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Oil companies reach tentative $185 million settlement in underpaid royalty lawsuit The agreement will end a case that alleged the oil companies underpaid royalties by under valuating oil extracted from federal and American Indian lands by The Associated Press
Four major oil companies have reached tentative agreements with U.S. prosecutors who had accused them of cooperating in schemes to shortchange the government by millions of dollars.
The tentative settlement, filed Sept. 10 in federal court in Lufkin, involved about $185 million in payments and would end a case that alleged the companies underpaid royalties by under valuating oil extracted from federal and American Indian lands.
The settlement has yet to be finalized, the Lufkin Daily News reported in its Sept. 11 editions.
Chevron USA Inc., BP America Inc., Amoco Oil Co. and Conoco Inc. agreed in principle to settle for $95 million, $32 million, $32 million and $26 million, respectively. The paper reported the agreement papers were filed just after 4 p.m. with U.S. District Judge John Hannah Jr.
Lawsuit filed in 1996 The 1996 lawsuit alleges that the companies, their affiliates and subsidiaries knowingly defrauded the government in royalties derived from the production of crude oil from lands spanning more than 27 million acres in 21 states.
According to the lawsuit, the defendants have underpaid oil royalties by calculating the royalties based on fraudulently deflated wellhead prices from as far back as 1988.
It alleged the schemes involved more than 6,000 onshore and offshore leases in Texas, Louisiana, Mississippi, California, Alabama, Alaska, Oklahoma, Arkansas, Colorado, Arizona, Florida, Kansas, Michigan, Montana, North Dakota, Nebraska, New Mexico, Nevada, South Dakota, Utah and Wyoming.
In the court documents filed Sept. 10, an accompanying motion said U.S. prosecutors wanted a stay of discovery against the oil companies so that the settlement can be approved by all parties.
The case is scheduled for trial in March, but several companies have been negotiating settlements. Mobil Corp., based in Fairfax, Va., agreed last year to pay $45 million, and Los Angeles-based Occidental Petroleum Corp. agreed last week to pay $7.3 million.
Royalty issues go back two decades The settlements would resolve charges made by two whistle-blowers in a 1996 lawsuit against 18 large oil companies. The lawsuit was filed in federal district court in Lufkin. The whistle-blowers alleged that the companies knowingly undervalued oil they extracted from federal and Native American lands beginning in 1988 to reduce the royalties they owed.
The Interior Department has billed the oil companies more than $400 million in alleged underpayment of federal royalties stretching back two decades.
In their lawsuit, the whistle-blowers charged that the companies paid royalties based on a posted wellhead price rather than the fair-market value. The Justice Department entered the case against Conoco, Amoco, Burlington Resources Inc., Shell Oil Co., Occidental Petroleum, Texaco Inc. and Unocal Corp.
The government is seeking about $5 billion from all the companies combined, including actual damages multiplied three times.
The lawsuit was originally filed under provisions of the False Claims Act that would entitle the private plaintiffs to a portion of the funds if any recovery is made. The government would be entitled to triple the amount of losses plus civil penalties.
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