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Wednesday, January 24, 2001
Shell to pay $110 million in underpaid-royalties suit
By Michael J. Sniffen
Associated Press
WASHINGTON - Shell Oil Co. has agreed to pay $110 million to settle allegations that it underpaid royalties on oil it took from leased federal land from 1980 to Dec. 31, 1998, the Justice Department said Tuesday.
The settlement brings to more than $392 million the amount the government has recovered from 12 oil companies as a result of a private whistle-blower lawsuit originally filed under the False Claims Act. More cases are pending.
Two private whistle-blowers, J. Benjamin Johnson Jr. and John Martinek, who filed the original complaint in U.S. District Court in Lufkin, will share a portion of the settlement. (The case included private royalty owners from South Texas, and portions of the case were settled in federal court in Corpus Christi.)
The whistle-blowers alleged that 17 companies underpaid royalties on oil taken from more than 27 million acres of leased federal and Indian land onshore and offshore in 21 states. They alleged that together the companies submitted more than 500,000 in false claims and damages and penalties might exceed $5 billion.
In their 1996 lawsuit, the whistle-blowers accused the companies of paying royalties based on a posted wellhead price rather than the fair market value.
The case is scheduled for trial in March 2001, but companies have been negotiating settlements.
In March, the Justice Department joined the whistle-blowers' lawsuits accusing Exxon-Mobil, Shell Oil Co. and Burlington Resources Inc. of intentionally underpaying royalties on oil and gas they took from leased federal and Indian land.
(U.S. District Judge Janis Graham Jack heard the lawsuits in a Corpus Christi courtroom in April 1999. She settled lawsuits alleging the underpayment of oil royalties and how much the lawyers should be paid.)
(Claimants included royalty and working-interest owners, including many from South Texas, who may have received payments from the settling oil companies between Jan. 1, 1986, and Sept. 30, 1998. Because the cases stem from the combination of more than a dozen state and federal class-action lawsuits, representing 4 million royalty owners, the nation's eyes were focused on the federal courtroom in Corpus Christi.)The government reached settlements with BP Amoco, for $32 million; Chevron, for $95 million; Conoco, for $26 million; Mobil Oil, for $45 million; Oxy USA Inc., for $7.3 million; Devon Energy Production Co., formerly known as Pennzoil, for $11.9 million; UPRC, for $2.7 million; Sunoco, for $200,000; Texaco, for $43 million; Kerr-McGee, for $13 million; and Exxon-Mobil, for $7 million.
Private oil and gas companies obtain mineral leases from the Interior Department, giving them the right to extract oil and gas from federal and Indian land in return for paying royalties.
The False Claims Act allows the government to collect three times the amount of unpaid roya lties - plus $5,000 to $10,000 for each underpayment.
It also allows private whistle-blowers to sue over these underpayments and to receive a portion, based on the value of their legal work, of whatever the government recovers.
Business writer Andrea Jares contributed to this report.
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