Teresa McCown, Oil And Gas Fraud, New Mexico 2023

Teresa McCown, owner of M&M Production & Operation, Inc. (M&M) and Shoreline Oil & Gas Company (Shoreline), was found guilty of operating a scheme to defraud the Jicarilla Apache Nation, Navajo Nation, and federal government out of millions of dollars in unpaid taxes and royalties on oil and gas extracted from federal and Indian leases. McCown’s scheme involved submitting false and inaccurate oil and gas extraction reports through online reporting systems, failing to submit mineral reports, and neglecting to pay due taxes and royalties.

Between 2017 and 2023, McCown repeatedly submitted false and inaccurate oil and gas extraction and production reports, failed to submit mineral reports in some cases, and did not pay due taxes and royalties for oil and gas produced from Federal and Indian leases. As a lease operator, McCown was responsible for accounting, reporting mineral production, and paying royalties to mineral owners for extracted gas and minerals. To that end, McCown was required to submit monthly Oil and Gas Operations Reports (OGOR) and royalty payments to the Office of Natural Resources Revenue (ONRR) based on the amount and value of oil and gas produced from the leases.

The investigation by the ONRR began in December 2019 after receiving a complaint letter from the Jicarilla Apache Nation alleging M&M and Shoreline’s ongoing failures to report oil and gas extraction volumes and failure to report revenue. The ONRR found that McCown and her companies had submitted over 400 incorrect reports on Indian and Federal leases during the time period, and that there were approximately 1,000 missing or unfiled OGOR reports for at least 32 leases or agreements. McCown was issued numerous Notices of Noncompliance (NONC), Failure to Correct Civil Penalties notices (FCCP), and Immediate Liability Civil Penalty (ILCP) notices for inaccurate reporting.

McCown was issued numerous Notices of Noncompliance (NONC), Failure to Correct Civil Penalties notices (FCCP), and Immediate Liability Civil Penalty (ILCP) notices for inaccurate reporting. ONRR held two pre-penalty teleconferences with McCown to discuss the civil penalties assessed in the NONCs, FCCPs, and ILCPs and any mitigating circumstances that may have prevented her companies from complying by the prescribed deadlines. Both of these teleconferences were audio recorded. In those teleconferences, McCown offered no relevant mitigating circumstances and instead gave various excuses, blaming medical ailments and fired employees for not properly reporting the well sites. Even after those teleconferences, McCown took no corrective action.

McCown also knowingly submitted false or inaccurate reports to ONRR over the internet, constituting wire fraud. When a user accesses ONRR’s online systems, there is a validation process. The validation process all occurs over wires and an interaction with the data center where user logins are authenticated and authorized. Thus, when reports are submitted via an internet connection, users are confronted with a popup message that reads “I am authorized to report for this Reporter and certify that the electronic data transmitted is valid, accurate, complete and accept responsibility for such data…”, and must click “OK” to proceed.

During the reporting periods at issue in the indictment, McCown also accessed relevant websites as an official representative of her two companies. When she accessed those websites to submit information, she agreed to ONRR’s Acceptable Use Policy (AUP), which warned against entering inaccurate or false information into the reporting system. The online system separately warns users that a violation of the AUP may result in criminal prosecution.

McCown’s plea agreement admitted to filing over 400 incorrect reports on Indian and Federal leases during the time period, that there are approximately 1,000 missing or unfiled OGOR reports for at least 32 leases or agreements, that she falsely reported gas extraction amounts, and failed to pay due royalties and interest. McCown’s actions resulted in significant financial losses to the Jicarilla Apache Nation, Navajo Nation, and federal government.

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