Lafayette, Aug 06: Shell Oil Co. will pay $49 million to the federal government to settle a lawsuit over the unauthorised release and burning of large amounts of natural gas from seven platforms in the Gulf of Mexico, a prosecutor said on Wednesday. Shell did not have permission from federal regulators to burn off the gas and did not pay required royalties on it to the government, US Attorney Donald Washington said. Washington said most of the gas was disposed of, through processes known as flaring and venting, from 1994 to 1998.

The largest well involved was the company's Auger deepwater facility, about 240 KM off the Louisiana coast. Shell was concentrating on oil production at Auger and, because of the way Auger was equipped at the time, the company found it uneconomical to transport large quantities of the gas that was brought up with the oil. “It appears that what they did was trade oil for gas,'' Washington said. However, federal regulations restrict the amount of gas that can be disposed of and require payment of royalties even on some gas that it burned off rather than sold, Washington said.

Shell spokeswoman Mary Dokianos said the dispute arose from “differences in understanding and in interpretation'' of federal regulations regarding disposal of natural gas. “Once we understood exactly what they meant by the wording, we have been working with them very closely to make sure we are in compliance with their needs,'' she said.