Oil, Gas and Mining Qui Tam Cases

Companies that extract oil, gas, coal, and other natural resources from federal or tribal lands must pay royalties based on the actual value of the resources they produce. When an energy company underreports production, manipulates pricing, or uses accounting schemes to reduce royalty obligations, it may be liable under the False Claims Act (FCA).

The Law Offices of David Berg represents whistleblowers who expose royalty underpayment schemes, fraudulent reporting, and other forms of government contract and natural-resource fraud.

How Royalty Fraud Creates False Claims Act Liability

The False Claims Act imposes liability on a defendant in connection with underpaying royalty payments to the Government that typically involve amounts owed for use of minerals, oil, and gas on public lands. Most of the reported cases involve the defendant entering into oil and gas leases with Indian Tribes. The Government, through the Mineral Management Service (MMS) agency, acts as a fiduciary for Indian Tribes with respect to royalty payments due on these leases. As part of this duty, the agency collects the royalties, ensures the accuracy of the payments through an auditing system, and remits the royalty payments to the tribe. Because the royalty payments are made to a federal agency on behalf of the Tribes, False Claims Act liability may be imposed on a defendant who underpays the royalties even though the Government does not have an ongoing interest in the funds, and the Government does not suffer a loss.

A Landmark Example: Nationwide Royalty Underpayment Scheme

The most well-known case in this area is United States ex rel. Johnson v. Shell Oil Company. In Johnson, the qui tam whistleblowers alleged that eighteen major oil companies and their divisions, subsidiaries or affiliates, underpaid royalties owed to the United States for production of oil on federal and Indian lands. The qui tam whistleblowers alleged that these companies historically underpaid oil royalties to the Government by calculating the royalties using prices substantially lower than the consideration the [oil companies] actually have received for the oil.

The whistleblowers alleged that major oil companies:

• Engaged in a nationwide scheme to underpay royalties owed on crude oil extracted from more than 27 million acres of federal and tribal lands
• Filed false reports with the government that used artificially low prices and incorrect data
• Used multiple pricing and reporting schemes (seven in total) to deflate the value of oil and reduce royalty payments
• Attempted to dismiss the case several times using different legal defenses—but were unsuccessful

Ultimately, the companies settled the case for nearly $440 million.

If you’ve observed any similarities of these patterns, you may have the basis for an Oil, Gas, and Mining qui tam case. Not sure whether what you’ve seen qualifies as fraud? Send a confidential message using the form on this page. We can review your information and explain your options.

Notice

This website is designed to provide general information only. This information is not and should not be construed to be legal advice. The transmission of the information found on this website also does not result in the formation of a lawyer-client relationship.

You should be aware that qui tam claims are subject to a Statute of Limitations. The area of limitations periods is complex. There are also first to file rules, public disclosure bars, original source issues, and varying limitations in pursuing retaliation claims. If you wish to pursue your claims, you should promptly seek the opinion of an attorney regarding the merits of your qui tam claim and the applicable statute of limitations.