per cent of Nigeria’s oil production in 2003. Delta human rights activists say FNDIC has a close relationship with Mend. The role of FNDIC is complicated by the fact that some of its leaders and loyalists say they have registered companies with Shell to solicit jobs such as pipeline clamping, surveillance, oil-spill clearances and waste disposal.
Kingsley Otuaro, FNDIC secretary-general, said he and his half-brother had registered contracting companies for work in the area where militant attacks and abductionshad taken place. But he complained that Shell had not honoured many of its promises for work.
“Shell has a cumbersome bureaucracy and often rely on their own local syndicates. We feel cheated,” Mr Otuaro said. Shell confirmed that Mr Otuaro’s half brother owns a company that is a Shell contractor.
Tension among local communities linked to militant groups frequently results in acts of sabotage against oil facilities, or violence among rival communities. A report commissioned by Shell and published in 2004 said the company’s corporate policies could force it to withdraw onshore production by 2008.
While Chevron, one of the biggest US oil companies in Nigeria, has changed its policy of engaging with “host communities”, saying such policies are responsible for increasing tensions, industry officials acknowledge that all oil companies are under pressure to make ad hoc payments to communities or to dish out contracts to calm tensions. While Chevron was worst hit in 2003, this year it has avoided strikes on its facilities. Some militants say this is because the company is easier to deal with.
Meanwhile many militant groups in the delta operate in cartels alongside political and military figures and are engaged in the theft of crude oil for sale to international criminal syndicates. Industry officials say such groups have built up arsenals from the proceeds and are likely to be a source of instability before elections next year.
Government officials privately acknowledge that political figures encouraged the rise of militant groups to bolster their influence before elections in 2003. But some officials say the companies are more to blame. “The methods of the kidnappers may be wrong but you cannot exonerate the oil companies,” said Ovuozourie Macualay, a government commissioner for ethnic affairs and conflict resolution. read more

By THE ASSOCIATED PRESS
ABUJA, Nigeria (AP) — Nigeria's president heads to Washington on a high note after the resolution of two issues of concern to his U.S. allies — the release Monday of kidnapped oil workers, including two Americans, and his agreement to hand over the continent's most infamous warlord.
President Olusegun Obasanjo, a former military leader, is now seen as a force for peace and democracy on the world's poorest continent. He is to meet with President Bush on Wednesday.
Some Nigerians say Obasanjo is a good African but a bad Nigerian who devotes too much time to regional issues. His political ambitions in the conflict-plagued West African nation clash with his international reputation as a champion of democracy, critics say.
On the domestic front, he has failed to control militants who have launched increasing attacks on oil facilities in Nigeria's oil-rich southern delta. The militants released their last remaining foreign hostages on Monday but threatened to continue attacks.
Americans Cody Oswalt and Russell Spell and Briton John Hudspith were released just before dawn after more than five weeks in captivity, said government spokesman Abel Oshevire.
The U.S. applauded Obasanjo's regional mediation when he offered Liberian warlord Charles Taylor refuge under an agreement that helped end Liberia's civil war in 2003.
Since then, though, the U.S., the U.N. and others have called for Taylor to be handed over to an international war crimes tribunal.
Taylor is accused of starting civil war in Liberia and its neighbor, Sierra Leone, that killed some 3 million people, and of harboring al-Qaida suicide bombers who attacked the U.S. embassies in Kenya and Tanzania in 1998, killing 12 Americans and more than 200 Africans.
Obasanjo initially resisted calls to surrender Taylor, who has been living in a luxurious government villa in the southern town of Calabar. But Saturday, after Liberia's new President Ellen Johnson Sirleaf asked that Taylor be handed over for trial, Obasanjo agreed.
The logistics of getting Taylor to Sierra Leone have not been worked out, leading to fears he might escape. Taylor escaped from a U.S. penitentiary in Boston to launch Liberia's war.
The militants have targeted the oil industry in the world's eighth-largest producer of crude and the fifth largest supplier to the United States, blowing up oil installations and cutting production by 26 percent.
Since the attacks began, Royal Dutch Shell has closed half its oil fields and one of its two main loading terminals. Despite the danger, oil companies remain drawn to the country because its quality benchmark Bonnie Light is so easily — and inexpensively — extracted.
The militants took nine foreign oil workers hostage Feb. 18 from a barge owned by Willbros Group Inc., the Houston-based oil services company that was laying pipeline in the delta for Royal Dutch Shell. The group released six of the captives after 12 days.
The last three hostages could be seen from a distance as they greeted officials Monday, but the freed men did not immediately address reporters.
In a news release, the militants said it had better uses for the fighters guarding the hostages — namely more attacks on oil facilities.
There's some sympathy for ''the boys,'' as some Nigerians call the militants, because they call for a better deal for residents of the Delta, who remain among the poorest Nigerians, though their land is the source of the country's wealth.
The White House has said corruption, endemic among Nigerian officials, will be discussed when the presidents meet. Obasanjo promised to root out corruption when he was elected, but is accused of using the campaign against opponents as elections near.
Obasanjo's supporters have been campaigning for a constitutional amendment that would allow the Nigerian leader to run for a third term next year. Obasanjo has not said he wants to run again, but has resisted U.S. calls to announce he will not. read more

