Amendments to Civil Penalty Regulations, 28862-28876 [2014-11552]

Agencies

• DEPARTMENT OF THE INTERIOR
• Office of Natural Resources Revenue

[Federal Register Volume 79, Number 97 (Tuesday, May 20, 2014)]
[Proposed Rules]
[Pages 28862-28876]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-11552]


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DEPARTMENT OF THE INTERIOR

Office of Natural Resources Revenue

30 CFR Part 1241

[Docket No. ONRR-2012-0005; DS63610300 DR2PS0000.CH7000 134D0102R2]
RIN 1012-AA05


Amendments to Civil Penalty Regulations

AGENCY: Office of the Secretary, Office of Natural Resources Revenue, 
Interior.

ACTION: Proposed rule.

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SUMMARY: This rule would amend the Office of Natural Resources Revenue 
civil penalty regulations to: apply the regulations to all mineral 
leases, including solid mineral and geothermal leases, and agreements 
for offshore energy development; adjust civil penalty amounts for 
inflation; clarify and simplify the existing regulations for issuing 
notices of noncompliance and civil penalties; and provide notice that 
we will post matrices for civil penalty assessments on our Web site.

DATES: You must submit comments on or before July 21, 2014.

ADDRESSES: You may submit comments to ONRR on this proposed rulemaking 
by any of the following methods. (Please reference the Regulation 
Identifier Number (RIN) 1012-AA05 in your comments.). See also Public 
Availability of Comments under Procedural Matters.
     Electronically go to www.regulations.gov. In the entry 
titled ``Enter Keyword or ID,'' enter ``ONRR-2012-0005,'' and then 
click ``Search.'' Follow the instructions to submit public comments. 
ONRR will post all comments.
     Mail comments to Armand Southall, Regulatory Specialist, 
ONRR, P.O. Box 25165, MS 61030A, Denver, Colorado 80225.
     Hand-carry comments, or use an overnight courier service 
to the Office of Natural Resources Revenue, Building 85, Room A-614, 
Denver Federal Center, West 6th Ave. and Kipling St., Denver, Colorado 
80225.

FOR FURTHER INFORMATION CONTACT: For comments or questions on 
procedural issues, contact Armand Southall, Regulatory Specialist, 
email armand.southall@onrr.gov. For questions on technical issues, 
contact Geary Keeton, Office of Enforcement and Appeals, ONRR, 
telephone (303) 231-3096.

SUPPLEMENTARY INFORMATION: 

I. Background

    ONRR is proposing to amend its civil penalty regulations. On May 
13, 1999, the Department of the Interior (Department) published a final 
rule (64 FR 26240) in the Federal Register (FR) governing Minerals 
Management Service (MMS) Minerals Revenue Management (MRM) issuance of 
notices of noncompliance and civil penalties.
    On May 19, 2010, the Secretary of the Interior (Secretary) 
reassigned MMS's responsibilities to three separate organizations. As 
part of this reorganization, the Secretary renamed MMS's MRM to ONRR 
and directed that it report to the Assistant Secretary of Policy, 
Management and Budget (PMB). This change required the reorganization of 
title 30 of the Code of Federal Regulations (30 CFR). In response, ONRR 
published a direct final rule on October 4, 2010 (75 FR 61051), to 
establish a new chapter XII in 30 CFR; to remove certain regulations 
from Chapter II; and to recodify these regulations in the new Chapter 
XII. Therefore, all references to ONRR in this proposed rule include 
its predecessor MRM, and all references to 30 CFR part 1241 in this 
proposed rule include former 30 CFR part 241.

II. Explanation of Proposed Amendments

    ONRR proposes to amend 30 CFR part 1241, subpart B and add new 
subparts A and C relating to general provisions and penalties for 
Federal and Indian oil and gas leases. ONRR is amending its regulations 
to clarify ambiguities, simplify the processes for issuing notices of 
noncompliance and civil penalties and for contesting notices of 
noncompliance and civil penalties, and rewrite the regulations in Plain 
Language.

