ExxonMobil Corp. on Tuesday vehemently denied the U.S. Justice Department’s claims that it deliberately underpaid royalties over a 10-year period on natural gas produced from federal and American Indian leases, adding that the case was settled two years ago.

The response was to Monday’s announcement by the U.S. Justice Department that the agency had reached a settlement agreement with ExxonMobil Corp. under which the producer would pay $32.2 million to resolve claims that it knowingly underpaid royalties from March 1, 1988 to Nov. 30, 1999 (see Daily GPI, April 6).

“We reject any accusation that the company deliberately underreported the value of the natural gas,” said David Eglinton, a spokesman for ExxonMobil. “The settlement agreement in this case, signed by the government, expressly denies any knowing underreporting with respect to royalty.”

Eglinton added that ExxonMobil’s policy is to make royalty payments consistent with our legal obligations “at all times,” noting that the matter announced by the government Monday was “settled with the Justice Department in 2008.”

The settlement with the Mobil companies, which are now part of ExxonMobil following the 1999 merger, arises from a lawsuit — U.S. ex rel. Wright v. Chevron USA, Inc. et al. — filed by Harold Wright in Texas on behalf of the United States (see Daily GPI, April 5, 2000). The whistle blower provisions of the False Claims Act allow private citizens to file actions on behalf of the United States and to share in any recovery. Because Wright is now deceased, his heirs will receive a $975,000 share of the settlement.

The U.S. Justice Department partially intervened against the Mobil defendants in the Wright lawsuit, and previously settled with 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).

The United States in the case alleged that the Mobil companies used transactions with affiliated entities to falsely reduce the reported value of gas taken from federal and American Indian leases, to claim excessive deductions for the cost of transporting that gas, and to otherwise understate the value they reported each month for their natural gas production.

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