Chevron Underpaying Royalties

Chevron Underpaying Royalties

Lorena Lopez

ACC 4375.160

Texas A&M International University

Chevron is a petroleum company that produces and transport oil and natural gas around the world. They explore and produce these products from drillings in places like land and sea, such as Texas and the Gulf of Mexico. In land, the company leases a land to explore and drill from and is required to pay a percentage of their production value, royalties, to their lessors.

A royalty is a share of the overall gross production, free of all production costs, that the landowner is entitled to receive. The landowner can receive the royalty at market price which would be before any sales. It can also be received after sales but the royalty might have

The False Claims Act states, “Any person who knowingly submitted false claims to the government was liable for double the government’s damages plus a penalty of $2,000 for each false claim” (Department of Justice, 2011).

The company was found out committing this fraud by Harrold Wright in the case U.S. ex rel. Wright v. Chevron USA, Inc. et al., 5:03-CV-264 (E.D. Tex.). Under the qui tam provision, a private person, referred as relator, is allowed to file suit for violation of the False Claims Act on behalf of the government (2011). Mr. Wright was a lessor for the ExxonMobil and had suspicions of underpayment of royalties. He claimed that Chevron and other oil companies were underpaying royalties from federal and Indian lands in the area of Beaumont, Texas.

Chevron payed $45,569,584.74 to resolve the claims in the accusation. Some part of the money was returned to the federal and Indian accounts that were affected, and a small amount went to Harrold Wright, as the False Claims Act states that the relator is entitled to receive a percentage of what the government recovers. In this case, Harrold Wright had passed away and his heir recovered the

However, it is alleged that Chevron undervalued the natural gas they were drilling. They were not paying what the total worth of their production, which it can be considered stealing from the lessors.

References

Chevron Policy, G. (2015). Company Profile | About Chevron | Chevron. Chevron.com. Retrieved 7 October 2015, from http://www.chevron.com/about/leadership/

DeseretNews.com,. (2009). Chevron to pay $45M to settle claims of royalty underpayment. Retrieved 7 October 2015, from