By REUTERS
WARRI, Nigeria (Reuters) – Nigerian militants freed three foreign oil workers on Monday after five weeks in captivity and said their fighters would now focus on crippling oil exports from the world's eighth largest supplier.
The three men, two Americans and one Briton, were handed to the governor of Nigeria's southern Delta state by an ethnic Ijaw leader who had been asked to negotiate with the militants.
“(The three) are in very good health and high spirits,'' said Abel Oshevire, a spokesman for Delta state.
The freed men — Cody Oswald and Russel Spell of the United States and John Hudspith of Britain — were transferred to embassy officials who took them for medical checks.
“John's release has come as a huge relief for all his family,'' the Hudspith family said in a statement.
The rebel Movement for the Emancipation of the Niger Delta (MEND) had demanded as conditions for their freedom more local autonomy over the delta's oil wealth, the release of two jailed Ijaw leaders and compensation for oil pollution.
However, on Monday they said the release was unconditional. They said kidnapping had tied up hundreds of fighters who would be better used to extend a three-month campaign of sabotage against oil pipelines and platforms that has already cut a quarter off Nigeria's 2.4 million barrels per day output.
“Care for these hostages tied down close to 800 of our fighters (who) would be put to better use attacking oil facilities,'' they said in a statement.
President Olusegun Obasanjo is due to fly to Washington on Tuesday and pressure had been building up for an end to the standoff over the hostages.
WAVE OF ATTACKS
MEND militants originally captured nine foreign oil workers on February 18 during a wave of attacks on oil facilities, but six were released on March 1.
It was the second bout of kidnapping and attacks by the previously unknown group since January.
The raids have forced oil companies to cut 630,000 barrels a day of oil production in the OPEC member nation, and MEND has previously threatened to cut another million barrels a day with a major attack this month.
Royal Dutch Shell, which has been worst hit by the attacks, said it would not resume normal operations until it was safe to do so. It said it was particularly concerned about the environmental impact of the crisis, which has prevented workers from assessing spills, effecting repairs and cleaning them up.
Ijaw activists have been working behind the scenes to resolve the three-month-old crisis, and some saw the release as a possible first step in that direction.
“Now that MEND have shown good faith, it is of utmost urgency that we move to the dialogue table to discuss the issues raised,'' said Oronto Douglas, an Ijaw activist nominated by MEND to mediate talks with the government.
“If the issues they proposed are discussed with a view to the attainment of justice, it will lead to a final resolution of the matter,'' he told Reuters by telephone.
The majority of people in the delta have seen few benefits from decades of oil extraction that has yielded billions of dollars in profits for the government and foreign oil companies.
Vast areas of the delta are not connected to the national power grid. There is no clean water in many places. There are few roads. Teachers and doctors are in short supply.
The environment has been wrecked by oil spills and the constant burning of gas associated with the extraction of oil.
Militants, often armed and funded with the proceeds of crude oil theft, roam the mangrove-lined waterways of the vast delta in speedboats. Ethnic warfare, piracy and extortion are rife.
Analysts say Nigerian governments, during almost three decades of military dictatorship as well as during periods of civilian rule, have seen it as being in their interests to control the oil by keeping the delta poor, divided and insecure. read more

By Jeremy Scott-Joynt
BBC News business reporter
Trust is a fragile thing.
For companies as much as for individuals, it can be a slow, hard job to convince the world that you're safe to talk to, deal with or rely on. Then – in the blink of an eye – a chance event, or a misjudgement, can rip your reputation to shreds. And once gone, rebuilding it can sometimes be impossible. No wonder, then, that the number of people managing reputational risk is mushrooming.
But compared with other risks – of giving bad credit, of becoming the victim of fraud, of falling foul of the regulators – how can one measure something so nebulous as a reputation?
And is it really possible to manage a reputation?
Threats
It's certainly mounting up the agenda.
In Switzerland, for instance, the mounting row over Iran's nuclear ambitions and the prospect of sanctions means some of its legendarily discreet banks are turning away Iranian government money.
There can also be the more direct risk of misrepresentation: a reputation attack.
“Identity theft of the brand, and bogus investment products purporting to be from that brand can be a real issue,” says Bill Cleghorn, corporate investigations partner at RSM Robson Rhodes.
Similarly, a firm can be assaulted through rumour, slander – or selective leaks.
But more general threats to reputation are common too: caused by staff mistakes and misdeeds, bad policies or planning, or mishandled crises.
A recent survey by the Economist Intelligence Unit found that of the top managers it interviewed, 90% said their firm's reputation was one of the most valuable things it possessed.
Indeed, they ranked the risk to reputation as more of a threat than regulatory problems, human capital issues such as employee fraud or misbehaviour, or IT breaches.
And three-quarters said reputational risk needed extra investment.
What works?
That said, however, there is a difference of opinion about how to go about tackling the issue.
For some, reputational risk is a thing in and of itself – something which needs to be addressed directly.
“It helps to tease out softer issues which can impact your reputation,” says Jenny Rayner, a consultant and writer on risk management. “That can be a really good sanity check.”
THE RISKS FIRMS FEAR
Reputational: 54%
Regulatory: 41%
Human capital: 41%
IT problems: 35%
Market risk: 32%
Credit risk: 29%
Source: Economist Intelligence Unit
Particularly in the PR and marketing sides of big businesses – the idea that risk management is something separate and special is proving rather popular.
For a concept which, unlike other risks, is frustratingly hard to measure, the temptation can be to attach money and faces to the issue as a means of keeping control – and that causes concern.
“Reputation doesn't lend itself to the quantitative, process-driven way risk management is normally packaged,” says Mike Power, Professor of Accounting at the London School of Economics.
“You can't manage it directly. But being weak human beings we tend to put a department and a budget behind it – and that can be why it gets discredited.”
Results
A damaged reputation is an outcome, rather than a cause, he argues – and it's the causes that need to be managed.
Otherwise risk management itself can become a cause of reputational risk, by triggering defensive and over-reactive thinking.
Similarly, a concern about reputation as a thing in itself can pervert decision-making, some warn.
“What if there are things going on which will besmirch your reputation if discovered?” says Mike Porter, from risk consultancy Detica.
“Attacks on your reputation are one of the things that can happen, but risk goes much wider than that. It's not enough to justify someone's job as a reputational risk manager.”
The reputational dimension
Still, reputations can and do suffer – and therefore need protection.
The secret, it seems, is simply to expand what well-prepared companies should already be doing.
Alongside the process of working out where they are vulnerable to financial loss – which usually means determining both how likely a given event is, and what impact it has – they should consider the reputational impact too.
The key, says PriceWaterhouseCoopers partner Glen Peters, is to avoid separating it out, and instead simply build a reputation dimension into the auditing process which large corporations ought already to be undertaking.
“It's not a perfect science,” Mr Peters says.
“But you would go a long way towards making a more resilient business if you were to highlight the potential impacts of risks to reputation.”
Internal auditors, he says, are the people to entrust with collating this kind of threat: not as something separate, but as an extra means of gauging all the other risks that a company is likely to encounter.
Running scared?
The implications of this kind of thing can be far-reaching – and it's a tall order to implement it across an entire organisation.
There's a cautionary tale of a company which, every year, asked its managers to rate the risks they feared on the basis of potential financial damage.
Then one year, they added the reputational dimension.
The result: a list several times as long, and with impact several times as severe.
And the company's response?
It ditched the reputation exercise. Some things, it seems, are just too scary to contemplate.
You can't manage reputation directly… But being weak human beings we tend to put a department and a budget behind it (Mike Power, LSE)
This is the second in a series of articles on risk in 2006. Next: the systemic risks to capitalism from crime and corporate misbehaviour.
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/1/hi/business/4697854.stm
Published: 2006/02/12 16:24:42 GMT
© BBC MMVI read more

