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MarketWatch: Shell in talks with U.S. on royalty relief

Last Update: 9:30 PM ET Aug 22, 2006

By Maya Jackson Randall and Ian Talley

Of DOW JONES NEWSWIRES

WASHINGTON (MarketWatch) — Shell Oil Co. (RDSB) President John Hofmeister told reporters Tuesday the company is in talks with the U.S. Department of Interior to address concerns that some Gulf of Mexico drilling leases don’t require oil companies to pay royalties to the federal government.

Hofmeister said he’s interested in resolving the dispute and optimistic about being able to reach an agreement that could satisfy all parties, leaving open the possibility that the company would rework the flawed 1999 and 1998 leases to address U.S. lawmakers’ concerns.

“We want to work a way forward to help all concerned,” he said. “We understand that people make human mistakes … we’d like the opportunity to help correct those mistakes.”

News earlier this year that contracts entered into with the DOI by large oil companies in the late 1990s did not include price triggers drew criticism on Capitol Hill.

Without the price thresholds, oil companies enjoying record profits are allowed to forgo paying drilling fees to the government – even when oil prices are high.

With lawmakers under pressure to address high gasoline prices, news that Big Oil wasn’t paying royalties stirred up debate and prompted several congressional hearings.

Meanwhile, government officials say a clerical error led to the missing price thresholds. Still no companies have publicly agreed to rework the flawed lease agreements.

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