Opinion ID: 165217
Heading Depth: 2
Heading Rank: 3

Heading: Grynberg's Investigation

Text: 18 Jack Grynberg is a petroleum engineer who is the president and co-owner of Grynberg Petroleum Company in Denver, Colorado. In late summer or fall of 1997, Grynberg was researching the acquisition of a liquid CO2 supply for use in the recovery of an oil field. [Vol. IV, Tab 104 at 722; Vol. III, Tab 66 at 439]. Because he thought Praxair's prices were high, he telephoned Jim Nielson, Nielson's president. Although the precise conversation is disputed, Grynberg alleges Jim Nielson complained Praxair was taking 30% of the natural CO2 produced and using it as part of its processing operation without payment. This statement motivated Grynberg to conduct an investigation into the situation. As described by Grynberg, the investigation included a subsequent conversation with Jim Williams, Nielson's chief operations officer, regarding the pricing arrangements between Nielson and Praxair. Grynberg also filed a request under the Freedom of Information Act (FOIA) to acquire a copy of the Agreement and other related documents, but his request was denied. Unable to get direct information regarding the Agreement, Grynberg sent an associate to research the records at the COCG office to learn the amount of Neilson's payments for conservation taxes on its CO2 production. In addition, he referred to an industry publication of gas and oil production records. Armed with this information, he calculated Nielson's reported payments received for CO2 and the royalties paid to the Government. He then determined the reasonable market value of the CO2 by making phone calls to end users and interviewing operators of other plants. In the meantime, he directed one of his employees to take photographs of the Praxair plant from the public county roads. That exercise revealed the vents used during operations. His efforts culminated in the conclusion that the volumes reported on [Nielson's] MMS Forms 2014 and 3160 are fraudulent and do not reflect the actual gas production from the McCallum Fields, as required by MMS regulations. (R. Vol. IV, Tab 104 at 725-26.) Grynberg also credits his investigation for the discovery that the price Praxair paid for the CO2 was intentionally undervalued. Although he concedes the actual numbers reported to the Government throughout the life of the Agreement were accurate, he insists the royalty submissions were knowingly false because Nielson and Praxair intentionally violated federal regulations by failing to pay royalties on wellhead production and by reducing the tailgate price through the deduction of processing costs.