United States: 2015 ONRR Civil Penalties: Where, Why, And How Much

The Office of Natural Resources Revenue ("ONRR"), a unit within the United States Department of the Interior, is responsible for collecting and disbursing revenues from energy production on federal and Indian lands and offshore on the Outer Continental Shelf.1

The agency verifies reporting, conducts audits, and enforces laws, regulations, lease terms, and orders.2 The agency also issues civil penalties for noncompliance.3

For example, if ONRR sends you a Notice of Noncompliance and you do not correct all of the violations identified within 20 days (or longer, if so specified), you become subject to civil penalties of up to $500 per day per violation.4 What is more, ONRR believes each incorrect line on a Form ONRR-2014 or Oil and Gas Operations Report ("OGOR") is a separate violation.5

In 2015, ONRR assessed lessors, operators, and other reporters and royalty payors more than $11.5 million in civil penalties.6 These penalties ranged from individual assessments of less than $3,000 to over $6.9 million.7 In fact, this past year saw the largest amount of civil penalties issued to date. By comparison, in 2014 ONRR assessed just over $8 million in civil penalties, in 2013 just over $9 million, and in 2012 just over $11.3 million.8

In 2015, ONRR focused its enforcement and collection efforts primarily on federal and Indian leases in Wyoming and New Mexico, as well as in Colorado, North Dakota, South Dakota, Utah, Oklahoma, Ohio, and offshore in the Gulf of Mexico.9 In 2014, ONRR also focused its efforts on Wyoming and New Mexico, in addition to Utah, Colorado, Oklahoma, and offshore.10

In 2015, civil penalties were most often issued for a company's failure to submit production reports and second most often for the failure to submit royalty reports.11 By comparison, in 2014 ONRR assessed civil penalties almost exclusively for the failure to submit production reports.12

The chart below summarizes each civil penalty ONRR issued and publicized in 2015. As you can see, companies often received Notices of Noncompliance before civil penalties were assessed. These Notices are typically issued after an audit or Data Request, and they almost always come with a 20-day deadline. We have found that regular and consistent communication with the agency during audits often prevents the issuance of such Notices. Auditors are also often able to extend compliance deadlines and are more willing to do so when companies and their legal counsel are actively involved in the process.

