BP Amoco latest oil company to settle False Claims Act allegations for underpaying royalties

by Ben Vernia | September 16th, 2011

On September 16, the Department of Justice announced the latest in a large, long-running qui tam suit involving the underpayment of oil and gas royalties:

BP Amoco Corp. (formerly Amoco Corp.), Amoco Production Company, BP Exploration & Oil Inc., BP America Inc., Atlantic Richfield Company and Vastar (the BP defendants) have agreed to pay the United States $20.5 million to resolve claims that the companies violated the False Claims Act by knowingly underpaying royalties owed on natural gas produced from federal and Indian leases, the Justice Department announced today.

Congress has authorized federal and Indian lands to be leased for the production of natural gas in exchange for the payment of royalties on the value of the gas that is produced. Each month companies are required to report to the U.S. Department of the Interior the amount of royalty that is due. This settlement resolves claims that the BP defendants improperly deducted from the royalty values they reported the cost of boosting gas up to pipeline pressures improperly reported processed gas as unprocessed gas to reduce royalty payments on federal and Indian leases, and improperly failed to perform “dual accounting” on certain federal leases.

The settlement explicitly excludes, and does not resolve, any claims the United States or the BP defendants have related to the Deepwater Horizon oil spill.

The case is the latest in a series of settlements (those already announced include Andarko and Kerr McGee, Shell, Exxon, Marathon and Dominion, and Occidental) totaling approximately $270 million. The estated of the deceased relator, Harold Wright, will receive $5.3 million from this settlement.

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