The Yomiuri Shimbun
The carcasses of more than 4,000 oil-covered wild birds have been found washed up ashore, including along the Shiretoko Peninsula, eastern Hokkaido, marking the worst disaster of its kind since the Russian tanker Nakhodka leaked oil in 1997, affecting about 1,300 seabirds.
Part of the peninsula has been designated a UNESCO World Heritage Site.
If birds that have sunk or been eaten are included, it is thought that tens of thousands of wild birds might have died.
Since Japanese officials cannot cross the Russian border to investigate the problem, the cause of the disaster remains shrouded in mystery one month after the deaths were first confirmed.
A photographer found wild bird carcasses around the mouth of a river in Sharicho in the middle of the peninsula on Feb. 27. Crows were pecking at the rotting corpses.
In addition to Shiretoko, remains were also found in Koshimizucho, Hokkaido on the shores of the Okhotsk Sea.
The wild birds included endangered species such as guillemots, Brunnich's guillemots, crested auklets and slaty-backed gulls.
The Environment Ministry and the Hokkaido government have dispatched helicopters to inspect the situation further.
With ice on the sea surface and shores now melting, the number of dead birds being collected has increased rapidly.
As of March 17, the remains of 4,005 dead birds had been collected.
Even now, patrol personnel usually find more than 10 bird carcasses every time they go out on their rounds.
After dissecting the bodies, the Hokkaido government has come to believe that the birds died due to hypothermia induced by oil contamination or by drowning.
Yasushi Fukamachi, an assistant professor specializing in marine physics at Hokkaido University's Institute of Low Temperature Science, believes the carcasses were carried by currents from the eastern shores of Sakhalin over a period of one to two months.
Researchers initially believed that the wild birds had been contaminated by oil spills from pipelines in oil fields off Sakhalin.
However, more recent studies pointed to the possibility that the oil was Bunker C fuel oil, which is used by large ships, leading to the belief that the oil had come from a ship or ships rather than from oil pipelines.
A Russian government official told The Yomiuri Shimbun that many carcasses of wild birds had also been found on Kunashiri Island, one of the four disputed northern territories that the Russians refer to as the Kuril Islands.
The official suggested that an infectious bird disease might have broken out on the Japanese side of the Sea of Okhotsk.
Since no oil leaks have been confirmed in Russia or Japan, the cause of the disaster remains a mystery.
A spokesman at the First Regional Coast Guard Headquarters in Otaru, Hokkaido, said that with crab and seabird egg poaching rampant in that area, even if a refueling ship had leaked oil, it would not make a report to Russian authorities.
Susumu Chiba, a lecturer at Tokyo University of Agriculture's Faculty of Bio-Industry, said that the leaked oil might also affect scallops, shrimps and other marine life.
(Mar. 28, 2006) read more

By Robert Aronen
March 27, 2006
While Americans turned their attention to March Madness last week, Canadian papers were plastered with headlines about Royal Dutch Shell (NYSE: RDS-A) and its latest move in the oil sands.
The headline-grabber up north was that Royal Dutch had paid $465 million Canadian (about $400 million U.S.) for leases on 10 parcels of land in an area known as the Grosmont formation. The size of the deal is impressive and makes for one of the largest lease sales in recent history. Furthermore, Royal Dutch is making this investment through its subsidiary Shell Exploration & Production in the Americas, not through Shell Canada.
The industry is somewhat baffled by the investment, because the Grosmont formation is an almost untouched area of oil sands, with no proven technology to develop the resource. This is a big bet — but it's one that has left the players in the oil patch scratching their heads.
The intrigue
How big is this deal? If successful, Shell Exploration & Production will have squatter's rights for about 219,000 acres of the Grosmont formation, which is estimated to hold 300 billion barrels of oil, although the amount actually recoverable is uncertain. Even though the company has not purchased rights to the entire formation, 300 billion barrels of oil would be higher than Saudi Arabia's current reserves of 259 billion barrels. And if Shell has an economically viable technology, the purchase will boost its shrinking reserve base by billions of barrels.
The fact that Royal Dutch used its American subsidiary, instead of Shell Canada, for this purchase also raises questions. Shell Canada is the major partner in the Athabasca Oil Sands Project, along with Chevron (NYSE: CVX) and Western Oil Sands. Under this partnership agreement, Shell Canada must allow Chevron and Western Oil Sands to participate in any expansion within the region. Shell Exploration & Production in the Americas is not under the same sharing obligation, which may explain why Royal Dutch decided to use it instead of Shell Canada for the Grosmont leases.
While this aspect of the story is interesting, I doubt that Shell Canada's partners are too upset. After all, for the foreseeable future, the Grosmont formation will likely be a money pit, sucking up hundreds of millions of research and development dollars, with no known payback. Even Shell claims that any project will not begin producing until the next decade.
A different kind of oil sand
Investing in the Grosmont formation is risky because the oil is locked in limestone, unlike the profitable oil sands currently under development that extract hydrocarbons from a mixture of heavy oil, sandstone, and dirt. Hydrocarbons in sandstone are extracted from the oil sands via mining operations or through in situ (in place) thermal recovery methods, with a current production cost of about $15 a barrel, according to alternative-energy superstar Suncor Energy (NYSE: SU).
To date, however, the Grosmont formation has proved unwilling to yield to in situ technologies and lies too far beneath the surface for mining operations. The resource has been considered economically unviable, with very little interest in the site. So why did Shell spend almost half a billion dollars, and how does it plan to produce any oil?
An ace up the sleeve?
Shell might just have an ace up its sleeve with an experimental technology it has developed for the oil shale formations of Colorado. Shell announced last year that it has an in situ thermal recovery method that would be commercially viable in oil shale at $30 a barrel. My guess is that Shell is looking at some variation of this method for the Grosmont formation.
At a minimum, Shell has staked a claim on a huge resource. The company undoubtedly remembers that the first movers, like Suncor, grabbed the most promising properties in the other oil-sands formations. If oil prices continue at current levels or rise in the coming years, this bold purchase in the Grosmont formation will likely prove to be a pivotal moment in Shell's corporate history.
Robert Aronen recommends a trip to Fort McMurray for anyone who doesn't believe in the oil sands story. Please feel free to share your comments with him at [email protected].
He does not own shares in any company mentioned. The Motley Fool has an ironclad disclosure policy. read more

