Oil and gas company Hilcorp San Juan agreed to pay $34.6 million as part of a settlement with the Department of Justice (DOJ) addressing allegations of False Claims Act violations regarding underpaid royalties on oil and natural gas produced from federal lands.
The settlement, announced Friday, resulted from a U.S. investigation into certain of Hilcorp’s leases in the San Juan Basin in northwest New Mexico and southwest Colorado and their associated royalty payments.
The details: From August 2017 through December 2018, Hilcorp paid federal royalties on oil, natural gas, and natural gas liquids for its leases based on estimated volumes and prices instead of actual volumes and prices, the DOJ alleged. When estimated payments are made, the law requires actual payments be made the following month.
Hilcorp knowingly made payments to the government based on estimated volumes and prices without indicating the payments were based on estimates and without making payments the following month based on actual volumes and values, according to the DOJ.
Compliance considerations: Hilcorp earned cooperation credit for assisting the DOJ in the determination of losses. In July 2021, the company repaid the U.S. Department of the Interior’s Office of National Resources Revenue approximately $20.6 million for royalty underpayments.
The company received a credit for that payment, which was deemed restitution, as part of the settlement.
Hilcorp did not respond to a request for comment. The settlement does not include any determination of liability.
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