US ACC wins renewed court hearing on agency contracts

02 March 2001 22:43  [Source: ICIS news]

WASHINGTON (CNI)--The American Chemistry Council (ACC) Friday applauded a federal court decision to consider whether a federal agency may arbitrarily demand additional payments from prior contractual agreements.

In response to an ACC appeal, the US federal 10^th Circuit Court of Appeals at Denver, Colorado has agreed to review its earlier decision supporting such federal authority, the ACC said today.

ACC senior counsel Don Evans said of the case that will again be heard by the court: "This case tests whether federal agencies can retroactively change the terms of a contract, lease or license, and assess fees or other costs, whenever and however they choose."

"Unless stopped by the court," Evans said, "this practice will set a dangerous precedent. This law actually undermines agency accountability and credibility and would threaten individuals and industries with erratic and capricious administrative action."

The controversy began when the Department of Interior's (DOI) minerals management service attempted to collect additional royalty payments on oil leases many years after the original payments were made and approved by the government.

Despite a six-year statutory limitation on such recoveries, DOI unilaterally decided to recalculate the royalties on these leases. DOI then demanded an additional $100m (Euro106.4m) from Shell Oil Company, the leaseholder, for oil produced 8-16 years earlier.

In its initial ruling in the case, the 10th Circuit Court of Appeals sided with the government. That decision effectively eliminated the six-year limitation, allowing the government to make additional monetary demands on contracts negotiated many years earlier.

After the initial 10^th Circuit ruling, the ACC submitted a brief asking the court to reconsider its decision. Although such a request is not often granted, the court agreed to rehear the case and determine whether the DOI exceeded its authority. The case is set for argument on 15 May.

The nearly 200 member companies of Arlington, Virginia-based ACC account for some 90% of US basic industrial chemicals production capacity.

By: Glenn Hess
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