• Monday, Mar 27, 2006
A Shell Petroleum Development Company (SPDC) corked-up well at location two last Friday, burst, spilling oil to over five communities at Kpor in Ogoniland of Rivers State.
The incident occurred as negotiations between Ogoni people and SPDC is about to commence on the resumption of oil production in the area.
Our correspondent reports that the incident, which occurred around 5p.m. on Friday, affected Kpor, Mogho, K-Dere, B-Dere and Bara communities.
The villages are located along the road leading to Kpor, the headquarters of Gokana Local Government Area of the state.
Conducting journalists round the scene, the leader of the Movement for the Survival of the Ogoni People (MOSOP), Mr Ledum Mitee, ruled out the possibility of vandalism.
He attributed the incident to the aging pipes.
Shell Corporate External Affairs Manager, Mr Don Boham, in his reaction, said crude oil was seen spewing from the company’s well on Friday.
Boham said SPDC had mobilised its Spills Response and Fire Service teams to the site, adding that measures have been taken to secure the well and contain the spill.
He said relevant government agencies and community leaders had been informed of the situation and that a joint investigation team was due to visit the area. read more

By Cassandra Braun
CONTRA COSTA TIMES
A potentially hazardous chemical release at the Shell refinery in Martinez this afternoon prompted authorities to issue a shelter-in-place warning to residents. Sirens sounded and automatic telephone warnings began about 4:15 p.m. after a sulfur dioxide release at the refinery. Residents were advised to stay inside and close windows and doors.
The extent of the release was not immediately known, but there did not appear to be a fire, said Steve Morioka, Contra Costa County Health Services hazardous materials specialist.
Sulfur dioxide has a distinctive odor and is a strong irritant to eyes and throat and also causes breathing difficulty for people with asthma, Morioka said.
Authorities had no further details. read more

Mar 27, 2006
LAGOS (MarketWatch) — The governor of Delta State in Nigeria, James Ibori, on Monday completed the handover of three foreign workers who had been held hostage by militants, the governor's spokesman said to Dow Jones Newswires.
“The hostages were handed over to officials of Shell (RDSA), their employer, in the presence of embassy officials from the U.S. and U.K.,” according to Abel Oshavire, who spoke by phone on the way back from Warri, where the handover took place.
The three men, two from the U.S. and one from the U.K., as well as six others released by the militants on March 1, are employees of Wilbros, an oil services contractor working for Shell in Nigeria.
Oshavire explained the release of the workers would have lingered further but for the confidence that the militants have in Ibori, who led the efforts to secure freedom for the kidnapped men.
“The governor has always been very sincere and free with these people (the militants), and always puts his reputation at stake with them,” Oshavire said.
He said that Ibori has assured the militants there would be no more attacks on them by the Nigerian government. Ibori also assured the militants that the Delta State government would negotiate with the Nigerian government for “justice, equity and a better Niger Delta region.”
“So they believed him, and on the basis of this, they were moved to release the hostages to our negotiating team,” Oshivare said. He spoke as they drove from Warri to Ibori's country home in Oghare, where he had been conducting the rescue efforts.
“The governor is very happy and hopes we will never walk this path again,” Oshivare said. The hostages had been held Okerenkoko, which is believed to be the stronghold of Ijaw militants in the Niger Delta.
The Nigerian government had warned last week it would not negotiate with the militants for the release of the hostages, but promised the problems of the Niger Delta would be discussed after the hostages had been released.
Demands by the militants include a greater control of revenue accrued from oil and gas, clean up of the region that has been polluted by oil exploration and production, and the provision of basic infrastructure in the area.
The Delta State government hopes all issues “will be resolved amicably to the satisfaction of both parties,” Oshivare said.
-Contact: 201-938-5400 read more

By Times Online, and AP in Warri, Nigeria
Three remaining hostages were released by militants in Nigeria’s oil-rich southern delta today, more than five weeks after the oil-industry workers were kidnapped.
Abel Oshevire, a spokesman for the southern delta state government, said that Cody Oswalt and Russell Spell, both American, and Briton John Hudspith were released just before dawn today and were now with the local governor, James Ibori. “They are here with us now and are all in good health,” Mr Oshevire told reporters.
The militants, responsible for a wave of recent attacks in southern Nigeria, took nine foreign oil workers hostage on February 18 from a barge owned by Houston-based oil services company Willbros Group Inc., which was laying pipeline in the delta for Royal Dutch Shell.
The group released six of the captives after 12 days. The last three hostages could be seen from a distance as they greeted officials but the freed men did not immediately talk to reporters.
The new militant group has targeted the oil-industry in the world’s eighth-largest producer of crude, blowing up oil installations and cutting production by 20 per cent, sending prices higher on international markets. The militants say their larger goal is a bigger cut of the oil revenues held by the federal government for their southern Niger Delta region, which remains deeply poor despite the oil pumped from beneath them.
The hostage takers had demanded the release of jailed ethnic Ijaw leaders and the payment by Royal Dutch Shell of US $1.5 billion ($1.26 billion) to compensate Ijaw communities for oil pollution, a demand that has also come from Nigerian lawmakers.
Mr Ibori said no ransom was paid, adding: “Now that they have been released, the pertinent issues raised by the youths on the Niger Delta condition will have to be addressed.”
Foreign oil workers are frequently taken hostage in Nigeria, and most are released unharmed. read more

