XTO Energy Inc. has agreed to pay $16 million to resolve False Claims Act allegations that it knowingly underpaid royalties owed on natural gas produced from federal and Native American lands. The settlement resolves allegations that the company improperly deducted costs necessary to put the gas in marketable condition, deducted costs of transporting carbon dioxide and failed to pay royalties on carbon dioxide.
XTO is an American energy company and subsidiary of ExxonMobil principally operating in North America. Acquired by ExxonMobil in 2010 and based out of Spring, Texas, it is involved with the production, processing, transportation, and development of oil and natural gas resources.[2][3] The company specializes in developing shale gas via unconventional means like hydraulic fracturing and horizontal drilling.
ExxonMobil’s acquisition of XTO made it the largest producer of natural gas in the U.S. Since then, XTO Energy’s resource portfolio has tripled through several acquisitions. The company owns interests in approximately 40,000 active oil and natural gas sites across North America, with locations in Arkansas, Colorado, Kansas, Louisiana, Montana, New Mexico, North Dakota, Ohio, Oklahoma, Pennsylvania, Texas, Utah, West Virginia, Wyoming and Western Canada
“Mineral royalties provide an important source of income for the United States, Native Americans and various states,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “This settlement demonstrates that the department will hold accountable those who knowingly take improper advantage of our public resources.”
“Taxpayers expect that every penny of these royalties gets paid,” said U.S. Attorney Cole Finegan for the District of Colorado. “Our office will make sure that energy companies pay what they owe when they take natural gas from leases on Native American and federal lands.”
“This recovery of unpaid mineral royalties is the direct result of the Department of Justice, Department of Interior (DOI)’s Office of Inspector General (OIG), DOI’s Office of Natural Resources Revenue and DOI’s Office of the Solicitor working diligently to ensure that revenues generated from resources under Federal jurisdiction are properly accounted for and collected on behalf of the mineral owners and the American public,” said Special Agent in Charge Ron Gonzales of the DOI-OIG’s Energy Investigations Unit.
Congress allows federal and Native American lands to be leased for the production of natural gas in exchange for the payment of royalties on the value of the gas produced. Lessees must put the gas in marketable condition at no cost to the United States. The settlement resolves allegations that when reporting and paying royalties from January 2009 to August 2017, XTO knowingly deducted payments to third parties for gas transportation and processing that included costs to place the gas in marketable condition. The settlement also resolves claims that from January 2009 to June 2016, XTO knowingly and improperly deducted from federal royalty payments on natural gas the costs of transporting carbon dioxide entrained in that gas, and that from May 2010 to March 2016, XTO failed to pay federal royalties owed on carbon dioxide produced at the Castle Valley Plant in Utah. Through a series of settlements since 2017, the department and its agency partners have used the False Claims Act to recover $25 million from energy companies that improperly deducted the costs of putting their gas in marketable condition. Here is the settlement agreement:https://www.justice.gov/media/1322381/dl?inline
The resolution obtained in this matter was the result of a coordinated effort between the Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section, the U.S. Attorney’s Office for the District of Colorado, DOI-OIG’s Energy Investigations Unit, DOI’s Office of the Solicitor and DOI’s Office of Natural Resources Revenue. The matter was handled by Senior Trial Counsel Gregory Pearson of the Civil Division and Assistant U.S. Attorney Amanda Rocque for the District of Colorado.
JEFFREY NEWMAN IS A WHISTLEBLOWER LAWYER. HE AND HIS FIRM REPRESENT WHISTLEBLOWERS UNDER THE FALSE CLAIMS ACT (FCA) IN VARIOUS KINDS OF CLAIMS INCLUDING OIL AND GAS UNDERPAYMENT CLAIMS. HE CAN BE REACHED AT JEFF@JEFFNEWMANLAW.COM OR 617-823-3217
