The Associated Press reported today that a federal jury found Kerr McGee liable for additional royalties on crude oil produced from federal properties and sold through Texon. The case is noteworthy in that it was brought as a False Claims Act case by Bobby Maxwell, an auditor with the Mineral Management Service, who alleged that his superiors at the MMS refused to pursue his recommendation to demand additional royalties from Kerr McGee. The underlying allegations were that Kerr McGee sold crude oil to Texon, and received marketing services and other non-cash considerations, on which royalty was not paid. Kerr McGee had denied the allegations and claimed that no additional royalties were owed.
The MMS issued a press release maintaining its original position that Kerr McGee had properly paid its royalties on these transactions, and that federal auditors should not be able to bring False Claim Act cases because of the conflict of interest that arises in seeking personal recovery upon information that they are paid by the taxpayers to collect. Kerr McGee has indicated that intends to appeal the verdict.
This is one of several False Claim Act cases filed by former or current employees of the MMS, claiming that royalties were underpaid to the federal government on oil or gas production.