By Christopher Hope (Filed: 27/03/2006)
Shell's future is looking rosy, Jeroen van der Veer tells Christopher Hope, in spite of Gordon Brown's tax bill
Companies the size of Shell have the economic clout of small countries. So it is no surprise to find that Jeroen van der Veer, Shell's chief executive, gets on well with our iron Chancellor.
“I have met Gordon Brown,” he says, “He is fast. You don't need a long time for pleasantries, you can go straight to the heart of the matter, which is excellent.”
Van der Veer insists the world is not about to run out of oil and gas. ‘There are plenty of reserves’ he says, as Shell looks to expand in China, Russia and Iraq
When we meet 24 hours after the Budget in his office in the Hague, Van der Veer is pondering whether Brown is a “fossil-fuel chancellor in a carbon-conscious world” (copyright: D Cameron). “This is not fair criticism,” says the Dutchman whose company produces 3pc of the world's fossil fuel. “If you look at Gordon Brown he has a pretty 'green' mind.”
But Van der Veer has good reason to be less than generous towards Brown after he slapped a windfall tax on North Sea oil companies last November. With BP's Lord Browne of Madingley, Van der Veer is campaigning for the tax to be pegged to the oil price. “It cannot be in the interests of the long-term development of the North Sea because you have lots of mature fields,” he says.
“You have to make sure that you maximise the recovery of the UK's resources. That is why our first priority is that those taxes disappear when the oil price has gone down.”
No Shell projects in the North Sea have been cancelled – yet. “As things stand today we put the taxes into the sum because that it is the best assumption and that will impact project ranking.”
Last week's Budget contained another nasty shock for Shell. Hidden away in the back of last week's Budget is press notice BN13 entitled Controlled Foreign Companies and Residence which, tax experts believe, could land Shell with a tax bill for hundreds of millions of pounds.
Van der Veer says he has no idea about the scale of this latest assault from the Treasury. “Our tax people have studied this. Our tax residency is in the Netherlands, that is where the headquarters is. But I am not a taxation expert.” But he is realistic enough to know that few people will be sympathetic to Shell's plight after it unveiled 2005 profits of $22.9bn (£12.9bn), a record for a British-listed company.
Van der Veer's problem is that while he runs one of the world's largest oil and gas companies, with more than 100,000 employees in 140 countries, most people think of Shell as the company that runs the local petrol station.
Van der Veer admits he needs to explain away the billions more effectively. “We need to do better explanations but I still give myself low marks.
“We have said 'hang on, we don't make the profits at the retail gasoline price' or 'we make most of our profits outside the UK'. Or 'we invest more or less the same amount of profits that we make for future production'. Maybe we find more explanations. But at the end of the day, I try to say this is not profiteering.”
Why not sell the garages, where Shell makes next to nothing? Van der Veer won't have it. “It is part of our legacy. Gasoline pumps were not good business in the recent past but over the long run we like to be in the downstream, and our history is part of this.”
This modest Dutchman was parachuted into the top job in March 2004, in the middle of Shell's reserves crisis – it lost a quarter of its proven oil and gas – after the abrupt departure of his predecessor Sir Phil Watts.
The drama was the making of Van der Veer, who managed to pull of the feat of merging Shell's two operational companies (separate since 1906) into one company in little over a year.
He pulls out a piece of A4 graph paper, with a series of handwritten boxes that show how he mapped out the future of Shell. “This is the same as the handwritten slide I showed to the board,” he says. “The board refused to believe we were attacking the structure. They said 'what do you mean'?”
More graph paper, this time for another presentation to Shell's top brass last December. “I am a strong believer in absolute simplicity, if you can't say it simply then you had better think again.”
Van der Veer believes that some of the problems which engulfed Shell two years ago stemmed from a “me first” culture at Shell, dating from the dot.com days. He says. “It is the classic Kennedy thing, 'what can you do for Shell' not 'what can Shell do for you'. If you like the second, don't join Shell.”
“Something happened around the year 2000 and everyone thought 'I am so brilliant and good things will come to me'. You have to bring people back to reality. These are the rules. This is all about teamwork, and if you think you are too important, then you don't fit in.”
Right now Van der Veer is asking for a bit of patience from investors who are wondering why Shell is not finding more oil and gas than it is producing. The company has ramped up its spending ($19bn this year) to develop fields and replace the “lost” reserves.
Van der Veer hopes that in four years' time, Shell's sluggish production will start to rise. “I feel very good for 2010 and beyond. The problem is that short term you don't see it in our figures.”
Part of the frustration is that under the SEC's booking rules, Shell can only report reserves which it is certain are there. So, at Shell's $19bn Sakhalin programme in eastern Russia, it only books a “very low percentage” of the 4bn-worth of barrels which are probably under the tundra. “You can only book around the hole you drill. You do that as you go along,” he says.
Surprisingly for an oil boss, Van der Veer is not worried about the world running out of the black stuff. “There are plenty of reserves,” he says. “There is a peak of easy oil like in the North Sea, but if you look at oil sands, oil shale, very deep water, we think that the peak is very far out.”
Instead, the Dutchman loses sleep over what to do with the world's hot air. Shell's latest plan is to bury carbon dioxide under the North Sea. But he admits that this may not be the right answer.
“Every CO2 solution has another disadvantage. You can store CO2 very deep in the ocean, but will it stay there? Nobody knows. CO2 is one of the most complex themes that our industry has to face over the coming years.”
One of Van der Veer's plans for the company's future is to use its boffin reputation to beat rival oil companies to new projects. Last week he appointed Shell's first chief technological officer. And he has already removed the “cap” from Shell's research and development budget to find new energies.
“To win work from national oil companies you have to offer something that others cannot,” he says.
Elsewhere Shell will focus on gradual expansion in places like Russia and China, while keeping a watching brief on war-torn Iraq and Iran. On Iraq he says it's too dangerous for now but: “we are ready. We are a spring that is coiled”. Iran, too, has potential. “The Chinese have identified many prospects in Iran. Of course you have a short-term difficult political situation, but Iran has the second largest reserves of oil and gas, and they will last for decades.”
The frustration of Van der Veer is the length of time it takes to develop reserves. This means that his successor will reap the benefits after he retires on July 1, 2008.
“You do a lot for your successors,” he says. “I hope that one day sitting in my chair, old and grey, someone will say thank you very much.” read more

By Christopher Hope, Industry Editor (Filed: 27/03/2006)
Shell could be landed with a tax bill running into hundreds of millions of pounds because of a decision by the Chancellor to change the rules on how some foreign companies are taxed. Tax experts believe the main victim could be Shell, which last year moved its HQ – and so its tax residency – to the Hague as part of its £130bn restructuring. One tax expert said: “It could be worth hundreds of millions.”
Under the changes, contained in the Budget, Gordon Brown is to tax companies that became non-resident for tax before April 2002 under “Controlled Foreign Companies and Residence” rules.
Shell carried out its restructuring in Britain by “reversing” into another UK company which had been registered before 2002. The company has always described the fiscal effect of its merger as “tax neutral”.
Jeroen van der Veer, Shell's chief, said Shell was studying the measure after receiving “an email from my tax people” on Wednesday.
He added: ” Our tax people have studied this and they have realised that our tax residency is in the Netherlands – that is where the headquarters is. But I am not a taxation expert.”
In an interview with The Daily Telegraph, Mr Van der Veer also said that Britain should not worry that more of its gas will come from Russian companies, such as state controlled Gazprom, as North Sea supplies run out.
Politicians had become alarmed after Russia cut off gas supplies to Ukraine this winter over a dispute about prices, he said.
However, he blamed that problem dating from the 1990s about “a lot of friction between Russia and Ukraine about the conditions of the gas delivery and whether they had paid for their gas”.
“It had nothing to do with them not liking to supply western Europe. On the contrary. For the past 30 or 40 years Gazprom has never missed a contractual delivery.
“They are very proud of that, and they will bend over backwards to keep that record.
''There is a high contractual compliance in their thinking. The Russian administration realises that export of oil and gas is one of the key levers for their international prestige as well.
“And like every country they will use that lever. If you talk with the leadership of Gazprom they are reasonable people, they don't necessarily fit our stereotype we have in the West.” read more

