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Phillips Petroleum Co. has agreed to pay the government $8 million to settle allegations it underpaid royalties on oil it took from leased federal and Indian land from 1988 through 1998, the Justice Department said Friday. The settlement with the Bartlesville, Okla.-based company brings to more than $417 million the amount the government has recovered from 15 oil companies as a result of a private whistle-blower lawsuit originally filed under the False Claims Act. The government is trying to negotiate settlements with one other company, Unocal. Two private whistleblowers, J. Benjamin Johnson Jr. and John Martinek, who filed the original complaint in U.S. District Court in Lufkin, Texas, will share a portion of the settlement. The two alleged that 17 companies, some of which have since merged, underpaid royalties on oil taken from more than 27 million acres of leased federal and Indian lands onshore and offshore in 21 states. They alleged that together the companies submitted more than 500,000 false claims and damages, and penalties might exceed $5 billion. In their 1996 lawsuit, the whistleblowers accused the companies of paying royalties based on a posted wellhead price rather than the fair market value. The government has joined a number of the cases. The case is scheduled for trial in March, but companies have been negotiating settlements. Previously, the government reached settlements with BP Amoco, for $32 million; Chevron, for $95 million; Conoco, for $26 million; Mobil Oil, for $45 million; Oxy USA Inc., for $7.3 million; Devon Energy Production Co., formerly known as Pennzoil, for $11.9 million; UPRC, for $2.7 million; Sunoco, for $200,000; Texaco, for $43 million; Kerr-McGee, for $13 million; Exxon-Mobil, for $7 million, Shell Oil for $110 million, Burlington Resources for $8.5 million, and Marathon for $7.7 million. Private oil and gas companies obtain mineral leases from the Interior Department, giving them the right to extract oil and gas from federal and Indian land in return for paying royalties. The False Claims Act allows the government to collect three times the amount of unpaid royalties — plus $5,000 to $10,000 for each underpayment. It also allows private whistleblowers to sue over these underpayments and to receive a portion, based on the value of their legal work, of whatever the government recovers.

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