The Department of the Interior’s Office of Natural Resources Revenue (“ONRR”) announced that it has issued a $6.9 million civil penalty to High Plains Gas, Inc., for failure to submit production reports for numerous federal leases in Wyoming.[1] This is the largest reported civil penalty ONRR has issued since December 2006 and appears to be the single largest reported civil penalty the agency has ever issued for failure to submit production reports.[2]

Current regulations state that “[i]f you operate a Federal or Indian oil and gas lease or federally approved unit or communitization agreement, you must submit production reports.”[3] Unless an exception applies, these reports are Form ONRR-4054 and Form ONRR-4058 for onshore and offshore oil and gas, respectively, and “ONRR must receive your completed Forms ONRR-4054 and ONRR-4058 by the 15th day of the second month following the month for which you are reporting.”[4]

If ONRR believes that a company has not followed these regulations, it may send the company a Notice of Noncompliance (a “Notice”), telling the company what the violation is and what the company needs to do to correct it to avoid civil penalties.[5] If a company does not correct all of the violations identified in the Notice within the time specified, ONRR may assess up to $5,000 per day, beginning with the date of the Notice, for each violation.[6] In the case of royalty and production reports, ONRR may consider each line on a report to constitute a separate violation.[7]

Before issuing the civil penalty to High Plains Gas, ONRR states that it had issued the company a Notice exactly one year ago, i.e., in July 2014, for failure to report production for its federal leases in Wyoming.[8] High Plains Gas reportedly failed to comply by the deadline established in the Notice, and as of the announcement date had not yet complied.[9] ONRR further reports that the civil penalty amount was escalated due to the company’s prior violations.[10]

This year, ONRR has penalized various companies with federal leases in Wyoming for failure to submit production reports.

In March, ONRR assessed two civil penalties totaling $52,968 to two companies for failure to submit royalty or production reports: Washakie Energies Co., Ltd., was penalized $41,412 for failure to provide production reports for several federal leases in Wyoming, and Grynberg Petroleum Company was penalized $11,556 for failure to report production on certain federal leases in both Wyoming and New Mexico.[11]

Also in May, ONRR assessed $306,052 in civil penalties against Patriot Energy Resources, LLC, for failure to submit production reports for several federal leases in Wyoming.[12]

It bears noting, however, that ONRR’s enforcement efforts this year for failure to submit production reports have not been solely limited to federal leases in Wyoming, but also include federal leases in Ohio and Indian leases in Oklahoma.[13]

[1] http://www.onrr.gov/about/pdfdocs/20150706.pdf.

[2] See http://onrr.gov/About/NR2015.htm; http://onrr.gov/About/NR2014.htm; http://onrr.gov/About/NR2013.htm; http://onrr.gov/About/NR2012.htm; http://onrr.gov/About/NR2011.htm; http://onrr.gov/About/NR2010.htm; http://onrr.gov/About/NR2009.htm; http://onrr.gov/About/NR2008.htm; http://onrr.gov/About/NR2007.htm. On December 7, 2006, the Department of the Interior’s Mineral Management Service, the predecessor to ONRR, announced that it had issued a $32 million royalty bill to BP America Production Company for additional royalties and interest due. http://www.onrr.gov/PDFDocs/20061207.pdf. Since December 2006, ONRR reportedly has only collected amounts larger than $6.9 million through False Claims Act settlements. On August 15, 2007, ONRR announced a $97.5 million settlement with Burlington Resources Oil and Gas Company to resolve claims that the company violated the False Claims Act by knowingly underreporting royalties owed on natural gas produced from federal and American Indian leases, along with other issues. http://www.onrr.gov/PDFDocs/20070815b.pdf. On July 21, 2009, ONRR announced a $12 million settlement with Western Energy Company to resolve claims of improper transportation allowances. http://www.onrr.gov/About/PDFDocs/20090721.pdf. On June 20, 2011, ONRR announced a $17 million settlement with Anadarko Petroleum Corporation, Kerr-McGee Corporation, and their affiliates to resolve claims that the companies violated the False Claims Act by knowingly underpaying royalties owed on natural gas produced from federal and American Indian leases, along with numerous additional administrative claims. http://onrr.gov/About/PDFDocs/20110620.pdf. On September 16, 2011, ONRR announced a $20.5 million settlement with BP Amoco Corp. and several affiliates to resolve claims that the companies violated the False Claims Act by knowingly underpaying royalties owned on natural gas produced from federal and American Indian leases. http://onrr.gov/About/PDFDocs/20110916.pdf. On February 22, 2012, ONRR announced a $14.6 million settlement with Total Fina S.A. and its affiliates to resolve claims that the companies violated the False Claims Act by knowingly underreporting and underpaying royalties owned on natural gas produced from federal and American Indian leases. http://onrr.gov/About/PDFDocs/20120222.pdf.

[3] 30 C.F.R. § 1210.101(a).

[4] Id. §§ 1210.102, 1210.103.

[5] Id. § 1241.51.

[6] Id. § 1241.53.

[7] See http://www.onrr.gov/compliance/PDFDocs/OE_Civil_Penalties_for_Reporting_Errors.pdf (April 2-3, 2014 Office of Enforcement Civil Penalties for Reporting Errors Presentation).

[8] http://www.onrr.gov/about/pdfdocs/20150706.pdf.

[9] Id.

[10] Id. It appears, however, that ONRR has neither issued nor collected a civil penalty from High Plains Gas, Inc., since 2007. See http://www.onrr.gov/compliance/PDFDocs/2015.pdf; http://www.onrr.gov/compliance/PDFDocs/2014.pdf; http://www.onrr.gov/compliance/PDFDocs/2013.pdf; http://www.onrr.gov/compliance/PDFDocs/2012.pdf; http://www.onrr.gov/compliance/PDFDocs/2011.pdf; http://www.onrr.gov/compliance/PDFDocs/2010.pdf; http://www.onrr.gov/compliance/PDFDocs/2009.pdf; http://www.onrr.gov/compliance/PDFDocs/2008.pdf; http://www.onrr.gov/compliance/PDFDocs/2007.pdf.

[11] http://onrr.gov/About/PDFDocs/20150325.pdf.

[12] http://onrr.gov/About/PDFDocs/20150513.pdf.

[13] See http://onrr.gov/About/PDFDocs/20150504.pdf (assessing a civil penalty of $244,216 against G-R Contract, Inc., for failure to submit production reports for a federal lease in Ohio); http://onrr.gov/About/PDFDocs/20150618.pdf (assessing a civil penalty of $32,708 against Reed Power Tongs for failure to report production for an Indian lease in Oklahoma).