Anadarko tops list of oil, gas companies with missing or incomplete production reports

Anadarko, the dominant oil and gas producer on Colorado’s Front Range, topped the list of companies that a recent state audit found had failed to submit required well production reports from 2016 to 2018.

Anadarko’s missing reports totaled 3,942, according to information released Wednesday by the Colorado Oil and Gas Conservation Commission, the COGCC. The monthly well reports can be used to provide some of the information used to determine the mineral severance taxes the companies pay.

Noble Energy was second on the list, with 3,742 missing reports, and Bonanza Creek Energy Operating Co. was third, at 1,891 reports.

Altogether, a state audit issued Jan. 28 said 316 oil and gas operators submitted 1,209 incomplete monthly well production reports and/or failed to submit as many as 50,055 reports.

Three operators each had more than 5,000 missing reports, the audit said. The state auditor’s office said state the Department of Revenue and the Department of Natural Resources, which houses the COGCC, could improve their processes to help ensure they have accurate information on the amount of resources being extracted and that severance taxes are being calculated correctly.

The COGCC  and the Revenue Department said they have started implementing the audit’s recommendations for more closely monitoring the reports and making sure the equipment used to measure the volumes produced is accurate.

However, the Revenue Department has said the monthly well production reports aren’t an essential source of information for determining severance tax rates. Spokesman Dan Carr said the department typically would review the reports only when conducting audits. It does about 10 audits a year.

“The reports are a very minor piece of the puzzle,” Carr said. “What we’re usually interested in is gross revenue.”

Severance taxes are levied on oil, gas, coal and other nonrenewable minerals that are “severed” from the earth. The revenue goes to both the state and local governments.

The state auditor’s office acknowledged that severance taxes are determined by the income generated by oil and gas, not directly by the amounts extracted. But the amount produced provides a foundation for calculating the tax owed, according to the audit.

“It all goes into the equation,” said Matt Samelson, an environmental attorney. “And it’s the law. If they don’t do it, there’s a penalty component to it.”

The COGCC uses the production reports to track what’s going on with wells and to help assess a levy on production that supplies a portion of the agency’s funding, said spokeswoman Megan Castle. Mineral royalty owners also use the reports, she said.

If the COGCC had imposed the maximum fines for the reports that were missing or incomplete from 2016-18, the penalties would have totaled as much as $308 million, the audit said. If the commission had fined just the three operators with the most delinquent reports, the penalties would’ve been more than $120 million, the auditor’s office said.

No fines were levied.

Colorado Rising, an activist organization that has pushed for tougher oil and gas regulations, asked the COGCC to pursue penalties for the missing reports. The group, which is proposing ballot measures to create stricter buffers around new wells, has said it will pursue legal action if the COGCC doesn’t hold the companies accountable.

However, COGCC Director Jeff Robbins said in a letter Wednesday to Joe Salazar, Colorado Rising executive director, that under the law, the agency can’t fine a company if the alleged violation occurred more than a year ago. The law gives the COGCC director the discretion to determine “when and whether to initiate enforcement actions” and that the goal is to bring companies into compliance rather than maximize penalties, said Robbins, who took over as director in 2019.

Occidental Petroleum, which acquired Anadarko in 2019, said in an email that it’s confident that all of its production in Colorado has been reported for tax purposes. The company said it is reviewing its records to make sure everything submitted to the COGCC was appropriate and accurate.

“This year Occidental, and all of its subsidiaries, will pay over $200 million in ad valorem tax to Weld County alone — taxes that fund schools, first responders and critical public services,” Occidental said.

“We asked the state to provide details on these reports, which we believe were flagged because they involve technical issues related to long-term shut-in, or plugged and removed wells that are not producing. These differentiators do not affect severance taxes, which are paid based on sales reported to the Department of Revenue,” Noble Energy said in a statement Thursday.

Lynn Granger, executive director of API Colorado, an industry trade group, said in a statement that the state audit and other information have created confusion.

“The report released today by the COGCC suggests that of the 2.5 million required reports, there were 19,393 production reports that were either kicked back for error or missing,” Granger said. “That accounts for less than 1 percent of total required production reports and is a clear indicator that the severity of this is being embellished by those with a political agenda.”

Source: denverpost.com