April 1 (Bloomberg) -- Kerr-McGee Corp., the oil and natural-gas producer bought last year by Anadarko Petroleum Corp., won a bid to dismiss a Jan. 23 jury verdict finding it liable for underpaying $7.55 million on federal oil leases.

U.S. District Judge Phillip Figa in Denver threw out the case on March 30, saying the court didn't have jurisdiction. Bobby Maxwell, a former auditor with the U.S. Minerals Management Service, sued Kerr-McGee in 2004 claiming it sold oil from the Gulf of Mexico to Texon LP at low rates in exchange for absorbing Kerr-McGee marketing costs. The U.S. got less royalties as a result, he claimed in his complaint.

``The Department of Justice has reviewed the factors of the case and, based on their review, the Mineral Management Service didn't see the need to be involved in the case, and still doesn't,'' said spokesman Gary Strasburg. He declined to comment on Figa's ruling throwing out the verdict by the Denver jury.

The complaint was filed by Maxwell on behalf of the government under the U.S. False Claims Act. Three similar cases have been unsealed in the past year in which auditors for the Minerals Management Service, a division of the U.S. Department of the Interior responsible for collecting royalties on oil and gas leases on federal lands, sued companies for underpaying royalties.

22 Years

Maxwell, who worked at the agency for 22 years, was fired in a reorganization a week after his suit was unsealed. Maxwell's lawyer Michael Porter, Kerr-McGee lawyer Scott Barker and company spokesman John Christiansen didn't return calls or e-mails seeking comment after business hours.

Last week, the U.S. Supreme Court limited the ability of whistleblowers to collect damages, siding with Boeing Co. in a case stemming from safety issues at a Colorado nuclear plant.

The court, voting 6-2, said retired engineer James Stone can't share in a $4.2 million award he and the U.S. government had won in a suit against Rockwell International, now part of Boeing. The ruling, which reversed a lower court, might also bar Stone from collecting legal fees.

The high court dispute centered on the requirement that whistleblowers be the ``original source'' of information about wrongdoing. The majority said Stone didn't meet that requirement because the focus of the case shifted during the litigation and the jury's findings against the company weren't based on information he provided.

Audited

In the Kerr-McGee case, the ruling centered on whether the whistleblower voluntarily disclosed to the government the ``principal information underlying'' his complaint.

Maxwell audited Kerr-McGee while at the MMS and uncovered in 2002 that the company sold 80 to 90 percent of its oil to Texon for $1.48 per barrel less than the average per barrel rate at the time. The suit deals with oil produced from the Gulf of Mexico between 1999 and 2002.

Because Maxwell first provided the information as part of his professional duties, it didn't constitute a ``voluntary'' disclosure as required by law, Figa wrote in his 28-page ruling.

During the trial, Kerr-McGee lawyer Barker told the jury that the government was aware of the marketing agreement with Texon, an oil marketing firm, and after a thorough review, accepted the $110 million that Kerr-McGee paid in royalties as payment in full on its leases.

Documents

Barker also said Maxwell never claimed Kerr-McGee filed fraudulent information in any of his audit documents.

Anadarko, a U.S. oil and natural-gas producer, bought Kerr- McGee and Western Gas Resources Inc. in August for a combined $22.5 billion.

At the time of the jury verdict, the MMS was under investigation for issuing drilling leases in 1998 and 1999 that failed to require royalty payments, a mistake that may cost the government as much as $10 billion. Separately, the Government Accountability Office, the investigative arm of Congress, was conducting a broad review of the Minerals Service's efforts to collect drilling fees.

The top U.S. official at Maxwell's former employer knew in 2004 about errors in leases that may allow companies to avoid up to $10 billion in fees, according to the inspector general.

The official, MMS Director Johnnie Burton, testified to Congress in September that she first learned in early 2006 about the flawed leases. Confronted with evidence that her employees informed her in 2004, Burton said she had not paid much attention to the matter, according to the inspector general's report, obtained by Bloomberg News.

Doubled

Anadarko, based in The Woodlands, Texas, more than doubled sales with the purchases of Kerr-McGee and Western Gas. The acquisitions pushed Anadarko past Devon Energy Corp. and Apache Corp. to become the largest so-called independent in the U.S., an oil producer that doesn't also have a refining or chemicals business.

Maxwell's lawyer, Michael Porter, argued at trial that Kerr-McGee's business relationship with Texon helped it avoid paying higher royalties. Texon also paid above-market prices for crude oil from Kerr-McGee that was produced on non-federal land, he claimed.

The case is Maxwell v. Kerr-McGee, 04-1224, U.S. District Court, District of Colorado (Denver).

To contact the reporter on this story: David E. Rovella in New York drovella@bloomberg.net

Last Updated: April 1, 2007 17:57 EDT