1. Office of Enforcement Civil Penalties Update
Geary Keeton, CFE
Chief of Enforcement
(Program Manager, Enforcement)

2. Disclaimer
The statements or opinions expressed in all ONRR presentations and panel discussions at the 2017 PASO-Tulsa Federal/Indian Royalty Compliance Workshop do not necessarily represent the views of ONRR or the Department of the Interior.

3. Learning Objective
The attendee will be aware of the new civil penalty rules, the main issues being pursued, and an update of civil penalties assessed in 2016 upon completion of this course.

4. FORMER OFFICE OF ENFORCEMENT AND APPEALS SPLIT INTO TWO PROGRAMS
ONRR ENFORCEMENT
(Program Manager: Geary Keeton)
Revenue Enforcement Team A
(Chief: Bethany Hagen-Templin)
Revenue Enforcement Team B
(Chief: Allen Vigil)
Debt Enforcement and Litigation Team
(Chief: Tim Calahan)
APPEALS AND REGULATIONS
(Program Manager: Bonnie Robson)
Appeals Analysts
Regulatory Specialists
Both Programs report to “Coordination, Enforcement, Valuation, and Appeals,” a major ONNR component.

5. New Civil Penalty Rules
Actually two new rules:
Amendments to Civil Penalty Regulations (Final)
Civil Monetary Penalty Inflation Adjustment (Interim Final)
The first clarified our longstanding practices under the former very general regulations
The second implements the Federal Inflation Adjustment Act Improvements Act of 2015

6. Minimal Change from Final CP Rule
Removed virtually all areas of industry concern
Added definitions conforming to OHA/IBLA decisions and longstanding ONRR usages
Distinguished maintenance of incorrect information from simple short-term failure to correct misreporting
Standardized hearing request deadlines to 30 days
Minor change in violation day count practice
Ended our practice of limiting royalty nonpayment penalties to three times the declared or estimated nonpayment amount
No anticipated changes in Enforcement practices other than prior three items

7. Changes from CP Inflation Rule
In 2015, Congress mandated Federal agencies to adjust their civil monetary penalties for inflation based on each penalty’s date of establishment or date of last inflation adjustment required by other laws
Must be updated annually by publication in the Federal Register
Our catch-up adjustment was 135.5% (since FOGRMA enactment in 1983) and it was again increased on January 15, 2017 by %
Regulatory (curable) violation maximum assessment rates went from $500 (first 40 days) to $1,196 per violation, per day, and from $5,000 to $11,967 per violation, per day, thereafter (applies to 30 U.S.C. § 1719(a) and (b))
Serious violation maximum penalty assessment rates under 30 U.S.C. § 1719(c) and (d) went from $10,000 and $25,000 respectively to $23,933 and $59,834 per violation per day
Maximum penalty assessment rates rarely used; most assessments made at small fractions of maximum rates

8. Practices Are Being Pursued?
What Main Issues and
Practices Are Being Pursued?
Cases opened by violation type

9. 2016 Civil Penalty Assessments
Case
Company
CP Date
Amount
Violation
Regulations
CP10-038
Quinex Energy Corporation
2/25/2016
$1,658,075.00
Maintenance of inaccurate information
30 CFR (b)(2)
CP12-169
Wooldridge Production Company
9/29/2016
$50,976.00
Production reports -- failure to submit or correct
30 CFR Part 1210, Subpart C and 30 CFR
CP13-088
Wasatch Oil and Gas Corp.
11/17/2015
$54,269.25
Payments -- failure to make, adequately make, or make timely
30 CFR (b)(1)
CP14-004
Chesapeake Energy
10/19/2015
$2,118,900.00
CP14-048
Columbia Production Company
4/25/2016
$5,504.00
CP14-096
Salt Creek Oil, LLC
6/28/2016
$72,076.00
CP15-013
Bill Barrett Corporation
3/28/2016
$57,052.00
CP15-073
Linn Operating, Inc.
4/18/2016
$51,641.00
CP16-003
Brown Farm Oil
4/24/2016
$14,560.00
CP16-021
Mountain Hawk Energy
6/7/2016
$107,256.00

10. What is Meant by Knowing or Willful Noncompliance?
“Knowing or willful” defined in the rule as “actual knowledge,” “deliberate ignorance,” or “reckless disregard”
“Noncompliance” is any act or failure to act inconsistent with a provision of the mineral revenue regulations or laws
The words used together do not include bona fide mistakes or simple errors which are normally addressed by curable NONCs

11. Failure to Permit an Audit
Construed under old and new regulations as failure to give ONRR auditors or State or Tribal auditors reasonable access to company records bearing on royalty or production reporting and payments
If records were destroyed or not kept as required by FOGRMA or the regulations, companies are expected to replace those records at their own cost
Penalties based on major audit steps that cannot be performed because of records not provided; therefore, failure to provide a contract would be subject to civil penalties if its unavailability prevented one or more audit steps from being timely completed
Also is a Federal crime (see 18 U.S.C. 1516)

12. Successful Civil Penalty Challenges (Revocations or Reductions)
No revocations on record
Some reductions based on mitigation found by ALJ, but all remained very significant
Some reductions made before hearing to correct errors in penalty assessments or new information produced by company (done through joint stipulation)