Thursday, August 5, 1999
AUSTIN - Texas Attorney General John Cornyn today announced a $12.575 million settlement with a group of oil companies which grossly underpaid oil royalties owed to the State. The defendants include Amoco, Marathon, Phillips, Shell and Texaco.
"These companies were guilty of shortchanging Texas taxpayers. We will hold businesses accountable when they fail to live up to their bargain," said Attorney General Cornyn.
According to oil leases with the state, royalties paid on the sale of oil are based upon the fair market value of the oil. However, these oil companies developed a pricing system of posting prices for crude oil depending on the location and grade of the oil and then paid royalties based on posted prices instead of the fair market value.
Different companies developed different systems for posting prices and some companies relied on prices posted by the major companies, but nevertheless, market value was not used to pay royalties. These allegations against oil companies have arisen in several forums, both in state court and federal district court. The discrepancy in pricing cost the state millions of dollars. The settlement represents damages for the underpaid royalties and interest on unpaid royalties.
In 1995, the Attorney General's office joined the General Land Office and a limited number of individual plaintiffs in a lawsuit against eight major oil companies. Two oil companies, Chevron and Mobil, previously reached settlements with the state.
The Permanent School Fund and the Permanent University Fund will each receive more than $5.5 million as a result of the settlement.
This case was handled by Assistant Attorney General Priscilla Hubenak of the Austin office of the Attorney General's Natural Resources Division.
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