BP pays $5.2 million penalty for false royalty reports
- Created on Thursday, 19 July 2012 17:16
BP America paid a $5.2 million civil penalty "for submitting false, inaccurate or misleading reports" regarding royalties from natural gas production on the Southern Ute Indian reservation in southwestern Colorado, a US Department of the Interior agency said Wednesday.
Interior's Office of Natural Resources Revenue assessed the penalty for incorrect royalty reports, which tribal auditors first discovered in the summer of 2007, agency spokesman Patrick Etchart said.
BP spokesman Brett Clanton said the company "is pleased to settle the matter involving allegations around administrative royalty reporting errors without further litigation." BP corrected the accounting mistakes that led to the penalty "prior to the beginning of this matter," he said, adding "BP denies it knowingly or willfully made reporting errors."
Etchart said the Southern Ute Tribal auditors first discovered errors in the way BP reported royalties on gas produced on tribal land in July 2007 in a multi-year audit conducted as part of a cooperative agreement with auditors from the Minerals Management Service, which was ONRR's forerunner.
Upon further investigation, tribal and federal auditors found that BP reported incorrect product and sales-type codes, resulting in their use of incorrect royalty rates and prices for reporting purposes, the ONRR said. "BP also reported well production to the wrong leases," the agency added.
"After receiving audit issue letters and an order, the company agreed with the auditors' concerns and repeatedly promised to correct the problems, which they attributed to errors in their automated files," the ONRR said.
But Etchart said tribal and federal auditors did a sampling of BP royalty reports in 2009 "and found the errors still had not been corrected." In June 2010, Interior officials issued the civil penalty to BP to account for errors through May 15 of that year.
"Although BP America initially requested a hearing on the civil penalty, it decided to pay the penalty instead," ONRR said. ONRR received the payment on Tuesday.
"This civil penalty demonstrates the expertise, skill and tenacity of the tribal auditors and ONRR enforcement team members who discovered and pursued this repeated misreporting of royalty and production information," Paul Mussenden, deputy assistant secretary for natural resources revenue management, said in the ONRR statement.
The penalty BP paid is just the latest of several such penalties ONRR has assessed against oil and gas producers in recent weeks. ONRR is one of three successors to MMS in a May 2010 reorganization that was conducted in the wake of the deepwater Macondo accident.
Earlier this month, the ONRR announced that Louis Dreyfus Energy Services had paid more than $4 million to settle allegations that it violated the False Claims Act by failing to pay money owed on gas that the company bought from Interior.
In April, the agency said it was assessing a $1.9 million civil penalty against Cabot Oil & Gas "for knowing or willful maintenance of false, inaccurate or misleading information on ONRR's database."
"We have been beefing up our enforcement efforts. We've been strengthening our data mining," said Etchart.
"Part of this has come about as a result of the reorganization," he said. "We're definitely becoming more vigilant."