Marathon Oil and Dominion agree to pay $6.9 million to settle qui tam suit over Indian royalties

by Ben Vernia | August 20th, 2010

The Department of Justice announced on August 20 that Dominion Oklahoma Texas Exploration & Production Inc. and Marathon Oil Company have agreed to pay a combined total of nearly $7 million to resolve allegations that it defrauded the Government in connection with oil royalty payments. According to the Department’s press release:

Dominion Oklahoma Texas Exploration & Production Inc. and Marathon Oil Company have agreed to pay the United States $2,219,9674.98 and $4,697,476.57, respectively, to resolve claims that the two companies separately violated the False Claims Act by knowingly underpaying royalties owed on natural gas produced from federal and Indian leases, the Justice Department announced today. Marathon is among the world’s leading integrated energy companies with operations around the globe, and Dominion is one of the nation’s largest producers and transporters of energy.

The Bureau of Ocean Energy Management, Regulation and Enforcement (BOEM) (formerly known as the Minerals Management Service) of the U.S. Department of the Interior is responsible for collecting and disbursing royalties from energy production that occurs on federal and American Indian lands, both on shore and offshore. Each month, companies are required to report to BOEM 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 settlements resolve claims that Dominion and Marathon improperly deducted from royalty values the cost of boosting gas up to pipeline pressures, and that Dominion improperly reported processed gas as unprocessed gas to reduce royalty payments.

The case was originally brought by a False Claims Act whistleblower, Harold Wright, who subsequently died. His estate and heirs will receive $1.822 million (a 26% share). The government had intervened in the case against several defendants, and settlements prior to this have totaled approximately $240 million.

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