On October 22, 2013, the Department of Interior’s Office of Natural Resources Revenue (“ONRR”) announced that it had assessed civil penalties in the amounts of $2.719 million to Apache Corporation (“Apache”) for the “knowing or willful” submission of false information, and $648,000 to XTO Energy (“XTO”) for “knowing or willful” failure to permit an audit. ONRR’s announcements mark the 11th and 12th civil penalties ONRR has announced this year.
The ONRR – which was established in 2010 – is a division of the Department of Interior’s Office of Policy, Management and Budget. As such, it is responsible for the collection and disbursement of energy production revenues originating from the use of natural resources on the Outer Continental Shelf and onshore federal and American Indian lands. On average, the ONNR has collected and disbursed $11 billion from such revenues on an annual basis.
Apache’s fine resulted from alleged violations of the improper deduction of transportation costs on royalty payments related to several of its leases on the Outer Continental Shelf. According to ONRR, the leases at issue do not allow for the deduction of transportation costs when calculating royalty payments. ONRR stated that the alleged behavior began in 2010 when ONRR directed Apache to cease its transportation cost deductions related to the leases, at which point in time Apache complied and refunded the deducted transportation costs. However, ONRR determined that Apache soon reinstituted the same practice, and as a result, ONRR referred the matter to its Office of Enforcement to conduct an investigation. After the investigation was completed, ONRR determined that Apache was in violation of reporting requirements and issued the $2.719 million penalty. While the penalty was issued in September 2013, ONRR only recently announced it publicly.
XTO’s penalty resulted from its failure to respond to an ONRR audit and related data requests. According to ONRR, XTO was non-responsive to a 2012 data request and repeated follow-up attempts to collect the data. As a result, ONRR determined that XTO’s conduct prevented auditors from performing the audit and levied the $648,000 fine.