US hits Apache with $2.7 million fine for improper royalty deductions

Washington (Platts)--21Oct2013/318 pm EDT/1918 GMT


The US Monday announced it had assessed against Apache Corp. a $2.7 million civil fine for the alleged "knowing or willful" submission of false data relating to royalties from Gulf of Mexico leases.

The Interior Department's Office of Natural Resources Revenue said the penalty stemmed from an ONRR audit that found that Houston-based Apache had been improperly deducting transportation costs from royalty payments generated by certain Gulf of Mexico leases, which produced both oil and natural gas. The particular leases, granted under the Outer Continental Shelf Lands Act, do not allow for such deductions, ONRR said.

"This civil penalty supports ONRR's continuing efforts to enforce correct reporting and accurate royalty payments," Paul Mussenden, Interior's Deputy Assistant Secretary for Natural Resources Revenue Management said in a statement. "Accurate reporting is essential for proper royalty collection and a first line of defense in ensuring that ONRR collects every dollar due to the American taxpayer."

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ONRR said its auditors ordered Apache in May 2010 to stop claiming the transportation deductions on the leases and to repay the amount it had already deducted. Apache complied, but then in August 2010 resumed deducting transportation costs from the same leases, ONRR charged.

Apache did not immediately return a call seeking comment.

In July 2011, ONRR's audit and compliance division referred the matter to its office of enforcement, which issued the civil penalty of $2,719,000 in late September.

--Gary Gentile, gary.gentile@platts.com
--Edited by Derek Sands, derek.sands@platts.com

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