Underpayment of Royalties

Oil, gas, coal, and timber companies often conduct business on government owned land, and therefore must pay royalties to the government. Royalties are calculated by formulas based on the value of the resources extracted from the government land. Companies often use deceptive practices to either disguise their full profit amounts, or manipulate the formulas to defraud the government out of its royalty payments. Submitting a false claim to the government and paying less than what is owed could be a violation of the FCA.

Example

Between 1988 and 1999, Mobile Oil Companies systematically underpaid the U.S. government royalties from the natural gas extracted from government-owned land. Every month, the Minerals Management Service (MMS) required Mobile to report the value of the natural gas taken from U.S. owned lands and pay a percentage of the value in royalties to the government. Mobile allegedly falsely undervalued the natural gas for 11 years, and defrauded the government out of the royalties it was owed. In 2010, Mobile agreed to pay the government $32.2 million to resolve claims under the False Claims Act. The whistleblower in this case collected a reward of $975,000.

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