From the Houston Chronicle... March 23, 2011

Occidental Petroleum Corp. and two of its subsidiaries will pay $2.05 million plus interest to resolve claims the companies knowingly underpaid royalties owed on natural gas produced from federal leases, according to the Department of Justice.

Among the claims the government made is that the companies improperly deducted from the royalty values the cost of boosting gas up to pipeline pressures.

The Los Angeles-based company didn’t admit guilt under the settlement agreement (see it below) but rather continues to dispute that it broke the law. The settlement was done “to avoid the delay, uncertainty, inconvenicne, and expense of protracted litigation… ”

Federal land is leased for natural gas production in exchange for royalty payments on the value of the gas that is produced.  Each month companies are required to report to the Department of the Interior the amount of royalty that is due. 

The settlement came from a lawsuit filed by Harrold Wright under the False Claims Act against Occidental and other companies.  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 U.S. initially declined to participate in the case, but was involved in the discussions that led to the settlement. 

The settlement brings the total recovery in the case to approximately $230 million.

The investigation and settlement were handled jointly by the Justice Department’s Civil Division and the U.S. Attorney 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.