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Louisiana Says Two Oil Companies Owe $475 Million

March 13, 1991

BATON ROUGE, La. (AP) _ The state claimed Wednesday that two major oil companies owe $475 million for underpayment of royalties on natural gas produced on public land.

The State Mineral Board’s claim is against Texaco Inc. and Louisiana Land & Exploration Co. and stems from LL&E’s subleasing of six public leases to Texaco since 1928. Those subleases in Cameron, Terrebonne, Lafourche and Vermilion parishes provided that LL&E got about one-eighth of the money from gas sales and the state got one-eighth.

Texaco allegedly underpaid both LL&E and the state, according to the board, which met Wednesday. But both companies are liable to the state, the board said.

The board will pursue the claim in court if the two companies don’t pay within 30 days, said Campbell Hutchinson, a state attorney.

The state said that while LL&E acted mainly as a paying agent on royalties of production developed by Texaco, it has a contractual agreement with the state for payment of the royalties.

″LL&E’s exposure is based on a lease contract, not on misconduct,″ Mineral Board Chairman T. Jay Seale said.

The state has negotiated with LL&E for more than a year, seeking to get the smaller company to join with the state in going after Texaco, but those negotiations were unsuccessful.

A representative of LL&E said that the amount sought by the state is ″grossly exaggerated under all applicable legal construction.″

LL&E also said the 1928 agreement between LL&E and Texaco had an indemnity clause requiring Texaco to pay whatever was required to meet state royalty requirements.

A Texaco attorney declined comment, saying it would be inappropriate while the matter was in litigation.

Earlier, the state charged in another case that Texaco had underpaid $550 million after undervaluing natural gas on which royalty payments were made.

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