Today, the Department of the Interior’s Office of Natural Resources Revenue (“ONRR”) announced that it has issued a $6.9 million civil penalty to High Plains Gas, Inc., for failure to submit production reports for numerous federal leases in Wyoming.[1] This is the largest reported civil penalty ONRR has issued since December 2006 and appears to be the single largest reported civil penalty the agency has ever issued for failure to submit production reports.[2]

Current regulations state that “[i]f you operate a Federal or Indian oil and gas lease or federally approved unit or communitization agreement, you must submit production reports.”[3] Unless an exception applies, these reports are Form ONRR-4054 and Form ONRR-4058 for onshore and offshore oil and gas, respectively, and “ONRR must receive your completed Forms ONRR-4054 and ONRR-4058 by the 15th day of the second month following the month for which you are reporting.”[4]

If ONRR believes that a company has not followed these regulations, it may send the company a Notice of Noncompliance (a “Notice”), telling the company what the violation is and what the company needs to do to correct it to avoid civil penalties.[5] If a company does not correct all of the violations identified in the Notice within the time specified, ONRR may assess up to $5,000 per day, beginning with the date of the Notice, for each violation.[6] In the case of royalty and production reports, ONRR may consider each line on a report to constitute a separate violation.[7]

Before issuing the civil penalty to High Plains Gas, ONRR states that it had issued the company a Notice exactly one year ago, i.e., in July 2014, for failure to report production for its federal leases in Wyoming.[8] High Plains Gas reportedly failed to comply by the deadline established in the Notice, and as of the announcement date had not yet complied.[9] ONRR further reports that the civil penalty amount was escalated due to the company’s prior violations.[10]

This year, ONRR has penalized various companies with federal leases in Wyoming for failure to submit production reports.

In March, ONRR assessed two civil penalties totaling $52,968 to two companies for failure to submit royalty or production reports: Washakie Energies Co., Ltd., was penalized $41,412 for failure to provide production reports for several federal leases in Wyoming, and Grynberg Petroleum Company was penalized $11,556 for failure to report production on certain federal leases in both Wyoming and New Mexico.[11]

Also in May, ONRR assessed $306,052 in civil penalties against Patriot Energy Resources, LLC, for failure to submit production reports for several federal leases in Wyoming.[12]

It bears noting, however, that ONRR’s enforcement efforts this year for failure to submit production reports have not been solely limited to federal leases in Wyoming, but also include federal leases in Ohio and Indian leases in Oklahoma.[13]