Two oil and gas companies operating on Utah trust lands have failed to report their production for more than a year, effectively stiffing the state’s school trust fund hundreds of thousands of dollars in royalties that would otherwise support Utah public education.
In filings with the Board of Oil, Gas and Mining, the Utah School and Institutional Trust Lands Administration (SITLA) is asking regulators to temporarily close down 52 wells operated in the Uinta Basin on state lands leased by Enduring Resources of Denver — unless it or the company’s successor files current production reports and pays delinquent royalties.
The trouble started in October 2016 when Enduring assigned its interests in the Natural Buttes gas field, south of Vernal near the White River, to WestStar Exploration Co. of Houston.
SITLA, which owns the land’s mineral resources, was not informed of the change until a year later and granted conditional approval, which it has since revoked because of WestStar’s failure to pay the 16.67 percent royalty. The wells were drilled years ago and many face dwindling gas production, with some already shut down at the end of 2016.
Monthly production reports ceased that October, state officials say — leaving SITLA unable to calculate what it is owed and depriving the state of tax and royalty revenue, according to the state Division of Oil, Gas and Mining, or DOGM.
“The failure to report production essentially results in Westar [sic] receiving payment for the oil and gas produced from its wells without meeting its obligations to the state of Utah for taxes that support the division’s regulation of the wells and taxes due to the state,” state regulators reported to the board in support of SITLA’s petition.
A phone message left for WestStar president William Gilmore was not returned Friday.
SITLA discovered WestStar’s failure to make royalty payments last fall and contacted the company. State officials promptly got a check for $10,346, along with a royalty report for October 2016, the first month the company went into arrears.
“The royalty payment was substantially less than the amount SITLA would have expected, which suggested that WestStar had taken a number of improper deductions,” the agency’s counsel Stephanie Barber-Renteria wrote in its filing.
Many emails and phone calls later, Barber-Renteria wrote, WestStar still hasn’t corrected its reporting lapses or made any additional royalty payments to SITLA.
SITLA staff say the royalties should be about $22,000 a month and WestStar owes about $330,000 as of the close of 2017. DOGM has repeatedly ordered WestStar to report its production and pay royalties to no avail, documents show.
But the operators appear to be coming around of late.
The oil and gas board granted a one-month delay in the case, to give SITLA time to reach a settlement with WestStar — after the company pledged to file all outstanding reports and pay up on royalties it owes by April 10. The company also agreed to explain recent changes to its meters on wells tapping SITLA leases.