U.S. Attorney Secures Guilty Plea in Oil and Gas Fraud Case

ALBUQUERQUE – A Farmington woman has pleaded guilty in federal court to charges related to submitting false and inaccurate oil and gas extraction reports, failing to pay due taxes and royalties to the Jicarilla Apache Nation, Navajo Nation, and federal government.

In her plea agreement, Teresa McCown, owner of M&M Production & Operation, Inc. (M&M) and Shoreline Oil & Gas Company (Shoreline), admitted that between 2017 and 2023, she repeatedly submitted false and inaccurate oil and gas extraction and production reports through online reporting systems, 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 Department of the Interior's Office of Natural Resources Revenue (ONRR) based on the amount and value of oil and gas produced from the leases.

On December 6, 2019, the Bureau of Indian Affairs (BIA) received 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. ONRR began its investigation into McCown and her companies’ failure to pay royalties and determined that required reporting for royalties was missing for long periods of time.

In her plea, McCown 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 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.

ONRR then sent the companies’ debts for unpaid royalties and penalties to the U.S. Treasury for collection. As of January 2024, neither M&M nor Shoreline had paid the debts to the U.S. Treasury and both debts continued to accrue.

In addition, McCown 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.

In her plea agreement, McCown admitted that she submitted inaccurate or false information through these systems on numerous occasions and that she intended to undertake a scheme to defraud the Navajo Nation, the Jicarilla Nation, and the United States of full amounts due for her companies’ operations – even after receiving notices, penalties, and participating in teleconferences with regulators.

As part of her plea agreement, McCown agreed to liquidate personal properties in Farmington and Rio Arriba County, an RV, and two motor vehicles and apply the proceeds the restitution she owes. McCown also agreed not to contest proceedings initiated by the Department of the Interior, the Bureau of Indian Affairs, the Bureau of Land Management to cancel her oil and gas leases. She agreed to file financial disclosure forms with the United States Attorney’s Office until restitution is complete, and agreed to fully comply with ongoing curative audit and compliance procedures that will follow her plea.

The Court ordered that McCown remain on conditions of release pending sentencing, which has not been scheduled.

At sentencing, McCown faces up to 20 years in prison. Upon her release from prison, McCown will be subject to up to three years of supervised release.

U.S. Attorney Alexander M.M. Uballez and the Department of the Interior (DOI) Office of Inspector General made the announcement today.

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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