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Occidental Fined $2.05M for Underpaying Royalties

Occidental Petroleum Corp. and affiliates Occidental Oil and Gas Corp. and OXY USA Inc. have agreed to pay the federal government $2.05 million to resolve claims that they knowingly underpaid royalties owed on natural gas produced from federal leases, the Department of Justice (DOJ) said Tuesday.

The settlement between the parties resolves claims that the Occidental companies improperly deducted from the royalty values they reported the cost of boosting gas up to pipeline pressure, and failed to properly report and pay royalties related to a natural gas keep-whole agreement, pool pricing for gas and gas resold to affiliates, DOJ said.

The settlement arises from a lawsuit filed by Harold Wright under the False Claims Act against the Los Angeles-based Occidental companies as well as a number of other producers. Under the qui tam, or whistleblower, 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 $91,000 plus interest as his share of the settlement. The United States initially declined to participate in the case, but was actively involved in discussions that eventually led to the settlements, DOJ said. The current settlement brings the total recovery in the case to approximately $230 million.

The DOJ reached settlements with several defendants in the Wright lawsuit, including Burlington Resources for $105.3 million; with Shell for $56 million; with Chevron, Texaco and Unocal for $45.5 million; with Mobil for $32.2 million; with ExxonMobil for $32.2 million; with Dominion Oklahoma Texas Exploration & Production Inc. for $2.2 million; and with Marathon Oil Co. for $4.7 million (see Daily GPI, Aug. 23, 2010; April 6, 2010).

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