Citation Companies Agree to Pay $2.25 Million to Settle Civil False Claims Act Allegations

Citation Oil & Gas Corp. and its affiliates, Citation 2002 Investment Limited Partnership and Citation 2004 Investment Limited Partnership (collectively, “Citation”), have agreed to pay $2.25 million to resolve allegations under the False Claims Act that they underpaid royalties owed on natural gas produced from federal lands in Wyoming, the Justice Department announced today.  Citation Oil & Gas Corp. is an oil and gas acquisition, development, and exploration company headquartered in Houston, Texas. 

“The United States allows companies to remove gas from public lands, which belong to all of us, in exchange for the full payment of royalties owed,” said Acting Assistant Attorney General Chad Readler of the Justice Department’s Civil Division.  “This settlement demonstrates that the government will hold accountable those who seek to take improper advantage of the federal royalty program at the expense of American taxpayers.”

“When gas companies reduce the amount of money owed to the government by taking deductions they are not entitled to, American taxpayers don’t get their fair share.  This settlement is a message to the entire gas industry that the government is working together to hold them accountable,” said Acting U.S. Attorney Bob Troyer for the District of Colorado.

“The obligation to properly pay federal mineral royalties is essential to the responsible development of oil and gas from public lands, and the Department of the Interior (DOI) Office of the Inspector General (OIG) is committed to working with DOJ and the Office of Natural Resources Revenue on behalf of the American public to ensure that companies meet their legal responsibilities,” said Ron Gonzales, Special Agent in Charge of the DOI OIG Energy Investigations Unit.

Congress has authorized federal lands to be leased for the production of natural gas in exchange for the payment of royalties on the value of the gas that is produced.  Lessees must put the gas in marketable condition at no cost to the United States.  Each month companies are required to report to DOI the amount of royalty that is due.  This settlement resolves claims by the United States under the False Claims Act that Citation knowingly deducted from royalty values fees paid to other companies that included the cost of placing the gas in marketable condition.

The resolution in this matter was the result of a coordinated effort between the United States Attorney’s Office for the District of Colorado, the Civil Division of the Department of Justice, the DOI OIG, and the DOI’s Office of the Solicitor.  No lawsuit was filed in this matter and there has been no determination of liability.