United States Recovers $600,000 in Federal Natural Gas Royalty False Claims Act Settlement

DENVER - The United States Attorney for the District of Colorado, Bob Troyer, today announces the recovery of $600,000 as settlement of allegations that Great Western Drilling Corporation ("GWD") violated the federal False Claims Act by failing to pay money owed on natural gas produced from federal leases located in New Mexico.

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 from those leases.  Each month, companies are required to report to the Department of the Interior's Office of Natural Resources Revenue ("ONRR") the amount of royalty that is due.  While the lessee is permitted to deduct certain post-production costs from its federal royalty payment, the lessee is required to place the gas in marketable condition at no cost to the United States.

The Settlement Agreement resolves contentions by the United States that GWD underreported and underpaid federal royalties due from July 2010 through June 2016.  During this time, GWD received a lower sales price from its third-party purchasers because those purchasers paid the natural gas processer, Enterprise Processing, for the transportation, compression, and processing of GWD's gas.  GWD did not credit the United States for the portion of the price reduction that related to the Enterprise Processing costs to place the gas in marketable condition.  Instead, GWD paid royalties only on the decreased purchase price.  In this way, the United States contends, GWD knowingly underreported and underpaid royalties owed to ONRR.

"We don't tolerate these games, and will continue to purse, and get every dollar due from, companies that underpay royalties," said United States Attorney Bob Troyer.

Ron Gonzales, Special Agent in Charge of the Office of Inspector General's Energy Investigations Unit stated, "This settlement is the result of Federal agencies working collaboratively and diligently to ensure that revenues generated from public resources are accounted for on behalf of the American taxpayers. The OIG is committed to work with DOJ, ONRR, and our Office of the Solicitor to support the Department's revenue collection programs."

Geary Keeton, Program Manager for Enforcement with ONRR stated, "ONRR works closely with the OIG and DOJ to help ensure that we collect every dollar due the American people." 

The United States Attorney's Office acknowledges the cooperation and teamwork demonstrated by governmental entities involved in today's recovery, including the Office of Natural Resources Revenue, the Department of the Interior's Office of the Solicitor, and the Energy Investigations Unit of the Department of the Interior's Office of Inspector General. The United States Attorney's Office in Denver, Colorado works closely with these offices in the pursuit of unpaid or underpaid oil and natural gas revenue, claims for which are processed at the Office of Natural Resources Revenue at the Federal Center in Lakewood.

The United States was represented in this matter by Assistant United States Attorney Andrea Wang of United States Attorney's Office in Denver, Colorado.