Shale Daily / NGI All News Access

Interior Fines Chesapeake for Filing 'Inaccurate' Royalty Reports

The Interior Department's Office of Natural Resources Revenue (ONRR) said Tuesday that it penalized Chesapeake Energy Corp. $765,000 for "knowing or willful submission of inaccurate information" on its oil and natural gas royalty reports.

"It is simply unacceptable for Chesapeake Energy to misreport sales volume information. Chesapeake Energy has been repeatedly warned about its inaccurate report on this oil and gas lease [in Oklahoma] from May 2011 through July 2012," said ONRR Director Greg Gould.

"Chesapeake does not believe that it knowingly or willfully submitted inaccurate royalty reports," a company spokesman told NGI. It intends to request a hearing on the civil penalty.

During an audit that began on Oct. 1, 2009 of the lease held by Chesapeake, ONRR directed the Oklahoma-based producer to report additional volumes on its royalty-reporting forms. But Chesapeake failed to comply at the time, the ONRR said.

Chesapeake eventually made the required corrections through April 2011, the agency said. The ONRR auditors, however, discovered that Chesapeake during the very next month resumed its practice of filing inaccurate reports. ONRR said it warned the company of the continued violations in an October 2011 order, and again on Sept. 4, 2012, following a separate review.

ONRR concluded that Chesapeake's behavior in submitting false information was "knowing or willful," and it issued the civil penalty on March 13.

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