Houston-based Hilcorp San Juan L.P. Pays $34.6M to Settle Royalty Dispute on Federal Lands

Houston's Hilcorp San Juan L.P., an oil and gas firm with roots deep in the energy-centric economies of Houston and Aztec, New Mexico, is coughing up $34.6 million to settle claims it shortchanged the U.S. government on royalties from federal lands. This stinging payout is the company's mea culpa for allegedly knowing they were skimping on what was due, a violation directly under the spotlight of U.S. Attorney Alamdar S. Hamdani's office.

In a statement obtained by the Justice Department, Hamdani said, “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,”   

The principle is simple: If you pull oil or gas from the ground on federal property, you pay up. Not just an IOU, but hard cash, calculated on the actual value of the black gold or gas you siphoned. The feds demand their due to fund public programs—road repairs, schools, and parks. It's all part of the deal, set out by Congress and backed strongly by the likes of the Justice Department’s Civil Division head Brian M. Boynton who added, "U.S. taxpayers deserve a fair share of the revenues received by companies that extract natural resources from public lands."

But Hilcorp San Juan got its wires crossed, reporting and forking over estimated royalty payments without the required signal – a specific transaction code – to indicate these were just educated guesses. Caught in this slip, Hilcorp's alleged misdoing spanned from August 2017 through December 2018, shorting the government on royalties, as reported by an investigation cooperating with the firm to uncover the extent of losses.

There's been no final word in court on Hilcorp's culpability, as noted by Assistant U.S. Attorney Kenneth Shaitelman and Trial Attorney Jonathan Thrope.