Dominion Oklahoma Texas Exploration & Production Inc. and Marathon Oil Co. have agreed to pay the United States $2,219,974.98 and $4,697,476.57, respectively, to resolve claims that they violated the False Claims Act by knowingly underpaying royalties owed on natural gas produced from federal and Indian leases, the U.S. Justice Department said Friday.

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. The settlements announced Friday 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.

"Mineral royalties provide an important source of income for Native Americans, the United States and various states," said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. "We are committed to protecting public and Indian lands and to ensuring that companies with leases to take natural gas from those lands pay their fair share of royalties."

The case is U.S. ex rel. Wright v. Chevron USA, Inc. et al., 5:03-CV-264 (E.D. Tex.)

The settlements with Dominion and Marathon arise from a lawsuit filed by Harold Wright under the False Claims Act. Under the whistle blower provisions of the act, private citizens may file actions on behalf of the United States and share in any recovery. Because Wright is deceased, his heirs will receive a $1.822 million share of the settlements. The Justice Department intervened against several defendants in the Wright lawsuit. Settlements in the case to date include agreements with Burlington Resources for $105.3 million, with Shell for $56 million, with Chevron, Texaco and Unocal for $45.5 million, and with Mobil for $32.2 million (see Daily GPI, April 7).

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