Judge Orders Oil Company to Pay $22.9 Million for Understating Royalties

An oil company was ordered to pay $22.9 million for understating the amount of royalty it owed the federal governments for oil pumped from offshore oil leases.

A federal judge ruled that Kerr-McGee Corp. understated the value of the oil and natural gas produced from the leases, allowing it to pay fewer royalties than the government was entitled to, The Wall Street Journal said.

Anadarko Petroleum (APC) acquired Kerr-McGee in 2006.

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Unusually, Kerr-McGee was sued by a private citizen, Bobby Maxwell, on behalf of the federal government. Maxwell began an audit of the company on behalf of the then Minerals Management Service in 2001.

Maxwell presented evidence that the company was understating production to his superiors. They believed there was no compelling evidence of fraud, leading him to sue on behalf of the federal government as a private citizen, under the False Claims Act.

Maxell is entitled to 25% of the settlement.

Gregory Goldberg, a lawyer for Kerr-McGee, said, "we respect the court's decision and are evaluating our options."