Shell Oil Fined $49 Million for Natural Gas Violations

WASHINGTON, DC, August 5, 2003 (ENS) - Shell Oil Company has agreed to pay $49 million to the U.S. government to settle claims relating to its unauthorized venting and flaring of gas in the Gulf of Mexico, the Justice Department announced today.

The settlement resolves a lawsuit filed by the Justice Department alleging that Shell improperly vented and flared gas from seven offshore federal leases.

The lawsuit charged that Shell released natural gas and and burned it off for extended periods large volumes of gas at its Auger platform, located about 150 miles off the coast of Louisiana, and other facilities in the Gulf of Mexico.

The suit also alleged that the energy company failed to properly report, or pay royalties on, the vented and flared gas.


The Shell Auger platform in the Gulf of Mexico (Photo courtesy Shell)
Regulations issued by the Department of the Interior prohibit unauthorized venting and flaring of gas in excess of small volumes that are not economical to recover.

The government alleged that Shell's conduct violated the False Claims Act, as well as other administrative requirements.

As part of the agreement settling the lawsuit, Shell acknowledged that it improperly vented and flared gas from its offshore leases, and failed to properly report or pay royalties on that gas.

A Shell spokesperson said the company and the government did not interpret the wording of federal regulations in the same way, and the company is pleased to conclude the matter.

"The Department of Justice is committed to preventing the waste of valuable resources, and to ensuring that the United States is fully compensated for assets removed from public lands," said Peter Keisler, assistant attorney general for the Civil Division.

In the company's most recent Health, Safety & Environmental Performance statement on its website, Shell says it aims to stop the continuous disposal of unwanted gas during oil extraction as early as possible. "Our target is to halt continuous venting by 2003 and continuous flaring by 2008," the company says.

This is the third case settled by Shell in the last four years alleging that it underpaid royalties owed to the United States, according to the Justice Department. In 2000, Shell agreed to pay $56 million to resolve claims that it undervalued gas produced from federal leases.

In 2001, Shell paid $110 million to resolve claims that it undervalued crude oil extracted from federal lands.

The current lawsuit and settlement were jointly handled by the U.S. Attorney for the Western District of Louisiana and the Justice Department’s Civil Division, with the assistance of the Department of the Interior's Office of Inspector General and the Minerals Management Service (MMS).

“A settlement of this size sends a clear message to industry that MMS is serious about compliance with its regulations,” said MMS Director Johnnie Burton. “MMS continues to ensure the American people receive the royalties that are due from production of their natural gas, and works to conserve our nation’s resources and to ensure safe and pollution free offshore operations.”