industry complianceaccurate revenues & dataprofessionalism & integrity 1 onrr: collecting...

Industry Compliance Accurate Revenues & Data Professionalism & Integrity

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ONRR: Collecting Every Dollar DuePresented by:

Gregory J. Gould, Director ONRR

AGA Professional Development ConferenceApril 26, 2012

Office of Natural Resources Revenue (ONRR)


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Overview

• Creation of ONRR• ONRR Mission and Contributions to the U.S.• ONRR Restructuring and Strategic Review • Mission Work: ONRR Program Areas• Recent ONRR Achievements • New Emerging Initiatives:

– Royalty Reform

– Extractive Industries Transparency Initiative (EITI)


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The Creation of ONRR

On October 1, 2010, ONRR was formally established and moved under the Office of the Assistant Secretary for Policy, Management and Budget.

ONRR has worked closely with the Assistant Secretary for Policy, Management and Budget to enhance the organization’s ability to deliver timely compliance on every dollar due, make accurate on-time payments, and earn public trust.

ONRR used the reorganization to spark an agency-wide transformation and develop a strategic framework to prioritize new and ongoing initiatives for implementation.

“This is significant not only for moving forward with our overall reorganization, but also for the American taxpayers, whose interests will be better protected by the improved collection and management of revenues from energy development on our public lands and oceans…”

-- Secretary Ken Salazar


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DOI: Prior to Restructuring


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DOI: After Restructuring


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ONRR: Who We Are

Responsible for the management of revenues associated with federal offshore and federal and American Indian onshore mineral leases, as well as revenues

received as a result of offshore renewable energy efforts

Dallas

Denver

Farmington

Ft. Berthold

Houston

Oklahoma City

Tulsa

Washington, D.C.


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Cumulative Mineral Lease Revenue Disbursement ~ $231 Billion

• Since 1982, approximately $231 billion in revenues was distributed from onshore and offshore lands to the Nation, states, and American Indians

• The distribution to the U.S. Treasury is one of the Federal government’s greatest sources of non-tax income

Cumulative Mineral Lease RevenueDisbursement (1982 - 2011)

U.S. Treasury$141.4 bil l ion State Share (Onshore)

$27.1 bil l ion

State Share (Offshore)$3.7 bil l ion

American Indian Tribes & Allottees

$7.6 bil l ion

Reclamation Fund$21 bil l ion

Land & Water Conservation Fund

$26.1 bil l ion

Historic Preservation Fund$4.1 bil l ion

Note: rounding may affect totals


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Contributing to the Nation’s Economy

• FY 2011 Disbursements -- $11.16 Billion

– $ 6.05 Billion to the U.S. Treasury

– $ 891 Million to the Land & Water Conservation Fund

– $ 150 Million to the Historic Preservation Fund

– $ 1.53 Billion to the Reclamation Fund

– $ 2 Billion to 37 States

– $ 538 Million to the Department’s Office of the Special Trustee on

behalf of 36 Indian tribes and approximately 30,000 individual

Indians

• Approximately $10 billion in revenue is disbursed annually


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ONRR Strategic Review and Reorganization

October 1, 2010 ONRR created

October 28, 2010 ONRR Strategic Review begins

December 17, 2010 Strategic Review results presented

March 2011Implementation Work Groups formed

October 1, 2011 ONRR FY 2012 Reorganization

Results:

• Developed a new Strategic Framework to guide decision making• Clearly communicated organizational priorities proliferating ownership, optimism and enthusiasm

across the organization• Launched new initiatives to improve compliance, organizational health and inter-agency collaboration• Instituted new ways to make decisions, hold people accountable, measure success and ensure effective

results


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Companies timely comply with laws, regulations, and lease terms and pay every dollar due

States, Tribes, Indian mineral owners, US Treasury, and other entities receive timely and accurate revenues and data

The public trusts ONRR’s professionalism, integrity, efficiency and quality

Three Outcomes Define ONRR’s Success


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Mission Work:ONRR Program Areas

