Several BP plc subsidiaries have agreed to pay the United States $20.5 million to resolve claims that they violated the False Claims Act by knowingly underpaying royalties for natural gas produced on federal and American Indian leases, the Department of Justice (DOJ) said Friday.

The defendants in the latest case are BP Amoco Corp. (formerly Amoco Corp.), Amoco Production Co., BP Exploration & Oil Inc., BP America Inc., Atlantic Richfield Co. and Vastar (U.S. ex rel. Wright v. Chevron USA, Inc. et al., 5:03-CV-264 (E.D. Tex.). The settlement specifically excludes any claims against BP related to the Macondo well blowout in the Gulf of Mexico.

Under federal law, federal and Indian lands may be leased for gas production in exchange for royalty payments on the value of the gas produced. The settlement resolves claims that the BP defendants “improperly deducted from the royalty values they reported the cost of boosting gas up to pipeline pressures, improperly reported processed gas as unprocessed gas to reduce royalty payments on federal and Indian leases, and improperly failed to perform ‘dual accounting’ on certain federal leases,” the DOJ stated.

“Natural gas royalties provide an important source of income for the United States, Native Americans, and various states, and help support critical programs from which we all benefit,” said DOJ’s Tony West, assistant attorney general for the Civil Division. “Through cases like this, we are keeping our commitment to protect public lands and to ensure that companies who take nonrenewable resources from those lands pay their fair share of royalties.”

According to DOJ, the settlement followed a lawsuit filed by Harold Wright under the False Claims Act against several producers more than 10 years ago (see Daily GPI, April 5, 2000). Settlements in the case to date total around $270 million.

DOJ already had settled with former Burlington Resources Inc. for $105.3 million; Shell Oil Co. for $56 million; Chevron Corp., Texaco and Unocal Inc., which are now part of Chevron, for $45.5 million; and Dominion Exploration and Production Co. for $2 million (see Daily GPI, Dec. 28, 2009). Last year DOJ collected $32.2 million to resolve claims with ExxonMobil Corp. (see Daily GPI, April 7, 2010). Earlier this year a settlement was reached with Occidental Petroleum Corp. and affiliates Occidental Oil and Gas Corp. and OXY USA Inc. (see Daily GPI, March 24).

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 $5.3 million from the BP settlement, DOJ stated.

The United States initially declined to intervene against the BP defendants, but intervened for the purpose of completing this settlement, DOJ said.

The investigation and settlement was handled jointly by the DOJ’s Civil Division and the U.S. Attorney’s Office for the Eastern District of Texas, with assistance from the Department of the Interior’s Office of Natural Resources Revenue Office of the Solicitor and Office of Inspector General.

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