Chevron to pay $45M to settle claims of royalty underpayment

WASHINGTON — Chevron Corp. will pay $45.5 million to resolve claims that it underpaid natural gas royalties to the government and Native Americans, the Justice Department announced Wednesday.

Most of the settlement money will be distributed to federal, state and American Indian accounts affected by the underpayments. More than $12.3 million of the amount will go to the heirs of the whistleblower who filed the lawsuit in Beaumont, Texas.

Each month, companies are required to report to the Interior Department the value of the natural gas produced from their federal and Indian leases. A percentage of the reported value is paid as royalties.

The settlement includes Chevron companies Texaco Inc., Unocal Corp. and other affiliates.

The government contended that the companies made improper deductions from royalty values and violated the False Claims Act by underpaying the royalties.

"This settlement successfully ends long-standing litigation and ensures that taxpayers receive their fair share of royalty revenues from energy production on federal and American Indian lands," Interior Secretary Ken Salazar said.

In a statement, Chevron said, "The agreement states that Chevron makes no admission of any kind concerning improper or fraudulent actions or omissions on its part, and Chevron reasserts that it did not engage in such activities. Chevron has settled this case simply to bring an end to a long and expensive legal proceeding."

Assistant Attorney General Tony West said mineral royalties provide an important source of income for Native Americans, the federal government and several state governments.

The settlement said the underreporting took place from March 1988 through November 2008.

The case was filed by an individual, Harrold Wright. Although he is deceased, his heirs will receive payment under the whistleblower provisions of the False Claims Act. The law allows private citizens to file actions on behalf of the United States and share in any recovery.

Wright's suit alleged that a number of companies systematically underpaid royalties. The Justice Department previously settled with Burlington Resources Inc. for $105.3 million, Shell Oil Co. for $56 million and Dominion Exploration and Production Co. for $2 million.

The case is U.S. ex rel. Wright v. Chevron USA Inc. et al., 5:03-CV-264 in the Eastern District of Texas.