Mar 27, 2006
LONDON (AFX) – Royal Dutch Shell PLC is facing a tax bill than could run into hundreds of millions of pounds following a decision by Chancellor Gordon Brown to change the rules on how some foreign companies are taxed, the Daily Telegraph newspaper reported, citing tax experts.
Shell, which last year moved its headquarters to The Hague from the UK, will be among those companies that will be hit hard by the tax reforms, contained in the Budget.
Under the changes, the government is to tax companies that became non-resident for tax before April 2002 under “Controlled Foreign Companies and Residence” rules. Shell carried out its restructuring by “reversing” into another UK company which had been registered before 2002, the newspaper said.
Shell has always described the fiscal effect of its merger as “tax neutral”.
[email protected] read more

By THE ASSOCIATED PRESS
Published: March 27, 2006
Filed at 3:27 a.m. ET
SINGAPORE (AP) — Crude oil prices held steady Monday above $64 a barrel amid lingering concerns about Nigerian and Iranian oil supplies.
Light, sweet crude for May delivery fell 6 cents to $64.20 a barrel in electronic trading on the New York Mercantile Exchange. The contract on Friday rose 35 cents to settle at $64.26 a barrel, 2 percent higher for the week.
April Brent crude futures on London's ICE Futures exchange fell 7 cents to $63.44 a barrel.
Gasoline prices dipped 0.52 cent to $1.8180 a gallon while heating oil futures rose 0.41 cent to $1.7965 a gallon. Natural gas futures fell 13 cents to $7.160 per 1,000 cubic feet.
Prices continued to be supported by concerns about supply disruptions in Nigeria and tension over Iran's nuclear program.
''The Nigerian attacks have really sparked concerns about supply,'' said David Thurtell, commodity strategist at the Commonwealth Bank of Australia in Sydney. ''People are wondering how deep is it going to go and how long will it go on for?''
On Monday, militants in Nigeria's oil-rich southern delta released their last remaining foreign hostages — two Americans and one Briton — more than five weeks after the oil-industry workers were kidnapped, officials said.
The militants took nine foreign oil workers hostage Feb. 18 from a barge owned by Houston-based oil services company Willbros Group Inc., which was laying pipeline in the delta for Royal Dutch Shell. The group released six of the captives after 12 days in captivity.
The militants are behind a spate of attacks that have cut Nigeria's oil exports by more than 20 percent. On Saturday, they said they killed three soldiers in fresh clashes near a key natural gas plant run by Royal Dutch Shell. Shell said there was no impact on the gas plant.
Iran, the No. 2 oil producer in OPEC, has been referred to the U.N. Security Council over fears it may want to misuse its nuclear program to make weapons, but the council has been at loggerheads over U.S.-led efforts to ratchet up the pressure on Iran. Iran insists its nuclear program is for peaceful energy purposes. read more

By REUTERS
Published: March 27, 2006
Filed at 0:49 a.m. ET
WARRI, Nigeria (Reuters) – Three foreign oil workers, two Americans and a Briton, were freed on Monday by Nigerian militants who had held them hostage for five weeks, officials said.
The release of the three, employees of U.S. oil services company Willbros, raised hopes for an end to three months of sabotage and kidnapping in the world's eighth largest oil exporting country that has cut shipments by a quarter.
The three men were handed to the governor of Nigeria's southern Delta state by an ethnic Ijaw leader, who had been negotiating with the militants on behalf of the government. U.S. and British diplomatic staff took the men for medical checks.
“(The three) are in very good health and high spirits,'' said Abel Oshevire, a spokesman for Delta state. “Of course, they are a bit agitated after a month in captivity.''
The rebel Movement for the Emancipation of the Niger Delta (MEND) had demanded a greater share of the region's huge oil wealth, the release of two jailed Ijaw leaders and compensation for oil pollution as conditions for freeing the hostages.
It was not immediately clear what produced the breakthrough, but President Olusegun Obasanjo is due to fly to Washington on Tuesday and pressure had been building up for an end to the standoff over the hostages.
WAVE OF ATTACKS
MEND militants originally captured nine foreign oil workers on February 18 during a wave of attacks on oil facilities, but released six of them earlier this month. It was the second bout of kidnapping by the group since January.
The militant attacks followed a military assault on communities in Delta state that the government accused of involvement in oil theft. The military commander who ordered the assault has since been removed.
Militants had threatened to stage another major attack on oil facilities this month with the aim of cutting another one million barrels a day of exports.
“I hope the federal government will cease all attacks and will not try to arrest anyone,'' said Dimieari Von Kemedi, Ijaw activist and head of the Our Niger Delta non-governmental group.
“I also hope MEND realizes that the issues raised are now being handled as a top priority and there is no need for further attacks as that would be counter-productive to dialogue.''
MEND has yet to comment on the freeing of the hostages.
Militants, often armed and funded with the proceeds of crude oil theft, roam the mangrove-lined waterways of the delta in speedboats.
The majority of people in the delta have seen few benefits from decades of oil extraction that has yielded billions of dollars in profits for foreign oil companies and corrupt politicians. Authorities often dismiss militants as thieves.
Vast areas of the delta are not connected to the national power grid. There is no clean water in many places. There are almost no roads. Teachers and doctors are in short supply.
The environment has been wrecked by oil spills and the 24-hour burning of gas associated with the extraction of oil.
Mnay analysts say Nigerian governments, during almost three decades of military dictatorship as well as during periods of civilian rule, have seen it as being in their interests to control the oil by keeping the delta poor, divided and insecure.
Royal Dutch Shell and other companies on the western side of the delta have shut about 556,000 barrels a day of oil output, most of which is exported through the Forcados tanker terminal, which was damaged in the February attacks.
Officials say they expect to be able to restore most of the oil production within two weeks if peace returns to the delta. read more

