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Oil Cos. Settle Royalty Dispute

September 10, 1999

LUFKIN, Texas (AP) _ Chevron Corp., BP Amoco PLC and Conoco Inc. reportedly have agreed in principle to pay about $155 million to settle charges that they underpaid oil royalty payments.

Chevron would pay about $95 million and BP Amoco PLC and Conoco Inc. would pay about $30 million each, The Dallas Morning News and the Wall Street Journal reported in Friday’s editions.

The settlements would resolve charges made by two whistleblowers in a 1996 lawsuit against 18 large oil companies.

In the lawsuit filed in federal district court in Lufkin, the whistleblowers alleged that the companies knowingly undervalued oil they extracted from federal and Native American lands beginning in 1988 to reduce the royalties they owed.

The case is scheduled for trial in March, but several companies have been negotiating settlements. Mobil Corp., based in Fairfax, Va., agreed last year to pay $45 million, and Los Angeles-based Occidental Petroleum Corp. agreed last week to pay $7.3 million.

According to the newspapers, a document was expected to be filed as early as Friday in federal court in Lufkin, asking the court to end discovery against San Francisco-based Chevron, Houston-based Conoco and London-based BP Amoco because the government has reached preliminary agreements with the companies.

Chevron spokesman Michael Libbey declined to comment directly on the settlement.

``The settlement isn’t signed, and we don’t think it’s appropriate to comment until it is finalized,″ he said.

BP Amoco said it has an ``understanding in principle″ to settle.

The newspapers cited people close to the negotiations as saying Chevron and the Justice Department must still agree on the language of a final agreement, expected in the next few weeks.

The Interior Department has billed the oil companies more than $400 million in alleged underpayment of federal royalties stretching back two decades.

In their lawsuit, the whistleblowers charged that the companies paid royalties based on a posted wellhead price rather than the fair-market value.

The Justice Department entered the case against Conoco, Amoco, Burlington Resources Inc,. Shell Oil Co., Occidental Petroleum, Texaco Inc. and Unocal Corp. The government is seeking about $5 billion from all the companies combined, including actual damages multiplied three times.

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