Fraud in Underpayment of Royalties – Government Lands

Underpayment of Royalties on Government-Leased Land

Oil and gas production on federal and Indian lands is governed by lease agreements between the Interior Department and private companies. By law, the companies must pay the federal government and Indian tribes a percentage of the value of the oil and gas as a royalty. Companies are also required to pay royalties on any timber harvested or minerals (such as coal) mined from federal and Indian lands. Private companies, like oil producers, risk becoming the subject of qui tam lawsuits by reporting false information and intentionally undervaluing the volume of product they recover from these federally-controlled lands.

Major oil companies have paid more than $500 million to the federal government to settle qui tam cases alleging that they knowingly undervalued oil extracted from public and Indian lands to reduce the royalties they had to pay.