2015 Civil Penalties
Date Penalty Reason(s) Source
02/11/2015 $330,050 The company was cited for "knowing or willful" maintenance of inaccurate information pertaining to offshore leases in the Gulf of Mexico.The company received an Order to Report and Pay Additional Royalties in December 2011, specifically requiring the company to correct gas volume inaccuracies on certain royalty reports for offshore leases in the Gulf of Mexico. The company paid the invoice but did not correct the reporting. http://onrr.gov/About/PDFDocs/20150211.pdf
02/18/2015 $1,334,000 The company was cited for "knowing or willful" failure to permit an audit involving several communitization agreements in North Dakota.The company received an Audit Engagement Letter and Data Request in February 2013, requesting information related to federal oil and gas leases included within several communitization agreements in North Dakota by April 1, 2013. The company was granted an extended deadline for compliance to August 30, 2013. The company received numerous follow-up emails, detailing the data necessary to complete the audit. However, the company did not fully comply until February 2014. http://onrr.gov/About/PDFDocs/20150218.pdf
03/25/2015 $41,412 The company was cited for failure to submit production reports for federal leases in Wyoming.
The company failed to timely comply with a Notice of Noncompliance, demanding that the company provide production reports for several federal leases in Wyoming. As of March 2015, the company had not yet complied.
http://onrr.gov/About/PDFDocs/20150325.pdf
03/25/2015 $24,384 The company was cited for failure to submit royalty reports for federal leases in Colorado, Utah, and South Dakota.
The company failed to comply with a Notice of Noncompliance, demanding that the company submit royalty reports for federal leases in Colorado, Utah, and South Dakota. As of March 2015, the company had not yet complied.
http://onrr.gov/About/PDFDocs/20150325.pdf
03/25/2015 $11,556 The company was cited for failure to submit production reports for federal leases in Wyoming and New Mexico.
The company failed to comply with an August 2014 Notice of Noncompliance, demanding that the company provide production reports for certain federal leases in Wyoming and New Mexico. The company submitted the necessary production reports but failed to comply by the Notice deadline.
http://onrr.gov/About/PDFDocs/20150325.pdf
05/06/2015 $244,216 The company was cited for failure to submit production reports for a federal lease in Ohio.
The company received a Notice of Noncompliance in May 2013 for failure to submit production reports for a federal lease in Ohio. The company failed to comply by the Notice deadline, and as of May 2015 had not yet complied.
http://onrr.gov/About/PDFDocs/20150504.pdf
05/13/2015 $306,052 The company was cited for failure to submit production reports for federal leases in Wyoming.
The company received a Notice of Noncompliance in July 2014 for its failure to report production for several federal leases in Wyoming. The company failed to comply by the Notice deadline, and as of May 2015 had not yet complied.
http://onrr.gov/About/PDFDocs/20150513.pdf
06/18/2015 $32,708 The company was cited for failure to submit production reports for an Indian lease in Oklahoma.
The company was issued a Notice of Noncompliance in January 2013 for its failure to report production for an Indian lease in Oklahoma. The company fully complied by June 2014, but it failed to comply by the Notice deadline.
http://onrr.gov/About/PDFDocs/20150618.pdf
07/06/2015 $6,901,440 The company was cited for failure to submit production reports for federal leases in Wyoming.
The company received a Notice of Noncompliance in July 2014 for its failure to report production for numerous federal leases in Wyoming. The company failed to comply by the Notice deadline, and as of July 2015 had not yet complied. The civil penalty was also escalated because of prior violations by the company.
http://onrr.gov/About/PDFDocs/20150706.pdf
09/21/2015 $72,438 The company was cited for failure to report or make royalty payments on production from an Indian lease in North Dakota.
The company was contacted multiple times between February 2013 and June 2014, so that ONRR could find out why the company did not report or make royalty payments on production from an Indian lease in the Fort Berthold Reservation in North Dakota. The company responded, assuring ONRR that the unpaid royalties would be forthcoming. However, the company did not pay royalties until July 2014.
http://onrr.gov/About/PDFDocs/20150921.pdf
09/25/2015 $16,000 The company was cited for failure to comply with Notices of Noncompliance and Orders to Report and Pay Additional Royalties on Indian leases in New Mexico.
As of September 2015, the company had not yet provided the missing reports or royalty payments.
http://onrr.gov/About/PDFDocs/20150925.pdf
09/25/2015 $27,120 The company was cited for failure to comply with Notices of Noncompliance and Orders to Report and Pay Additional Royalties on Indian leases in New Mexico.
As of September 2015, the company had not yet provided the missing reports or royalty payments.
http://onrr.gov/About/PDFDocs/20150925.pdf
09/25/2015 $2,840 The company was cited for failure to comply with Notices of Noncompliance and Orders to Report and Pay Additional Royalties on Indian leases in New Mexico.
As of September 2015, the company had not yet provided the missing reports or royalty payments.
http://onrr.gov/About/PDFDocs/20150925.pdf
10/19/2015 $2,118,900 The company was cited for "knowing or willful" maintenance of inaccurate information in royalty reports for gas produced and sold from Indian leases.
The company received an Order to Perform Restructured Accounting in October 2011, in which ONRR notified the company that it had found repeated, systemic errors in the company's monthly reporting of the amount of gas it produced and sold from Indian leases. The Order required the company to review the amounts it reported for more than 100 Indian leases and correct the unreported and misreported volumes. The company said in May 2012 that it had submitted all the corrections required by the Order. ONRR conducted follow-up testing and found additional underreported volumes, which the company corrected in 2013. ONRR again conducted further sampling and still found uncorrected volume shortages, which the company corrected in May 2014. The company eventually complied with the Order to amend its monthly reports to correct the misreporting, but the company continued to maintain inaccurate information on ONRR's data systems for an extended period of time.
http://onrr.gov/About/PDFDocs/20151019.pdf
11/23/2015 $54,269 The company was cited for "knowing or willful" failure to pay gas royalties to the Southern Ute Indian tribe in Colorado.
The company submitted royalty reports in March 2014 for a Southern Ute lease located in Colorado for the monthly reporting periods of September 2011 through November 2013, but the company failed to pay the required royalties. During a pre-penalty teleconference, the company agreed to pay the royalties, but it did not make such payment until May 2014. The company also failed to timely pay royalties for the reporting periods December 2013 through September 2014.
http://onrr.gov/About/PDFDocs/20151123.pdf
Total Civil Penalties: $11,517,385

Footnotes

1 https://www.doi.gov/news/pressreleases/Interior-Establishes-Office-of-Natural-Resources-Revenue

2 http://www.onrr.gov/compliance/default.htm

3 See 30 C.F.R. Part 1241

4 See 30 C.F.R. § 1241.53

5 http://www.onrr.gov/compliance/PDFDocs/OE_Civil_Penalties_for_Reporting_Errors.pdf at 3

6 See http://onrr.gov/About/NR2015.htm

7 See http://onrr.gov/About/NR2015.htm

8 Note that these amounts do not include settlements. See http://onrr.gov/About/NR2014.htm; http://onrr.gov/About/NR2013.htm; http://onrr.gov/About/NR2012.htm

9 See http://onrr.gov/About/NR2015.htm

10 See http://onrr.gov/About/NR2014.htm

11 See http://onrr.gov/About/NR2015.htm

12 See http://onrr.gov/About/NR2014.htm

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