The head of the new Bureau of Ocean Energy (BOE) agency told a House committee Wednesday that a fine of $5.2 million was being imposed on BP America for submitting false reports related to onshore energy production.

“We are imposing a fine of $5.2 million on BP America for false, inaccurate and misleading reports [that were] submitted over a long period of time on energy production on the Southern Ute tribal lands in southwestern Colorado,” BOE Director Michael Bromwich said during a hearing of the House Natural Resources Committee.

With the old Minerals Management Service now extinct, the fine signals that the director of the new agency is taking the lead in holding companies accountable. Houston-based BP America is the U.S. affiliate of British oil giant BP plc, which is at the center of the massive oil spill disaster in the Gulf of Mexico (GOM) (see Daily GPI, April 22).

The Southern Ute tribal auditors initially discovered the errors during an audit and brought them to BP America’s attention in August 2007, according to BOE. The tribe’s audit was conducted in cooperation with the BOE’s Minerals Revenue Management (MRM) program.

The tribal auditors and MRM found that BP reported incorrect royalty rates and the wrong prices for determining royalties, as well as submitted misleading information about which leases were producing. BP America agreed with auditors’ concerns and said it would correct the problems, BOE said.

As part of the investigation, MRM and tribal auditors examined later production reports to determine if BP had resolved issues, as it had agreed. Bromwich said the same reporting errors were found in later reviews, “leading us to conclude that BP’s continued submission of erroneous reports was knowing or willful.” BP may challenge the penalty assessment in a Department of Interior hearing.

Bromwich further said he has established an Investigations and Review Unit (IRU), which will be “staffed with experienced prosecutors, investigators, scientists and other personnel that will allow us to undertake prompt and aggressive enforcement action both with respect to allegations of misconduct against people in my agency, but also with respect to companies and other participants in the industry that we regulate.

“I’m determined to be aggressive” in the enforcement of safety and environmental regulations, he told the house panel. “I hope to make a big difference in this agency.

“I think there have been a lot of allegations and significant evidence that there has been too cozy a relationship between regulators and the [oil and gas] industry. That’s not going continue. We’re going to have an arms-length, tough, aggressive regulatory program. It’s going to be fair. It’s going to be even-handed, but it’s going to be tough, and in cases of violations of the regulations, substantial sanctions will be imposed. And in the case of willful violations of the regulations, extraordinarily serious sanctions will be imposed,” he told the House panel.

With respect to whistle blower complaints, the IRU “will run them to ground very quickly to determine whether there is substance behind them or not,” Bromwich said.

Because of the explosion and oil spill in the GOM, Rep. George Miller (D-CA) recommended that BP be “debarred from participation in the Outer Continental Shelf [OCS] for five or seven years.” Both Bromwich and Interior Secretary Ken Salazar agreed that BP should be held to tougher standards in the future, but they were silent on Miller’s proposal.

Salazar again found himself defending the Obama administration’s decision to impose a six-month moratorium on deepwater drilling in the GOM. He said he was “confident” that the moratorium was the “correct decision.” While he may consider narrowing the scope of the ban in the future, Salazar said he wouldn’t be “pushed into doing anything prematurely relative to additional development in the OCS.”

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