Department of Justice Seal




(202) 514-2007


TDD (202) 514-1888



WASHINGTON, D.C. -- The Department of Justice announced today that it has intervened in a lawsuit against two major oil companies accusing the 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.

Beginning in 1996, four private parties sued 14 oil-producing companies under the qui tam provisions of the False Claims Act. In 1998, the United States intervened in the case as to five of the defendants: Amoco Corporation, Burlington Resources, Conoco, Inc., Shell Oil Company and Texaco, Inc. Today, in its Second Amended Complaint filed in U.S. District Court in Lufkin, Tex., the United States added two defendants to its lawsuit -- BP America, Inc., and Unocal Corporation, as well as their subsidiaries and affiliates, said U.S. Attorney Mike Bradford of Beaumont, Texas.

Acting Assistant Attorney General for the Civil Division David Ogden said the United States has not yet decided whether to intervene as to the remaining defendants named in the qui tam complaint, but intends to continue its investigation as to those companies.

Oil production on federal lands is governed by the Federal Oil and Gas Royalty Management Act of 1982. Mineral lease agreements between the Department of the Interior and private oil companies grant the companies the right to extract oil from federal and Indian lands. 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 suit alleges that oil companies have been knowingly undervaluing the oil produced from federal lands to reduce the amount of the royalties they must pay. The United States seeks to recover the unpaid royalties. Under the False Claims Act, the United States may recover three times the amount of the unpaid royalties plus civil penalties.

Under the qui tam provisions of the False Claims Act, a private party, known as a "relator," can file an action on behalf of the United States and receive a portion of the recovery.

The investigation of the allegations in the qui tam complaint has been conducted by the Office of the United States Attorney for the Eastern District of Texas, the Civil Division of the Department of Justice and the Department of Interior.

The Second Amended Complaint was filed by the Civil Division and the U.S Attorney for the Eastern District of Texas. The original lawsuit is United States of America ex rel. J. Benjamin Johnson, et al., v. Shell Oil Company, et al., Civil Action No. 9:96CV66 (E.D. Tex, Lufkin Division).