Department of Justice Seal


THURSDAY, FEBRUARY 19, 1998 (202) 616-2765

TDD (202) 514-1888


WASHINGTON, D.C. -- The Justice Department has intervened in an action accusing four major oil companies of knowingly undervaluing oil extracted from public and Indian lands to reduce royalties they would have had to pay the United States and the Indian nations under federal mineral contracts, the Department of Justice announced today.

The suit was originally filed in U.S. District Court in Lufkin, Texas, by three private parties under the qui tam provisions of the False Claims Act, said U.S. Attorney Mike Bradford of Beaumont, Texas.

Bradford said the original complaint, which was made public today, alleged that 14 oil-producing
companies violated the False Claims Act by knowingly underpaying royalties on oil taken from federal and Indian lands. The Department's action was against four of the defendants: Amoco Oil Company, Burlington Resources Inc., Conoco Inc. and Shell Oil Company and their subsidiaries and affiliates. There was no estimate of the value of the underpayment.

The United States has advised the court that it has not decided whether to intervene in the allegations involving the other 10 defendants, but intends to continue its investigation of those assertions.

Deputy Assistant Attorney General Stuart Schiffer of the Civil Division said that from 1988 to the present the companies undervalued hundreds of millions of barrels of oil taken from three oil-producing areas: off-shore drilling in the Gulf of Mexico, oil sites in California and on-shore
oil drilling sites in New Mexico, Wyoming and other western states.

The Department said oil production on federal and Indian lands is governed by mineral lease agreements between the Department of the Interior and private oil companies under the Federal Oil and Gas Royalty Management Act of 1982. The Minerals Management Service of the Department of the Interior oversees the collection of oil and gas royalties from companies leasing mineral rights from the United States and Indian tribes. By law, the oil companies must pay the United States and the tribes a percentage of the value of the oil as a royalty.

The investigation of the allegations in the qui tam complaint was conducted by the U.S. Attorney's office in Beaumont, Texas, the Department's Civil Division and the Department of Interior.

Under the qui tam statute, a private party, known as a "relator," can file an action on behalf of the United States and receive a portion of the recovery. By law, the case remained under seal while the United States investigated the relators' allegations to determine whether to intervene in the case and prosecute the action.

Under the False Claims Act, the United States may recover three times the amount of its losses plus civil penalties.