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BP Fined for False Reporting of Energy Production in Colorado

Jul 1, 2010 | Parker Waichman LLP

BP America has been fined $5.2 million by the federal government for false reporting of energy production on Southern Ute tribal land in Southwest Colorado. BP says the misreporting occurred because of an accounting error.

The fine was levied by the Bureau of Ocean Energy Management, Regulation and Enforcement, which recently replaced the scandal-ridden Minerals Management Service. The BP penalty marks the first enforcement action by the agency. The Bureau’s release detailing the fine said it was unrelated to the Deepwater Horizon oil spill.

The federal government said BP repeatedly misreported royalty rates for natural gas on Southern Ute Indian tribal lands. According to the Associated Press, BP at times reported erroneous royalty rates, or listed gas coming from the wrong wells.

Southern Ute auditors said they discovered incorrect reports in 2007 and reported them to BP, which blamed the misreporting on a computer glitch and promised to make changes, the Associated Press said. However, BP’s reporting errors continued, leading to the fine.

According to the Denver Post, BP is one of the top natural-gas producers in Colorado. About a third of BP’s total production in 2009 came from 400 wells on Ute land.

About $200,000 in the $1.1 billion BP pays annually in royalties from operations on land and in the Gulf of Mexico went underreported because of the problem.

“It is simply unacceptable for companies to repeatedly misreport production,” Michael Bromwich, director of the Bureau of Ocean Energy Management, Regulation and Enforcement, said in a statement.

BP will be allowed to challenge the penalty through an Interior Department hearing procedure.

A BP America spokesperson told CNN that the errors have been corrected, and “we are considering our options in response to the order.”

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