Chevron Agrees to Pay More Than $45 Million Dollars to Resolve Allegations of False Claims for Royalties Under Payment

February 2nd, 2010 by Qui Tam

Chevron Corporation, Texaco, Unocal, Inc. and their affiliates (the Chevron Companies), have agreed to pay the United States $45,569.584.74 to resolve claims that they violated the False Claims Act by knowingly underpaying royalties owed on natural gas produced from federal and Indian leases. 

Responsibility for overseeing the collection of royalties on federal and Indian leases lies with the Minerals Management Service (MMS) of the U.S. Department of Interior.  Companies are required to report to the MMS the value of the natural gas produced from their federal and Indian leases and to pay a percentage of the reported value as royalties.  These royalties provide an important source of income for Native Americans, the United States, and various states.

The United States alleged that from March 1988 to November 2008 the Chevron companies improperly deducted from royalty values the cost of boosting gas up to pipeline pressures, used affiliate transactions to falsely reduce their reported value of gas taken from federal and Indiana leases, and improperly reported processed gas as unprocessed gas to reduce royalty payments.  Most of the $45 million will be distributed to federal, state and American Indian accounts that were affected by the Chevron Companies’ underpayment of natural gas royalties and improper deductions. 

This is not the first settlement involving allegations of underpayment of royalties.  The Justice Department previously settled with Burlington Resources, Inc. for $105.3 million.  Shell Oil Company for $56 million and Dominion Exploration and Production Company for $2 million. 

The whistleblower initially filed suit in Texas.  Because the whistleblower is deceased, his heirs will $12,303,787.88, plus interest, as part of this settlement. 

More information can be found at:  http://www.justice.gov/opa/pr/2009/December/09-civ-1379.html

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