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Brazil’s main oil-producing states, Rio de Janeiro, Espirito Santo and São Paulo, asked the Supreme Court in Brasilia on Friday to overturn a new law that strips them of billions of dollars in royalties levied on the output of rich offshore oilfields. They argued that the legislation was unconstitutional because it changed existing contracts and violated Brazil’s fiscal discipline law. A decade ago, states pledged a percentage of oil royalties to make payments on debt to the federal government. The bill signed into law by President Dilma Rousseff on Thursday night forces the government to share offshore oil royalties more equally among the country’s 26 states, federal district, and 5 500 municipalities. The royalty bill was originally meant to distribute Brazil’s future oil wealth more widely as it developed giant resources off its Atlantic coast near Rio de Janeiro. But with 80 percent of output and the bulk of royalty payments, the three states were receiving too much from the offshore crude that was seen more as a federal resource than a state one, supporters of the change said. – Reuters
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