The U.S. Department of Interior's Office of Natural Resources Revenue (ONRR) said Wednesday a subsidiary of BP plc has agreed to settle charges that it submitted false production reports on tribal lands in Colorado and will pay a penalty of $5.2 million.

The ONRR's Office of Enforcement first issued the civil penalty in June 2010, accusing BP America Inc. of allegedly submitting false, inaccurate or misleading reports to the Southern Ute Indian Tribe, whose lands are in southwestern Colorado.

According to the ONRR, tribal auditors had initially discovered that BP had submitted incorrect product and sale type codes, which resulted in incorrect royalty calculations and reports. The auditors said the company had also reported well production to the wrong leases.

"After receiving audit issue letters and an order, the company agreed with the auditors' concerns and repeatedly promised to correct the problems, which they attributed to errors in their automated files," the ONRR said. "However, ONRR and the tribal auditors found the same errors in later reviews, prompting ONRR to issue the civil penalty. BP America has now corrected the reporting errors."

ONRR Deputy Assistant Secretary Paul Mussenden lauded tribal and federal officials for their efforts in the matter.

"This civil penalty demonstrates the expertise, skill and tenacity of the tribal auditors and ONRR enforcement team members who discovered and pursued this repeated misreporting of royalty and production information, and underscores the value of our partnership with tribal and state auditors under our cooperative agreements," Mussenden said.

BP spokesman Brett Clanton said the company denies that it knowingly or willfully made reporting errors and said the accounting mistakes were corrected "prior to the beginning of this matter."

"The company is pleased to settle the matter involving allegations around administrative royalty reporting errors without further litigation," Clanton said. "We are committed to continuing to comply with all administrative reporting requirements on the Southern Ute Indian Reservation and throughout the United States."

ONRR said BP had originally requested a hearing to discuss the charges but ultimately decided to settle the matter instead.

So far this year, ONRR has fined QEP Resources Inc. $1.2 million for allegedly submitting false production and/or royalty reports on oil and natural gas leases, and Cabot Oil & Gas Corp. $1.9 million for allegedly submitting false information to ONRR's database (see Daily GPI, July 12; May 1).

In January, Royal Dutch Shell plc subsidiary Shell Offshore Inc. agreed to pay ONRR $25 million to settle charges that the company underpaid royalties on oil and natural gas leases owned by the federal government (see Daily GPI, Jan. 18).

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