Federal prosecutors accuse a New Mexico woman of fraud in oil and gas royalty case

ALBUQUERQUE, N.M. (AP) — A New Mexico businesswoman is accused of defrauding the U.S. government and two Native American tribes of taxes and royalties due to them for oil and gas that her companies extracted from leased federal and tribal lands.

Federal prosecutors announced this week that Teresa McCown recently was indicted by a grand jury on several wire fraud charges and violations of the Federal Oil and Gas Royalty Management Act. She was released from custody earlier this month. A trial date has yet to be scheduled.

A phone number listed for McCown went unanswered Saturday. It was not immediately clear from court records if she had an attorney who could speak on her behalf.

Federal authorities say McCown consistently underreported oil and gas production from the lands in questions over a period of years beginning in 2017.

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Records indicate her businesses — M&M Production & Operation Inc. and Shoreline Oil & Gas Company — have been operating in northwestern New Mexico’s San Juan Basin since the early 1990s. According to the indictment that was filed in late January and only recently made public, the companies held more than 30 leases on land belonging to the federal government, the Navajo Nation and the Jicarilla Apache Nation.

McCown’s indictment came just days after the U.S. Department of Justice announced the outcome of another case in which Hilcorp San Juan L.P. — an oil and gas company with offices in New Mexico and Texas — agreed to pay more than $34 million to resolve allegations that it knowingly underpaid royalties owed on oil and gas produced from federal lands.

In that case, authorities said Hilcorp San Juan made payments to the federal government based on estimated volumes and prices without indicating that those payments were based on estimates and without subsequently making payments in the following month to reflect actual volumes and values.

The development of energy and mineral resources funnels an average of more than $10 billion a year in revenue to the federal Office of Natural Resources Revenue. It’s one of the U.S. government’s largest sources of non-tax revenue.

Like all producers, 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 federal government so royalty payments could be determined. A review by federal officials revealed over 400 incorrect reports had been filed between January 2017 and July 2021.

The Office of Natural Resources Revenue had sent the companies notices of noncompliance. Civil penalties totaling more than $1.7 million were eventually issued after McCown failed to address the inaccurate reports, authorities said.

The indictment states that McCown had acknowledged the failure of her companies to accurately report the data during teleconferences with regulators that were prompted by the noncompliance notices.

If convicted, McCown could face up to 20 years in prison and $300,000 in additional fines, prosecutors said.

As part of her conditions of release, she may not work as a record-keeper or reporter in any industry that is subject to state or federal reporting or regulatory requirements, including oil and gas companies.