DENVER – Extraction Oil and Gas, Inc., an oil and gas company headquartered in Denver, has agreed to pay over $462,000 to resolve allegations that it drilled and operated three oil and gas wells where it removed minerals from federal public lands without permission.  Extraction agreed to make this payment in addition to a $884,407 settlement it paid in February 2020 for another set of wells where it had similarly removed minerals from federal public lands without permission.  

Oil and gas exploration companies may drill for oil, gas, or other minerals on federal lands managed by the Bureau of Land Management (“BLM”) only after first obtaining a federal mineral lease and permit to drill from BLM.  Once companies obtain the proper lease and permit, they pay royalties, which are a percentage—typically 12.5%—of the value of the federal minerals they remove.  Removing minerals without permission is considered trespassing.

The 2020 settlement covered twelve wells drilled in Weld County, Colorado.  The United States contends that for eleven of these wells, Extraction’s trespass was willful.  This willful trespass made Extraction liable to the United States for the full value of all minerals it removed from the trespassing wells, and Extraction was not permitted to reduce that payment with any offset for its costs of drilling and production. 

The 2021 settlement covered three wells, also located in Weld County.  The United States contends that for these wells, Extraction removed minerals without permission, but did not act willfully.  This non-willful trespass made Extraction liable to the United States for the value of all minerals removed from the trespassing wells, but Extraction was permitted to offset its payment with a credit for its costs of drilling and production.

“Protecting public lands and resources is a priority for our office,” said Acting U.S. Attorney Matt Kirsch. “Oil and gas companies that do not follow the mineral leasing process before removing natural resources from federal lands are trespassing. We will continue to hold them liable for damages from that trespassing--in amounts up to the full value of the minerals they removed, not just the royalties they would have owed had they first obtained a federal lease.”     

Ron Gonzales, Special Agent in Charge for the Department of the Interior, Office of Inspector General’s Energy Investigations Unit, stated, “This settlement is the result of the OIG, Department of Justice, Bureau of Land Management, and Office of the Solicitor working collaboratively and diligently to ensure minerals removed from federal ownership are properly accounted for on behalf of the American public.”

This case was handled by Assistant U.S. Attorney Andrea Wang.