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MarketWatch/Dow Jones Newswires: House panel subpoenas Shell in US Gulf royalty probe

Jun 20, 2006

HOUSTON (MarketWatch) — A House subcommittee has subpoenaed Royal Dutch Shell Plc. (RDSA) after the company balked at participating in a hearing this week on the government’s troubled royalty program for the Gulf of Mexico.

The hearing, scheduled for Wednesday morning, features executives from Chevron Corp. (CVX), ConocoPhillips (COP) Exxon Mobil Corp. (XOM) and Kerr-McGee Corp. (KMG). But Shell’s appearance was an open question after the company indicated it was unwilling to appear, a House committee aide said Tuesday. The subpoena went to John Hofmeister, the head of Shell’s U.S. division, the aide said. “We assume they’re going to show up tomorrow,” said the aide. “They’ve been issued a subpoena to show up.”

A Shell spokeswoman did not immediately return a phone call Tuesday morning.

The hearing, which also features officials from the Department of Interior, focuses on a loophole in a royalty relief program that is expected to allow the oil companies to keep upwards of $10 billion in royalties instead of having to pay them to the Interior Department for production in the Gulf of Mexico.

The 1995 royalty relief program was designed to encourage costly developments in the deepwater Gulf of Mexico. But the Interior Department neglected to include price thresholds for leases from two years, 1998 and 1999. That omission allows energy producers to keep the royalties, even in the current high-price climate.
The story behind the omission “is a trail of irresponsibility and gross mismanagement,” the House committee said in a hearing announcement. “The purpose of this hearing is to ascertain how these egregious errors occurred and who is responsible for them.”

-By John M. Biers, Dow Jones Newswires; 713-547-9214;
-Contact: 201-938-5400 

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