Financial and Program

Management

Audit and Compliance Management

Coordination and Enforcement

Management


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Financial and Program Management

Production Reporting & Verification

Receive, process and verify industry-submitted production reports

Error correction for all Federal and Indian production

Oversee meter inspections for production verification

Financial Management

Collect, verify, distribute all rent, royalties and bonuses

Receive, process and verify industry-submitted royalty reports

Perform Data Mining functions

Asset Valuation

Issue valuation guidance and determinations Review and respond to transportation and

processing allowance requests Draft and publish valuation rulemakings


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FY 2011 Reports Received:1,950 payors (Form 2014)

1,900 operators (Oil and Gas Operations Report)

Financial Management Accomplishments

5.7 million production lines

@ 97.4% accuracy rate

Financial operations and internal controls contributed to DOI

achieving unqualified opinions* during the annual CFO audits

The PeopleSoft accounting system was one of the first in DOI to

satisfy OMB and Federal Managers

Financial Integrity Act financial system

requirements

*Unqualified opinion (Clean Audit) - In conformity with U.S. generally accepted accounting principles (GAO-09-946SP)

FY 2011 Transaction Lines Processed:

4.7 million royalty lines

@ 99.2% accuracy rate


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PrecisionP

reci

sion

ONRR DATA ACCURACY EFFORTS

Up-Front System Edits

Data MiningMissing Reports, Volume Comparisons,

LVS/GVS, High Level Analyses of Sales Values, Royalty Values, Adjustments, etc.

1 Month

6-9 Months

2-3 Years

7 Years (Fed. oil & gas)

Compliance Reviews

Audits

Timeline

Risk-based A

pproach Ris

k-ba

sed

App

roac

h

Enf

orce

men

t

Act

ions

Enforcement Actions

Enforcement Actions

Enf

orce

men

t Act

ions


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Audit and Compliance Management

All audits performed according to

Generally Accepted Government

Auditing Standards

Compliance reviews are an analysis that

determines the reasonableness of reported revenues

Properties and companies are selected for review or audit using

a risk assessment across the entire

universe of properties and companies

Audit and Compliance ensures that Federal and Indian mineral

revenues are accurately reported

and paid

A 3-year cycle to review and/or

audit revenues was established


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Audit and Compliance Accomplishments

For every dollar spent on compliance activities between FY 2009-2011, ONRR returned approximately $4.00 back to

taxpayers

Since 1982, audit and

compliance activities have collected $3.9 billion

In FY 2011 completed 311

audits and 1,059 compliance reviews

Received a “pass” opinion on 2011 Peer Review of our audit

activities

In FY 2011 ensured compliance for

about $5.5 billion in royalty revenues


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Coordination and Enforcement Management: State and Tribal Coordination

– Audit agreement support and coordination with ten States and six Tribes

– Conduct Outreach

– Serves as an advocate for the fulfillment of ONRR trust responsibility and to resolve Indian mineral-related issues

– In FY 2011, States and Tribes completed 244 audits and 171 compliance reviews

– In FY 2011, held 98 outreach sessions and resolved over 12,500 royalty-related inquiries

– For every dollar spent on compliance activities between FY 2009-2011, States and Tribes returned $3.39 back to taxpayers

Alaska North Dakota

California Oklahoma

Colorado Texas

Montana Utah

New Mexico Wyoming

Blackfeet Southern Ute

Navajo Nation Ute

Shoshone/Arapaho Ute Mountain Ute


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Coordination and Enforcement Management:Office of Enforcement

Office of Enforcement Functions:

Alternative Dispute Resolution Litigation Enforcement Operations

New Enforcement Strategy Emphasizing:

Deterrence – resolve to sanction repeat offenders Appropriate Enforcement Actions – aggressively issuing civil penalties Communication – provide training/information to managers and

employees; publicize collected civil penalties Continuous improvement – balance and improve staff expertise Partnership – collaborate on creative enforcement solutions


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Office of Enforcement Penalties

• The civil penalties program is a tool ONRR uses to encourage compliance by issuing civil penalties when companies fail to comply with, or knowingly violate, applicable regulations or laws. Such penalties are authorized by the Federal Oil and Gas Royalty Management Act of 1982 (FOGRMA).