By EDMUND L. ANDREWS
March 27, 2006
WASHINGTON, March 26 — It was after midnight and every lawmaker in the committee room wanted to go home, but there was still time to sweeten a deal encouraging oil and gas companies to drill in the Gulf of Mexico.
“There is no cost,” declared Representative Joe L. Barton, a Texas Republican who was presiding over Congressional negotiations on the sprawling energy bill last July. An obscure provision on new drilling incentives was “so noncontroversial,” he added, that senior House and Senate negotiators had not even discussed it.
Mr. Barton's claim had a long history. For more than a decade, lawmakers and administration officials, both Republicans and Democrats, have promised there would be no cost to taxpayers for a program allowing companies to avoid paying the government royalties on oil and gas produced in publicly owned waters in the Gulf.
But last month, the Bush administration confirmed that it expected the government to waive about $7 billion in royalties over the next five years, even though the industry incentive was expressly conceived of for times when energy prices were low. And that number could quadruple to more than $28 billion if a lawsuit filed last week challenging one of the program's remaining restrictions proves successful.
“The big lie about this whole program is that it doesn't cost anything,” said Representative Edward J. Markey, a Massachusetts Democrat who tried to block its expansion last July. “Taxpayers are being asked to provide huge subsidies to oil companies to produce oil — it's like subsidizing a fish to swim.”
How did a supposedly cost-free incentive become a multibillion-dollar break to an industry making record profits?
The answer is a familiar Washington story of special-interest politics at work: the people who pay the closest attention and make the fewest mistakes are those with the most profit at stake.
It is an account of legislators who passed a law riddled with ambiguities; of crucial errors by midlevel bureaucrats under President Bill Clinton; of $2 billion in inducements from the Bush administration, which was intent on promoting energy production; and of Republican lawmakers who wanted to do even more. At each turn, through shrewd lobbying and litigation, oil and gas companies ended up with bigger incentives than before.
Until last month, hardy anyone noticed — or even knew — the real costs. They were obscured in part by the long gap between the time incentives are offered and when new offshore wells start producing. But lawmakers shrouded the costs with rosy projections. And administration officials consistently declined to tally up the money they were forfeiting.
Most industry executives say that the royalty relief spurred drilling and exploration when prices were relatively low. But the industry is divided about whether it is appropriate to continue the incentives with prices at current levels. Michael Coney, a lawyer for Shell Oil, said, “Under the current environment, we don't need royalty relief.”
The program's original architect said he was surprised by what had happened. “The one thing I can tell you is that this is not what we intended,” said J. Bennett Johnston, a former Democratic senator from Louisiana who had pushed for the original incentives that Congress passed in 1995.
Mr. Johnston conceded that he was confused by his own law. “I got out the language a few days ago,” he said in a recent interview. “I had it out just long enough to know that it's got a lot of very obscure language.”
A Subsidy of Disputed Need
Things looked bleak for oil and gas companies in 1995, especially for those along the Gulf Coast.
Energy prices had been so low for so long that investment had dried up. With crude oil selling for about $16 a barrel, scores of wildcatters and small exploration companies had gone out of business. Few companies had any stomach for drilling in water thousands of feet deep, and industry leaders like Exxon and Royal Dutch Shell were increasingly focused on opportunities abroad.
“At the time, the Gulf of Mexico was like the Dead Sea,” recalled John Northington, then an Energy Department policy adviser and now an industry lobbyist.
Senator Johnston, convinced that the Gulf's vast reservoirs and Louisiana's oil-based economy were being neglected, had argued for years that Congress should offer incentives for deep-water drilling and exploration.
“Failure to invest in the Gulf of Mexico is a lost opportunity for the U.S.,” Mr. Johnston pleaded in a letter to other lawmakers. “Those dollars will not move into other domestic development, they will move to Asia, South America, the Middle East or the former Soviet Union.”
Working closely with industry executives, he wrote legislation that would allow a company drilling in deep water to escape the standard 12 percent royalty on up to 87.5 million barrels of oil or its equivalent in natural gas. The coastal waters are mostly owned by the federal government, which leases tens of millions of acres in exchange for upfront fees and a share of sales, or royalties.
Mr. Johnston and other supporters argued that the incentives would actually generate money for the government by increasing production and prompting companies to bid higher prices for new leases.
“The provision will result in a minimum net benefit to the Treasury of $200 million by the year 2000,” Mr. Johnston declared in November 1995, denouncing what he called “outrageous allegations” that the plan was a giveaway.
He won support from oil-state Democrats, Republicans and the Clinton administration. Hazel O'Leary, the energy secretary at the time, said the assistance would reduce American dependence on foreign oil and “enhance national security.”
Representative Robert Livingston of Louisiana, then a rising Republican leader, declared that the inducements would “create thousands of jobs” and “reduce the deficit.”
Many budget experts agree that the rosy estimates were misleading. The reason, they say, is that it often takes seven years before a new offshore field begins producing. As a result, almost all the costs of royalty relief would occur outside of Congress's five-year budget timeframe.
Opponents protested that the cost estimates were wrong, that the incentives amounted to corporate welfare and that companies did not need government incentives to invest.
“They are going to the Gulf of Mexico because that's where the oil is,” said Representative George Miller, Democrat of California, during a House debate. “What we do here is not going to change that. We are just going to decide whether or not we are going to give away the taxpayers' dollars to a lot of oil companies that do not need it.”
Industry executives and lobbyists fanned out across Capitol Hill to shore up support for the program, visiting 150 lawmakers in October 1995. The effort succeeded. A month later, Congress passed Mr. Johnston's bill.
A Missing Escape Clause
To hear lawmakers today, they never intended to waive royalties when energy prices were high.
The 1995 law, according to Republicans and Democrats alike, was supposed to include an escape clause: in any year when average spot prices for oil or gas climbed above certain threshold levels, companies would pay full royalties instead.
“Royalty relief is an effective tool for two things: keeping investment in America during times of super-low prices, and spurring American energy production when massive capital and technological risks would otherwise preclude it,” said Representative Richard W. Pombo, Republican of California and chairman of the House Resources Committee. “Absent those criteria, I do not believe any relief should be granted.”
But in what administration officials said appeared to have been a mistake, Clinton administration managers omitted the crucial escape clause in all offshore leases signed in 1998 and 1999.
At the time, with oil prices still below $20 a barrel, the mistake seemed harmless. But energy prices have been above the cutoff points since 2002, and Interior Department officials estimate that about one-sixth of production in the Gulf of Mexico is still exempt from royalties.
