Kerr-McGee attorneys say they are still “evaluating our options” as to whether to appeal last week’s court ruling ordering the producer, which is now part of Anadarko Petroleum, to pay $22.9 million for the alleged underreporting of oil and natural gas royalties.

U.S. District Judge Marcia S. Krieger in Denver ruled in favor of Bobby L. Maxwell, a former auditor with the Interior Department’s Minerals Management Service (MMS), who gained notoriety when he brought a False Claims Act (FCA) lawsuit on behalf of the federal government alleging the undercollection of royalties owed by then-Kerr-McGee. Although Kerr-McGee is the defendant in the lawsuit, the company no longer exists as an independent entity since it was acquired by Houston-based Anadarko Petroleum in 2006 (see Daily GPI, June 26, 2006).

“With regard to Mr. Maxwell’s claim, the company believes it has paid all of the royalties it owes the government; the government itself disagreed with Maxwell’s allegations and chose not to seek any additional monies from the company,” said Gregory E. Goldberg, an attorney with the law firm of Holland & Hart in Denver.

In 2006 Maxwell claimed that he was fired when top Interior officials allegedly ordered him to stop pursuing Kerr-McGee for $12 million in back royalty payments (see Daily GPI, July 5, 2006).

While still employed by the MMS, which was the predecessor to the Bureau of Ocean Energy Management, Regulation and Enforcement, Maxwell said he was under pressure not to pursue royalty underpayments to the U.S. government, including from Kerr-McGee. Maxwell filed the FCA lawsuit against Kerr-McGee to collect the underpayments, and within days of the lawsuit becoming public, he said he was notified he was being terminated. He alleged that top Interior officials ordered him to stop pursuing Kerr-McGee for back royalties, a claim that Interior disputed.

In 2007 a jury awarded Maxwell $7.5 million in damages; this was later overturned by the district court (see Daily GPI, April 3, 2007). In late 2008 the Tenth Circuit Court of Appeals reversed the lower court’s decision overturning the jury verdict and remanded the case to the district court. Krieger last week ordered the producer to pay triple the damages that the jury originally awarded. As a whistle blower, Maxwell could get one-fourth of the damage settlement.

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