• ONRR regulations at 30 C.F.R. § 241 provide a cure period of at least 20 days for regulatory violations such as failure to submit reports. Violations not cured within the period are subject to civil penalty assessments, until they are cured:

• As much as $500 per day;

• $5,000 per day after 40 days;

• Certain violations - as much as $10,000 or $25,000 per violation for each day the violation continues.

• Some violations are also crimes under Title 18, U.S.C. or False Claims under 31 U.S.C. 3729. ONRR works in partnership with the Department’s Office of the Inspector General and the U.S. Attorney’s Office in pursuing these violations.


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Office of Enforcement Accomplishments

Litigation Support• 624 debts referred to Treasury between FY 2009 - FY 2011 involving over $3.2 million in principal + interest

• 21 Bankruptcy Proofs of Claim filed since FY 2009 involving over $27 million principal + interest

Civil Penalties• $28.8 Million in penalties collected since FY 2000

• 1,112 cases opened since FY 2000 and 964 cases closed (637 or 66% with compliance achieved)

Alternative Dispute Resolution• $185 million received in settlement cases from FY 2009 - FY 2011 (25 ADR case facilitations resulting in Compliance)


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Increased Industry Education:Targeted Reporting Training to help industry comply

Implemented new e-commerce technology that places additional onus on companies to report correctly

New data mining business processes:Collected approximately $12 million in additional revenues since 2010Monitor adjustments outside 6-year statute of limitationsVolume comparison between royalty and production reports

Established a Meter Inspection Team:Joint partnership with Bureau of Safety and Environmental Enforcement Automated Production Metering Feasibility Study

Recent ONRR Achievements

Piloting an integrated compliance approach with a large independent producer

Professionalism and Integrity:3-year Auditor Training ProgramHigh employee involvement in ONRR continuous improvement initiatives


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Emerging Initiatives:Royalty Reform

Federal Oil & Gas Valuation

Federal & Indian Coal Valuation

Indian Oil Valuation Negotiated Rulemaking


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Emerging Initiatives:Improving Data Transparency

Extractive Industries Transparency Initiative (EITI)

President Obama announced the U.S. intention to implement EITI September 2011

Voluntary framework for governments to disclose revenues received from oil, gas and mining assets belonging to state

Parallel disclosure from companies of what they have paid the government in royalties, rents, bonuses, taxes and other payments

INDUSTRY discloses payments

EITI REPORT payments are independently

reconciled and verified

GOVERNMENT discloses receipt of

payments


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The Future of ONRR

ONRR’s future is bright because we are…▪ Constantly adapting to find innovative improvements and

operational efficiencies to best serve the American people▪ Holding our self and our employees accountable for performance

while maximizing talent and knowledge development▪ Working cross-functionally and cross-departmentally to achieve

critical goals▪ Committing to transparency for the American people and other

nations looking to be leaders in the energy field

ONRR expects to achieve…▪ Timely compliance from companies and payment of every dollar due▪ Timely and accurate revenues and data distributed to recipients▪ Trust in ONRR’s professionalism, integrity, efficiency and quality


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Please Contact

Gregory J. GouldActing Deputy Assistant Secretary for Natural Resources Revenue

Director, Office of Natural Resources Revenue(202) 254-5573

[email protected]

Questions & Comments

http://www.onrr.gov

industry complianceaccurate revenues & dataprofessionalism & integrity 1 onrr: collecting...

Documents

onrr restructuring

management of revenues

onrr strategic review

restructuring slide

secretary ken salazar

offshore lands

assistant secretary

american indians