Underpayment of Gas Royalties Costs Burlington $97.5 Million

The U.S. Department of Justice has announced that Burlington Resources Inc. agreed to pay the United States government $97.5 million to resolve claims that it underpaid royalties owed on natural gas produced from federal and Indian leases.

The settlement resolves allegations under the False Claims Act that Burlington systematically under-reported the value of natural gas that it produced from onshore federal and Indian leases from March 1, 1988, to March 31, 2005, and as a result paid less royalties than it owed to the United States and various Indian tribes.

Each month, companies are required to report to the federal Minerals Management Service the value of the natural gas produced from their federal and Indian leases and to pay a percentage of the reported value as royalties.

The United States alleged that Burlington used transactions with affiliated entities to claim excessive deductions for the cost of transporting and treating its gas, and to otherwise understate the value it reported each month for its natural gas production.

The settlement with Burlington arises from a lawsuit filed by a private whistleblower under the False Claims Act, which alleges that a number of companies systematically underpaid royalties due for their federal and Indian natural gas production.

The Justice Department partially intervened against several defendants in the lawsuit, and previously settled with Shell Oil Co. for $56 million and Dominion Exploration and Production Co. for $2 million. The department is continuing to pursue claims against Exxon-Mobil Corporation.

Last year, Burlington became a wholly owned subsidiary of ConocoPhillips, the third largest integrated energy company in the United States.