by Ben Vernia | November 3rd, 2023
On November 1, the Department of Justice announced that XTO Energy, a subsidiary of ExxonMobil, had agreed to pay $16 million to settle allegations that the company underpaid royalties owed to the United States. According to DOJ’s press release:
XTO Energy Inc. has agreed to pay $16 million to resolve False Claims Act allegations that it knowingly underpaid royalties owed on natural gas produced from federal and Native American lands. The settlement resolves allegations that the company improperly deducted costs necessary to put the gas in marketable condition, deducted costs of transporting carbon dioxide and failed to pay royalties on carbon dioxide.
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Congress allows federal and Native American lands to be leased for the production of natural gas in exchange for the payment of royalties on the value of the gas produced. Lessees must put the gas in marketable condition at no cost to the United States. The settlement resolves allegations that when reporting and paying royalties from January 2009 to August 2017, XTO knowingly deducted payments to third parties for gas transportation and processing that included costs to place the gas in marketable condition. The settlement also resolves claims that from January 2009 to June 2016, XTO knowingly and improperly deducted from federal royalty payments on natural gas the costs of transporting carbon dioxide entrained in that gas, and that from May 2010 to March 2016, XTO failed to pay federal royalties owed on carbon dioxide produced at the Castle Valley Plant in Utah. Through a series of settlements since 2017, the department and its agency partners have used the False Claims Act to recover $25 million from energy companies that improperly deducted the costs of putting their gas in marketable condition.
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The case apparently arose from a government investigation, rather than from a whistleblower’s qui tam lawsuit.
