BP to Pay $20.5M to Settle Royalties Case

Six BP Plc (BP/) units will pay $20.5 million to resolve claims they knowingly underpaid royalties on natural gas drawn from leased federal and Indian lands, the U.S. Justice Department said.

The companies, including U.S.-based BP Corp. North America Inc., Amoco Production Co. and Atlantic Richfield Co., allegedly reported processed gas as unprocessed, improperly deducted some production costs to reduce the amount of money owed and departed from required accounting practices.

“Natural gas royalties provide an important source of income for the United States, Native Americans and various states and help support critical programs from which we all benefit,” Assistant U.S. Attorney General Tony West said in a statement today announcing the accord.

The agreement resolves a 2003 whistleblower lawsuit filed in federal court in Texarkana, Texas, by Harrold Wright, who has since died, according to the U.S. The U.S. moved to intervene as against BP for settlement purposes yesterday.

The settlement doesn’t resolve any claims over last year’s Gulf of Mexico oil spill, caused by an explosion aboard the Deepwater Horizon platform being used by BP.

“BP is pleased that the parties were able to work cooperatively to resolve this longstanding and complex dispute involving the method for determining natural gas royalties,” Daren Beaudo, a spokesman for the company, said in an e-mailed statement.

The oil producer denied any wrongdoing, Beaudo said.

Wright’s heirs will receive $5.3 million in compensation, according to the Justice Department. His first claims were filed in 1998.

The case is U.S. ex rel. Wright v. Chevron USA Inc., 03cv264, U.S. District Court, Eastern District of Texas (Texarkana).

To contact the reporter on this story: Andrew Harris in Chicago at aharris16@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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