The Montana Department of Revenue has filed a lawsuit in District Court against seven oil and gas companies, alleging they owe more than $1 million in taxes to the state and five Hi-Line counties. Filed Jan. 3, the suit claims that multiple fuel production companies owned by William M. Fulton and fuel transmission companies owned by Gary McDermott have failed to pay a variety of natural resource and property taxes. The companies had agreed to pay the taxes in settlement agreements reached in 1998, the lawsuit says. Headquarters for all seven companies are in Shelby. The department alleges the companies conspired with financier Triassic Energy Partners, a development company incorporated in Delaware, to alter the terms of their settlement agreements to avoid paying taxes. “The Fulton Companies gave their word that they would pay the taxes they owe,” Revenue Director Dan Bucks said. “Now we are seeking payment. In Montana, we will not tolerate those who willfully refuse to pay the taxes they owe.” Neither McDermott nor Fulton returned phone calls seeking comment. Under the settlement agreements, the companies committed to making periodic payments; and the state and local governments relinquished their top position on tax liens against them, allowing the companies to borrow $8 million from Triassic to finance various water flood projects for the purpose of increasing their oil and gas production.
The department alleges the companies breached their tax settlement agreements in 2005 when they entered into a new loan agreement with the Bank of Oklahoma. The agency said the new loan changed the terms, security and collateral of the loan outlined in the 1998 tax settlement agreements. The state and counties maintain they had no knowledge of the new loan and did not consent to it. In addition, the lawsuit says that in 2005, Fulton sold his interest in his oil- and gas-producing properties, equipment and leases to McDermott in a $16 million deal financed by the Bank of Oklahoma. The sale also changed the identity of the debtor and the terms, conditions and security of the original loan, the lawsuit alleges. According to the deparment, neither Triassic, Fulton, McDermott, nor the Bank of Oklahoma obtained the state’s consent for subsequent liens on the companies’ properties, equipment and leases. Counties that helped enable the lawsuit and would receive revenues from it are: Liberty, Pondera, Teton, Blaine and Glacier.