1. ENFORCEMENT AND CIVIL PENALTIES UPDATE
James M. Auslander
Beveridge & Diamond, P.C.
February 13, 2019

2. Royalty Management
The Federal Oil and Gas Royalty Management Act of 1982 (“FOGRMA”), 30 U.S.C. §§ 1701 et seq., provided the Secretary with new authority to account for and collect royalties, including new civil penalty authority
Congress extended only FOGRMA’s penalty provisions beyond federal oil and gas leases, 30 U.S.C. § 1720a.

3. FOGRMA’s Civil Penalty Hierarchy
§ 1719(d)
§ 1719(c)
§ 1719(b)
30 U.S.C. § 1719(a)

4. Congress Limits ONRR Civil Penalty Discretion
“[T]he Committee feels strongly that administrative discretion should not be the principal mechanism through which the severity of punishment is matched to the seriousness of the offense.
Therefore, the Committee amendment attempts to distinguish between those violations which ought to lead to a very large civil penalty and those for which liability should be reduced. In making this distinction, a balance must be struck between the need to deter violations of the Act and the need to avoid a situation in which exposure to very severe penalty liability for relatively minor or inadvertent violations of necessarily complex regulations becomes a major disincentive to produce oil or gas from lease sites on federal or Indian lands. The Committee attempted to achieve this balance by providing a requirement of notice of violation and a lower civil penalty for certain violations of the Act and a steeply rising civil penalty liability for serious violations knowingly or willfully committed.”
S. Rep. No (1982), at 17 (emphasis added).

5. ONRR Civil Penalty Regulations Under FOGRMA
30 C.F.R. Part 1241
Original regulations largely mirrored FOGRMA
NONC requirement
2014 Proposed Amendments
Definitional changes
Procedural changes
2016 Final Amendments

6. 2016 Rule Key Changes and Issues
New Definitions:
“Maintains”
“Submits”
“Knowingly or willfully”
Royalty consequences
Vicarious Liability
Audits
Privileged & Confidential | Attorney-Client Communication

7. Privileged & Confidential | Attorney-Client Communication
Litigation of 2016 Rule
Facial challenge in District of Wyoming
District court largely affirmed
Vacated 30 C.F.R (b)(5)
Appeal to Tenth Circuit
Privileged & Confidential | Attorney-Client Communication

8. False Claims Act
Instead of pursuing civil penalties under FOGRMA, ONRR and the United States recently have been using the False Claims Act, 31 U.S.C. § 3729 (“FCA”), to pursue alleged “knowing” violations of royalty payment obligations
FCA allows the United States to pursue treble damages and per claim (i.e., per line on Form ONRR-2014) penalties from $10,781 to $21,563
No administrative process. United States initiates a complaint in U.S. District Court

9. Questions? James M. Auslander Principal, Beveridge & Diamond, P.C.
Washington, D.C.
(202)