Burlington Resources Inc., a subsidiary of ConocoPhillips, has agreed to pay the federal government $97.5 million to resolve claims that it underpaid royalties owed on natural gas produced from federal and Indian leases, the Department of Justice (DOJ) said last Wednesday.

Burlington was accused of underreporting the value of natural gas that it produced from onshore federal and Indian leases from March 1, 1988 to March 31, 2005, and consequently underpaying royalties.

The United States alleged that Burlington used transactions with affiliated companies to claim excessive deductions for the cost of transporting and treating its gas, and to otherwise understate the value it reported each month for its natural gas production.

The settlement with Burlington arose from a lawsuit filed by a private whistleblower under the False Claims Act for underpayment of royalties. The DOJ partially intervened against several producers in the lawsuit, and settled with Shell Oil Co. for $56 million and Dominion Exploration and Production Co. for $2 million. It said it is continuing to pursue claims against ExxonMobil Corp.

The department "is committed to ensuring that those who remove valuable assets from public or Indian lands pay a fair price for those assets," said Assistant Attorney General Peter D. Keisler in the DOJ's Civil Division. "We will continue to pursue claims against other companies that seek to evade their royalty payment obligations."

The investigation of and settlement with Burlington were jointly handled by the U.S. Attorney for the Eastern District of Texas and the Civil Division of DOJ, with assistance from the Interior Department's Office of Inspector General, the Minerals Management Service, and the New Mexico Taxation and Revenue Department's Oil and Gas Bureau.

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