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Office of Enforcement Update

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ONRR
Office of Enforcement
September 2011
Program Manager
Sarah Inderbitzin
Enforcement Operations
Geary Keeton
Alternative Dispute Resolution
Cab Baldwin
Litigation Support
Tim Calahan
1
Office of Enforcement
Enforcement Operations
•
Enforcement begins when the Office of Enforcement (OE)
receives a referral from ONRR employees, states, Tribes, or
outside entities and through its own initiatives
•
OE investigates and either informally resolves, issues a Notice
of Noncompliance (NONC) or an immediate liability Civil
Penalty Notice (from up to $500 to as much as $25,000 per
day per violation)
2
Office of Enforcement
Enforcement Operations
•
What types of royalty issues and practices are OE
currently penalizing? The short answer is any that the Federal
Oil and Gas Royalty Management Act authorizes. This
includes NONCs and Civil Penalties for the following violation
types:
пѓ� Regulatory violations (include non-reporting, unresolved
reporting errors, failure to submit sureties, failure to pay via EFT)
пѓ� Royalty payment violations (knowing failure to pay or habitual
late payments)
пѓ� Failure to permit an audit (knowing refusal to fulfill audit
information requests)
пѓ� False information (knowing submission or maintenance of false,
misleading, or incorrect information submitted)
3
Office of Enforcement
Enforcement Operations
•
Will OE notify me of an issue in advance so that I can correct
it before OE assesses a penalty?
пѓ� 30 C.F.R. В§ 1210.30 gives you 30 days to correct any reporting
errors you discover. Failure to do so may result in a NONC or a
civil penalty for maintaining incorrect information
� Our NONCs give you a 20-day “cure period” to correct the
specified errors we discover without penalty
пѓ� Civil penalties for failure to cure a NONC may be as much as
$500 per violation per day for the first 40 days, escalated to as
much as $5,000 per violation per day after 40 days
пѓ� Unlike NONCs, our knowing or willful Civil Penalty Notices do not
give you an advance opportunity to correct prior to assessment
of penalties of as much as $25,000 per violation per day
пѓ� Each 2014 line or OGOR well line you do not submit or correct
may constitute a separate violation
4
Office of Enforcement
Enforcement Operations
•
More about information request violations. Information
request violations are failure to timely fulfill ONRR or agent
(State or Tribal) requests for documentation or data for audit,
compliance reviews, and investigations
пѓ� Delays may result in curable NONCs followed by civil penalties of as much as $500
пѓ�
пѓ�
пѓ�
пѓ�
per violation (type of document not provided) per day and then escalate to as much
as $5,000 per document type per day (usually after 40 days of failure to correct)
Delays in the case of audits will likely be treated as knowing or willful failure to
permit an audit with penalties of as much as $10,000 per day per violation (audit
steps which ONRR cannot perform for lack of requested documents)
Substantial uncooperativeness may be construed as Audit Obstruction and can
result in criminal sanctions under 18 U.S.C. В§ 1516
On March 10, 2011, ONRR sent a Dear Reporter Letter to all reporters on
recordkeeping requirements and consequences of failure to produce documents
upon request
Selling leases does not exempt the seller or purchaser from records maintenance
requirements (except for Indian leases). Merged companies carry such records
maintenance requirements into the purchasing or surviving companies
5
Office of Enforcement
Enforcement Operations
•
What does “knowing or willful” mean? Knowing or willful is a very broad
term and does not require proof of specific intent to defraud or a
correlation to nonpayment of royalties
Includes:
пѓ� Actual knowledge of the falsity of the information
пѓ� Reckless disregard of the truth or falsity of the information
пѓ� Deliberate ignorance of the truth or falsity of the information
Indicators:
пѓ� Intentional or accidental admission
пѓ� Submission of contradictory documents
пѓ� Inaction on orders, unfulfilled promises to correct errors, or repeated
“mistakes”
пѓ� Adverse inspection/audit report findings which company has failed to resolve
пѓ� Complaints from other agencies or the public
6
Office of Enforcement
Enforcement Operations
•
How does company size impact the penalties that are
assessed?
