Dominion Fined for Alleged Underpayment of Gas Royalties

Dominion Exploration and Production Co., formerly CNG Producing Company, has paid the United States $2 million to resolve claims that CNG underpaid royalties owed on natural gas that it produced on federal leases, the Justice Department announced. The settlement resolves allegations that the Richmond, Virginia-based company systematically under-reported the value of natural gas that it produced on the government leases in the Gulf of Mexico from January 1, 1995 through December 31, 1999 and, consequently, paid less royalties than it owed to the United States.

The Minerals Management Service (MMS) of the U.S. Department of the Interior is responsible for overseeing the collection of royalties on federal leases. Each month, companies are required to report to MMS the value of the natural gas produced from their federal leases and to pay a percentage of the reported value as royalties. "The Department of Justice is committed to ensuring that the United States is fairly compensated for the sale of valuable assets from public lands," said Robert D. McCallum, Jr., Assistant Attorney General for the Civil Division.

The settlement arises from a lawsuit filed under the False Claims Act by whistleblower Harrold E. Wright, which alleges that a number of companies have systematically undervalued their natural gas production from federal leases. The False Claims Act permits private parties to file suit on behalf of the United States and to receive a share of any recovery.

The Department previously settled similar allegations against Shell Oil for $56 million and is continuing to pursue allegations against Burlington Resources and Exxon-Mobil. The investigation and settlement was handled by the Civil Division of the Department of Justice with the assistance of the Department of the Interior's Office of Inspector General and the Minerals Management Service.