Hilcorp San Juan Settles Allegations of Underpaid Royalties on Federal Lands for $34.6 Million

Hilcorp San Juan L.P., an oil and gas company with offices in Houston and Aztec, New Mexico, has agreed to settle allegations of knowingly underpaying royalties for oil and natural gas produced from federal lands. The company will pay $34.6 million to resolve its False Claims Act and other liabilities related to the conduct.

Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division, emphasized the importance of ensuring that energy companies accurately report and pay the United States the royalties owed for their use of natural resources from public lands. The settlement stems from Hilcorp San Juan’s reported and paid royalties between August 2017 and December 2018, where the company allegedly made payments to the federal government based on estimated volumes and prices without proper indication or subsequent payments based on actual volumes and values.

Congress permits federal lands to be leased for oil and natural gas production, with lessees required to pay royalties on the produced resources. The settlement addresses the underpayment of royalties resulting from Hilcorp San Juan’s failure to follow proper procedures in reporting and paying royalties during the specified period.

Hilcorp San Juan cooperated with the investigation, assisting in determining losses and receiving credit for disclosure, cooperation, and remediation under the Department’s guidelines for False Claims Act cases.

“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. That’s why my office will vigorously pursue those who deprive the United States of revenue,” said U.S. Attorney Alamdar S. Hamdani. “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 resolution is the outcome of a coordinated effort involving the Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section, the U.S. Attorney’s Office for the Southern District of Texas, DOI’s Office of the Inspector General-Energy Investigations Unit, DOI’s Office of the Solicitor, and DOI’s Office of Natural Resources Revenue. Assistant U.S. Attorney Kenneth Shaitelman, along with Trial Attorney Jonathan Thrope, handled the matter.