BP Is to Pay $32mn for Drilling

BP Plc, Europe's second-largest oil company, must pay the U.S. government $32 million in extra natural gas drilling fees, according to the agency responsible for collecting federal oil and gas royalties, Bloomberg reported.

BP must pay $18.9 million for underpaid royalties and $13.3 million in interest by the end of the month, the U.S. Minerals Management Service said in a press release.

The royalties cover production of coalbed methane, a form of natural gas, on federal lands in New Mexico from June 1991 through May 2006.

"This action demonstrates that MMS is vigilant in collecting the royalties due to the Federal Government from energy production that occurs on Federal lands,'' Johnnie Burton, the agency's director, said in a statement. "We take our job seriously.''

BP underpaid royalties in New Mexico by deducting the cost of removing carbon dioxide from methane gas from payments to the government, the agency said. The government argued that removing the carbon dioxide was a production cost that should be paid by the company.

After BP appealed, the government's position was upheld by the U.S. District Court of Appeals for the District of Columbia on June 10, 2005. The U.S. Supreme Court declined to hear a further appeal.