Devon Energy and its affiliates have agreed to pay the federal government nearly $3.5 million to resolve claims made by a whistle blower that the independent producer underpaid royalties owed on natural gas produced on federal and Native American lands, according to the U.S. Department of Justice (DOJ).

The affiliate that allegedly underpaid royalties, PennzEnergy, formerly known as Pennzoil Co., was acquired by Devon in May 1999. Prior to the merger, PennzEnergy was involved in the production of natural gas from federal leases offshore in the Gulf of Mexico and onshore in the Gulf Coast.

The resolution is one of the last in a series of settlements arising out of qui tam, or whistle blower, litigation that has been pending for more than a decade. The settlement arises from a lawsuit filed by Harold Wright under the False Claims Act (FCA). Under the qui tam provisions of the FCA, private citizens may file actions on behalf of the United States and share in the recovery.

Because Wright is deceased, his heirs will receive $908,000 (26%) of the settlement with Devon.

Last month Total Final SA and its affiliates agreed to pay the federal government $14.6 million plus interest to resolve claims that the companies underpaid royalties owed on natural gas produced from federal and Native American lands (see Daily GPI, Feb. 23).

A year ago Los Angeles-based Occidental Petroleum Corp. and affiliates Occidental Oil and Gas Corp. and OXY USA Inc. agreed to pay the federal government $2.05 million to settle claims that they knowingly underpaid royalties owed on natural gas produced from federal leases (see Daily GPI, March 24, 2011).

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

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