Exxon subsidiary penalized for $1.3M in ND audit dispute; company plans to appeal

IndustriesAssociated Press

A subsidiary of Exxon Mobil Corp. was hit with a $1.3 million civil penalty on Wednesday for failing to provide timely information needed for an audit of its federal oil and gas leases in North Dakota.

The U.S. Department of Interior's Office of Natural Resources Revenue said Texas-based XTO Energy, Inc. did not fully comply with the 2013 information request for a year.

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That substantially delayed the audit work, and diverted the agency's resources to pursuing the information rather than examining it, said Deputy Interior Secretary Paul Mussenden.

Audits are used to ensure companies pay the appropriate royalties on oil and gas produced from publicly-owned energy leases.

XTO spokeswoman Suann Guthrie said the company will appeal the fine.

She said XTO cooperated with officials and attempted to provide all the information they wanted, but had difficulty immediately obtaining some contracts that were sought by federal and state officials because the contracting parties had been sold.

"We provided ... all the information that was readily available in a timely manner," Guthrie said. "We believe there is no justification for this extremely disproportionate fine."

XTO was penalized $684,000 two years ago over a similar case in Kansas involving federal royalties on two wells owned by Ellora Operating, LP, which is now owned by XTO.

Guthrie said XTO ultimately provided the records sought in that case. But the process was hindered because Ellora had sold the two wells to another company and locating the records on them proved time-consuming, she said.

An appeal of that case is pending before the Interior Department's Office of Hearings and Appeals.

Office of Natural Resources Revenue spokesman Patrick Etchart said a company's compliance history can impact civil penalty amounts in other cases that the company becomes involved in.

The revenue agency collects royalties and other revenues from companies that drill or mine natural resources from federal and American Indian lands. Much of that money is disbursed to the states where oil, gas and coal leases are located.