Dominion & Marathon Oil to Pay $6.9 Million to Resolve Allegations of Royalty Underpayments from American Indian and Federal Lands

WASHINGTON – Dominion Oklahoma Texas Exploration & Production Inc. and Marathon Oil Company have agreed to pay the United States $2,219,974.98 and $4,697,476.57, respectively, to resolve claims that the two companies separately violated the False Claims Act by knowingly underpaying royalties owed on natural gas produced from federal and Indian leases, the Justice Department announced today. Marathon is among the world’s leading integrated energy companies with operations around the globe, and Dominion is one of the nation’s largest producers and transporters of energy.

The Bureau of Ocean Energy Management, Regulation and Enforcement (BOEM) (formerly known as the Minerals Management Service) of the U.S. Department of the Interior is responsible for collecting and disbursing royalties from energy production that occurs on federal and American Indian lands, both on shore and offshore. Each month, companies are required to report to BOEM the value of the natural gas produced from their federal and Indian leases and to pay a percentage of the reported value as royalties. These settlements resolve claims that Dominion and Marathon improperly deducted from royalty values the cost of boosting gas up to pipeline pressures, and that Dominion improperly reported processed gas as unprocessed gas to reduce royalty payments.

"Mineral royalties provide an important source of income for Native Americans, the United States and various states," said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. "We are committed to protecting public and Indian lands and to ensuring that companies with leases to take natural gas from those lands pay their fair share of royalties."

"The Department of Justice must remain vigilant in protecting both American and tribal financial interests from unscrupulous business practices," said John Bales, U.S. Attorney for the Eastern District of Texas. "These latest two settlements underscore that commitment."

"We will aggressively pursue every dollar due to American citizens from energy production on federal and American Indian lands," said BOEM Director Michael R. Bromwich. "That means companies must accurately report and pay the proper royalties on a monthly basis, with no exceptions."

The settlements with Dominion and Marathon arise from a lawsuit filed by Harold Wright under the False Claims Act. 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 Mr. Wright is deceased, his heirs will receive a $1.822 million share of the settlements. The Justice Department intervened against several defendants in the Wright lawsuit. Settlements in the case to date include agreements with Burlington Resources for $105.3 million, with Shell for $56 million, with Chevron, Texaco and Unocal for $45.5 million, and with Mobil for $32.2 million.

The investigation and settlement of these matters were jointly handled 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 Inspector General, BOEM and Office of the Solicitor.

The case is U.S. ex rel. Wright v. Chevron USA, Inc. et al., 5:03-CV-264 (E.D. Tex.)