Walter Cruickshank, a senior official in both the Clinton and Bush administrations, told lawmakers last month that officials writing the lease contracts thought the price thresholds were spelled out in the new regulations, which were completed in 1998. But officials writing the regulations left those details out, preferring to set the precise rules at each new lease sale.
“It seems to have been a massive screw-up,” said Mr. Northington, who was then in the Energy Department. No one noticed the error for two years, and no one informed Congress about it until last month.
Five years later, the costs of that lapse were compounded. A group of oil companies, led by Shell, defeated the Bush administration in court. The decision more than doubled the amount of oil and gas that companies could produce without paying royalties.
The case began as a relatively obscure dispute. Shell paid $3.8 million in 1997 for a Gulf lease and soon drilled a successful well. But the Interior Department denied the company royalty relief, saying that Shell had drilled into an older field already producing oil and gas. The decision hinged on undersea geography and the court's interpretation of language in the 1995 law.
A typical field, or geological reservoir, often encompasses two or three separately leased tracts of ocean floor. Interior Department officials insisted that the maximum amount of royalty-free oil and gas was based on each field. Shell and its partners argued that limit applied only to each lease.
Perhaps shrewdly, the oil companies sued the Bush administration in Louisiana, where federal courts previously had sided with the industry in spats with the government.
The fight was not even close. In January 2003, a federal district judge declared that the Interior Department's rules violated the 1995 law. If the department “disagrees with Congress's policy choices,” Judge James T. Trimble Jr. wrote, “then such arguments are best addressed to Congress.”
What might have been a $2 billion mistake in the Clinton administration suddenly ballooned into a $5 billion headache under Mr. Bush.
But even as the Bush administration was losing in court, it was offering new incentives for the energy industry.
Mr. Bush placed a top priority on expanding oil and gas production as soon as he took office in 2001. Vice President Dick Cheney's task force on energy, warning of a deepening shortfall in domestic energy production, urged the government to “explore opportunities for royalty reduction” and to open areas like the Arctic National Wildlife Refuge to drilling.
Gale A. Norton, who stepped down this month as interior secretary, moved quickly to speed up approvals of new drilling permits. Starting in 2001, she offered royalty incentives to shallow-water producers who drilled more than 15,000 feet below the sea bottom.
In January 2004, Ms. Norton made the incentives far more generous by raising the threshold prices. Her decision meant that deep-gas drillers were able to escape royalties in 2005, when prices spiked to record levels, and would probably escape them this year as well.
She also offered to sweeten less-generous contracts the drillers had signed before the regulation was approved.
“These incentives will help ensure we have a reliable supply of natural gas in the future,” Ms. Norton proclaimed, predicting that American consumers would save “an estimated $570 million a year” in lower fuel prices.
Ms. Norton's decision was influenced by the industry. The Interior Department had originally proposed a cut-off price for royalty exemptions of $5 per million British thermal units, or B.T.U.'s, of gas. But the Independent Petroleum Association of America, which represents smaller producers, argued that the new incentive would have little value because natural gas prices were already above $5. Ms. Norton set the threshold at $9.34.
Based on administration assumptions about future production and prices, that change could cost the government about $1.9 billion in lost royalties.
“There is no cost rationale,” said Shirley J. Neff, an economist at Columbia University and Senator Johnston's top legislative aide in drafting the 1995 royalty law. “It is astounding to me that the administration would so blatantly cave in to the industry's demands.”
Incentives Keep Growing
Last April, President Bush himself expressed skepticism about giving new incentives to oil and gas drillers. “With oil at $50 a barrel,” Mr. Bush remarked, “I don't think energy companies need taxpayer-funded incentives to explore.”
But on Aug. 8, Mr. Bush signed a sweeping energy bill that contained $2.6 billion in new tax breaks for oil and gas drillers and a modest expansion of the 10-year-old “royalty relief” program. For the most part, the law locked in incentives that the Interior Department was already offering for another five years. But it included some embellishments, like an extra break on royalties for companies drilling in the deepest waters.
Lee Fuller, vice president of the Independent Petroleum Association of America, said smaller companies wanted to prevent future administrations from cutting back on incentives. “Having a clear, stable royalty policy was of value to independent producers,” he said.
And energy companies, whose executives had long contributed campaign funds to Republican candidates, pushed to block any amendments aimed at diluting the benefits.
The push to lock in the royalty inducements came primarily from House Republicans. The only real opposition came from a handful of House Democrats, in a showdown about 1 a.m. on July 25, according to a transcript of the session.
“It is indefensible to be keeping these companies on the government dole when oil and gas prices are so high,” charged Representative Markey of Massachusetts, who proposed to strip the royalty provisions. “We might as well be giving tax breaks to Donald Trump and Warren Buffett.”
Mr. Barton, the Texas Republican, brushed aside the objections. He reassured lawmakers that the new provisions would not cost taxpayers anything.
When Mr. Markey proposed a more modest change — having Congress prohibit incentives if crude oil prices rose above $40 a barrel — Republicans quickly voted him down again.
“The only reason they waited until after midnight to bring up these issues is that they couldn't stand up in the light of day,” Mr. Markey said in a recent interview. “They all expected me to give up because it was so late and I didn't have the votes. But if nothing else, I wanted to get these things on the record.”
A Royalty-Free Future?
It is still not clear how much impact the reduced royalties had in encouraging deep-water drilling. While activity in the Gulf has increased since 1995, prices for oil and gas have more than quadrupled over the same period, providing a powerful motivation, experts say.
“It's hard to make a case for royalty relief, especially at these high prices,” said Jack Overstreet, owner of an independent oil exploration company in Texas. “But the oil industry is like the farm lobby and will have its hand out at every opportunity.”
The size of the subsidies will soar far higher if oil companies win their newest court battle.
In a lawsuit filed March 17, Kerr-McGee Exploration and Production argued that Congress never authorized the government to set price cut-offs for incentives on leases awarded from 1996 through 2000. If the company wins, the Interior Department recently estimated, about three-quarters of oil and gas produced in the Gulf of Mexico will be royalty-free for the next five years.
Mr. Markey and other Democrats recently introduced legislation that would pressure companies to pay full royalties when energy prices are high, regardless of what their leases allow.
But Republican lawmakers and the Bush administration have signaled their opposition.
“These are binding contracts that the government signed with companies,” Ms. Norton recently remarked. “I don't think we can change them just because we don't like them.” read more