ONRR fines Chesapeake over Indian tribal gas royalties

This story was updated on Oct. 21.

The US Department of the Interior’s Office of Natural Resources Revenue (ONRR) has fined Chesapeake Energy Corp. more than $2.1 million for failing to comply with a 2011 order that found repeated, systematic orders in the Oklahoma City-based independent’s monthly reporting of the amount of natural gas it produced and sold from leases on American Indian tribal land.

The order required Chesapeake to review the amounts it reported for more than 100 Indian leases and correct unreported and misreported volumes, ONRR said on Oct. 19 as it announced the fine.

ONRR said that while it eventually obtained Chesapeake’s compliance with its order to amend monthly reports to correct for its misreporting, Chesapeake continued to maintain inaccurate information on ONRR data systems for an extended period. ONRR said it issued the civil penalty for Chesapeake’s knowing or willful maintenance of this inaccurate information.

The agency said it issued the order to perform restructured accounting in October 2011, and Chesapeake said it had submitted all the required corrections the following May. ONRR conducted follow-up testing and found additional underreported volumes, which Chesapeake corrected in 2013. ONRR again conducted further sampling and still found uncorrected volume shortages, which Chesapeake corrected in May 2014.

Paul A. Mussenden, DOI’s Deputy Assistant Sec. for Natural Resources Revenue Management, said US taxpayers and Indian tribes are best served when companies correct erroneous sales and production information from leases they hold on federally administered land.

“In this instance, the company was ordered to correct underreported volumes in its royalty reports beginning in 2011,” Mussenden said. “While [Chesapeake] assured ONRR it had corrected all the reports, follow-up checks still found additional errors.”

Contact Nick Snow at nicks@pennwell.com.

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