Justice Dept. Joins Royalties Suit

The Justice Department said Thursday that it is joining a suit accusing Amoco Oil Co., Burlington Resources Inc., Conoco Inc. and Shell Oil Co. of undervaluing oil taken from public and Native American lands to lessen the amount of royalties paid to the federal government and the tribes.

The suit, filed by three private parties on behalf of the government under the False Claims Act, alleges that 14 oil-producing companies violated federal mineral contracts by knowingly engaging in this practice. The U.S. told the U.S. District Court in Lufkin, Texas, where the suit was filed, that it didn’t know if it would intervene in the other 10 cases.

According to the charges, the companies undervalued hundreds of millions of barrels of oil from 1988 until now that were taken from oil drilling sites near the Gulf of Mexico and in California and other Western states. The government doesn’t know the total value of what hasn’t been properly paid as a result of the undervaluing.

Houston-based Shell, an affiliate of Royal Dutch/Shell Group, called the suit “meritless” and said it will fight the charges “vigorously.”

Executives for the other three companies couldn’t be reached for comment.

Oil on federal land is governed by mineral lease agreements between the oil companies and the Interior Department. The companies are required by law to pay a percentage of the oil’s value in royalties to the federal government and the Indian tribes.