JANUARY 23, 2024. New Mexico and Texas-based oil and gas company, Hilcorp San Juan (Hilcorp), has agreed to pay $34.6 million to resolve allegations that it violated the False Claims Act by knowingly underpaying royalties on oil and natural gas from federal lands.
The federal government allows for land under its control to be leased to companies to produce natural gas and oil, but these companies must agree to pay monthly royalties for any oil or gas taken from the land. Those who lease from the government may not know the exact value of the extracted resources, therefore the government allows lessees to make estimated royalty payments the month following production. In the month following that, the company must pay the actual amount of royalties owed. To distinguish these transactions, lessees must use a specific transaction code labeling their payment as an estimate, rather than the full amount.
From August 2017 to December 2018, Hilcorp knowingly paid the government based on only estimated costs, without disclosure that these were estimates. Hilcorp also failed to pay the actual full amounts in the subsequent months, intending to hide its continuous underpayment of royalties to the United States. Hilcorp did cooperate with the government’s investigation, receiving credit for assisting in the gathering of information.
The U.S. Attorney for the Southern District of Texas stated, “Oil and gas production is a centerpiece of Houston and Texas’s economies, and for businesses to thrive it’s important that oil and gas companies play by the rules … Royalties from oil and gas production on federal lands help support various public programs, and this settlement demonstrates my steadfast commitment to hold accountable those who fail to pay royalties in full accordance with the law.”
The government relies on whistleblowers to expose fraudulent activities, such as the underpayment of royalties, to safeguard the economy and ensure taxpayer dollars are not misused. Those who report fraud under the False Claims Act have protection from retaliation and are entitled to a portion of the government’s recovery.
If you would like to report fraud against government programs, you can contact attorneys at Tycko & Zavareei LLP. Eva Gunasekera and Renée Brooker are former officials of the United States Department of Justice and prosecuted whistleblower cases under the False Claims Act. Renée served as Assistant Director at the United States Department of Justice, the office that supervises False Claims Act cases in all 94 United States District Courts. Eva was the Senior Counsel for Health Care Fraud. Eva and Renée now represent whistleblowers. For a free consultation, you can contact Renée at [email protected] (tel.: 202-417-3664) or contact Eva Gunasekera at [email protected]. You can also go to Tycko & Zavareei LLP’s website for whistleblowers to learn more at www.fraudfighters.net.