Energy Companies Could Owe “Billions” in Unpaid Gas Royalties

Updated  Five congressmen, including Rep. Tom Tancredo, R-CO, have asked federal officials to examine whether they could be getting more money for the natural gas taken from public lands, according to an article in the Denver Post today. The congressmen may be responding to an earlier story by the Washington Post that stated “state governments, Indian tribes and individual “bounty hunters” are claiming that big energy companies are shortchanging taxpayers by billions of dollars.”Tancredo joined four other Democratic congressmen in a letter drafted by Rep. Carolyn Maloney, D-NY to ask the Minerals Management Service and the Bureau of Land Management (BLM) to look into these accusations, including from Colorado oil executive Jack Grynberg, that gas companies have withheld billions of dollars in royalties payments to the government by under-reporting production.

The Minerals Management Service in the Department of the Interior determines what royalties are owed and collects the money. States and Indian tribes then receive their shares from the federal government. Gas drilling has reached record numbers on BLM land, especially in Western Colorado.

Jack Grynberg, owner of Grynberg Petroleum based in Greenwood Village near Denver, has charged that the energy industry owes the federal government more than $30 billion dollars in unpaid royalties for natural gas alone.

Grynberg has sued oil and gas companies before under the “False Claims Act” (FCA), which enhances the government’s ability to recover losses sustained as a result of fraud against the federal government. According to the FCA, a private individual can bring a civil action for a violation of this code for the US government. If the government declines to intervene in the suite, the private citizen may continue the action and receive a share of any government recovery.

A case that Grynberg initiated in Cortez in 2004, netted a $6 million dollar settlement from BOC Gases that was found to have underpaid royalties to the federal government for CO2 that was taken from wells near Cortez.

Five years ago, energy companies paid more than $400 million to settle charges that they had not paid royalties owed on oil taken from public land.

Beth Daley, of the Project on Government Oversight, has charged the Bush administration with loosening reporting rules and cutting back on production audits so that energy companies can get away with fraud. “The industry seems to have all sorts of ways to avoid paying what it owes for this gas,” she said.

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Leslie Robinson

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