пѓ� Our civil penalty regulations at 30 C.F.R. 1241.70 provide that
when we determine the amount of a civil penalty, we will
consider the severity of the violations, the company’s history of
compliance, and whether the company is a “small business.” We
follow Small Business Administration rules regarding company
size. “Very small” means less than 25 employees, “small” means
up to 500 employees, above 500 is considered “large”
пѓ� The size of the penalty assessed is lower for very small and small
companies
7
Office of Enforcement
Enforcement Operations
•
Specific Initiatives Now and in the Future Include:
пѓ� Failure to File 2014s or OGORs. Will result in an NONC
пѓ� Failure to timely correct Reporting Errors. We may issue a curable NONC or knowing
пѓ�
пѓ�
пѓ�
пѓ�
пѓ�
пѓ�
or willful Civil Penalty Notice depending on the facts and your violation history
Repeat Errors/Noncompliance. If ONRR has previously warned you about particular
reporting errors or other noncompliance, we may consider the same error or
noncompliance in the future to be knowing or willful preparation, submission, or
maintenance of a false, inaccurate, or misleading report
Failure to provide requested Documents. We may consider this to be knowing or
willful failure to permit an audit
Failure to Use Indian Index Zone or Major Portion Pricing. We may consider this to be
knowing or willful preparation, submission, or maintenance of a false, inaccurate, or
misleading report
Failure to Post a Bond for an Appeal. Will result in an NONC for failure to comply with
ONRR regulations at 30 C.F.R. Part 1243
Failure to Pay Electronically. Will result in an NONC
Failure to Use Adjustment Reason Code 17 or any Other Special Reporting
Requirements in an Order. Will result in an NONC
8
Office of Enforcement
Enforcement Operations
• When will ONRR Update the ONRR Civil Penalty?
пѓ� Was updated on July 21, 2011
пѓ� Shows $1.3 million in civil penalties collected in FY 2010 and
$1.5 million collected to date in FY 2011
пѓ� We will update quarterly in the future
•
What is the status of amendments to the civil penalty
regulations?
пѓ� We are drafting revised regulations. We hope to issue a proposed rule by
the end of calendar year 2011
9
Office of Enforcement
Enforcement Operations
•
What role does the Office of Inspector General (OIG) and it's
investigations play in the enforcement efforts for royalty
payments and/or gas measurement?
пѓ� OE must refer to the OIG Energy Investigations Unit any cases
that may involve a crime under Title 18.
пѓ� The OIG uses its broad authority to investigate the referral and
coordinates with the Department of Justice (DOJ) to investigate
any cases that may involve crimes or violations of the False
Claims Act
пѓ� If the OIG and DOJ decline to pursue the case, the OIG remands
it back to ONRR for follow-up enforcement
10
Office of Enforcement
Alternative Dispute Resolution
• Begin process when a lessee requests settlement discussions.
We have Alternative Dispute Resolution (ADR) because it is
encouraged by the Alternative Dispute Resolution Act of 1990
and for federal oil and gas leases, the Royalty Simplification and
Fairness Act mandates at least 1 settlement consultation
• Facilitate negotiations to resolve issues through settlement or
compliance
• Build a team with ONRR, State or Tribe, and, if appropriate,
other Interior agencies, the Solicitor’s Office, and/or
Department of Justice
11
Office of Enforcement
Alternative Dispute Resolution
• How or when should a company request ADR to resolve
royalty compliance issues?
пѓ� A company may request ADR to address its royalty compliance issues
at any time – during an audit, at the issue letter phase, or at the
order/appeal phase
пѓ� ONRR may or may not agree to ADR
пѓ� ONRR asks all companies if they are interested in ADR as part of its
order appeals process
12
Office of Enforcement
Litigation Support
•
Assist DOJ and Solicitor’s Office with discovery and other
litigation support
•
Coordinate bankruptcies/file proofs of claim
•
Refer unpaid debts to Department of Treasury
•
Maintain adequate Surety Instruments
13
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