Farmington Woman Charged with Violations of the Federal Oil and Gas Royalty Management Act and Wire Fraud

ALBUQUERQUE – Alexander M.M. Uballez, United States Attorney for the District of New Mexico, and the Department of the Interior (DOI) Office of Inspector General announced today that a federal grand jury returned an indictment charging Teresa McCown with violations of the Federal Oil and Gas Royalty Management Act and wire fraud. McCown, 55, of Farmington, will remain on condition of release pending trial, which has not been scheduled.

According to the indictment, between Jan. 24, 2017, and June 5, 2023, McCown owned M&M Production & Operation, Inc. (M&M) and Shoreline Oil & Gas Company (Shoreline). Both are in the business of extracting oil and gas from land leased to the companies by the federal government, the Navajo Nation, and by the Jicarilla Apache Nation and both companies sold extracted oil and gas to refiners. M&M and Shoreline are required to report the quantity and quality of oil and gas extracted from the leases and the revenue derived from sales of those materials to the Department of the Interior, Office of Natural Resources Revenue (ONRR), in Report of Sales and Royalty Remittance (Form ONRR-2014) forms and Oil and Gas Operations Reports (OGORs). The intent of these reports is to determine royalties due to the lessors: the Navajo Nation, the Jicarilla Apache Nation, and the federal government.

After reviewing financial statements from refiners, ONRR determined that M&M and Shoreline’s Oil and Gas Operations and Sales and Royalty Remittance reports were incorrect. More specifically, a detailed analysis revealed over 400 incorrect reports on both Indian and Federal leases between January 2017 and July 2021. Furthermore, ONRR issued a Notice of Noncompliance to McCown in March 2021 for failing to report M&M's production of oil or gas from Federal and Indian properties from July 2019 through January 202l. ONRR is also authorized to issue civil penalties associated with the Notice of Noncompliance for failure to correct violations identified – and did issue those penalties. After receiving notices, penalties, and participating in teleconferences with regulators, McCown failed to correct false and inaccurate reporting. The total civil penalties assessed by ONRR for multiple violations by M&M and Shoreline total $1,707,339.58.

For knowingly and willfully submitting false and inaccurate reports, McCown is charged in Counts 2-9 with wire fraud. Specifically, McCown submitted the false and inaccurate reports over the internet via ONRR’s website. The electronically submitted forms were transmitted over interstate wire from Farmington, New Mexico to servers in Raleigh, North Carolina. ONRR employees in Lakewood, Colorado then accessed the same data through an internal networking system for overseeing production reporting and to process royalty payments.

An indictment is only an allegation. A defendant is presumed innocent unless and until proven guilty. If convicted, McCown faces up to 20 years in prison and $300,000 in additional fines. As part of her conditions of release, McCown may not work as a record-keeper or reporter in any industry subject to state or federal reporting or regulatory requirements, including oil and gas companies.

The Department of the Interior, Office of Inspector General, Office of Investigations, Energy Investigations Unit investigated this case. Assistant U.S. Attorney Alexander Flores is prosecuting the case.

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