III. Section-By-Section Analysis of 30 CFR Part 1241--Penalties

Subpart A--General Provisions

    Before reading the additional explanatory information below, please 
turn to the proposed rule language that immediately follows the List of 
Subjects in 30 CFR part 1241 and signature page in this proposed rule. 
DOI will codify

[[Page 28863]]

this language in the CFR, if we finalize the proposed rule as written.
    After you have read this proposed rule, please return to the 
preamble discussion below. The preamble contains additional information 
about this proposed rule, such as why we defined a term in a certain 
manner and why we chose a certain interpretation.
Purpose (Section 1241.1)
    We propose to add a new Sec.  1241.1 explaining that this part 
applies to recipients of Notices of Noncompliance (NONC), Failure to 
Correct Civil Penalty notices (FCCP), and Immediate Liability Civil 
Penalties (ILCP). This section also would explain when you may receive 
an NONC, FCCP, or ILCP, when we will assess civil penalties, and how 
you can appeal an NONC, FCCP, or ILCP. See the discussion of NONC, 
FCCP, and ILCP in Sec.  1241.3 below.
Scope (Section 1241.2)
    We propose to add a new Sec.  1241.2 to explain what leases are 
subject to this part. We currently undertake civil penalty enforcement 
activities under Sec.  109 of the Federal Oil and Gas Royalty 
Management Act of 1982 (FOGRMA), 30 U.S.C. 1719, and its implementing 
regulations in 30 CFR part 1241. Because FOGRMA Sec.  109 only applies 
to Federal and Indian oil and gas leases, the current ONRR regulations 
in part 1241 also only apply to Federal and Indian oil and gas leases.
    However, in the 2009 Omnibus Appropriations Act, Public Law 111-88, 
sec. 114, 123 Stat. 2928 (2009) (codified at 30 U.S.C. 1720a), Congress 
authorized the Secretary of the Interior to apply FOGRMA Sec.  109 to 
Federal and Indian solid mineral leases, geothermal leases, and 
agreements for outer continental shelf energy development under 30 
U.S.C. 1337(p). Therefore, this proposed rule would implement that new 
authority by adding new Sec.  1241.2 stating that this part will apply 
to all Federal and Indian mineral leases, geothermal leases, and 
agreements for outer continental shelf energy development under 30 
U.S.C. 1337(p).
Definitions (Section 1241.3)
    We propose to redesignate the definitions currently located at 
Sec.  1241.50, rewrite them in Plain Language, and modify and clarify 
definitions as discussed below.
    Unless specifically defined in this section, the terms in this part 
would have the same meaning as they do in 30 U.S.C. 1702. In order to 
clarify the current regulations in part 1241, this section would define 
certain terms used in part 1241 and in 30 U.S.C. 1719. See the proposed 
rule language for the list of terms and definitions not discussed in 
this preamble.
    Under this proposed rule, we may issue either an NONC or an ILCP, 
depending upon the type of violation(s) we discover and whether it is 
knowing or willful. An NONC would mean a Notice of Noncompliance that 
states the violation(s) and how to correct the violations to avoid 
civil penalties. If you fail to correct the violations we identify in 
an NONC within the time period specified in the NONC, we may assess 
civil penalties by issuing an FCCP.
    As we discuss further below, if a violation is knowing or willful, 
we will issue an ILCP to assess civil penalties without giving you a 
prior opportunity to correct the violation to avoid the penalty 
assessment.
    We propose to add a definition for ``information.'' Under this 
proposed rule, information would mean any data you provided to ONRR, 
including but not limited to, any reports, notices, affidavits, 
records, data or documents you provide to ONRR, any documents you 
provide to ONRR in response to an ONRR information or data request, and 
any other written information you provide to ONRR. This definition is 
needed for the proposed definitions of ``maintenance'' and 
``submission'' discussed below.
    The proposed rule would define what ``knowing or willful'' means 
under 30 U.S.C. 1719(c) and (d) and part 1241. This statutory term is 
largely self-explanatory and readily implementable without regulation. 
However, ONRR believes that its enforcement efforts, adjudications of 
its enforcement efforts, and the regulated public would benefit from 
defining ``knowing or willful.'' We also believe there is a benefit to 
clarifying that corporations and other persons subject to FOGRMA are 
liable for the actions of their agents and employees regardless of the 
level of knowledge of managers, principals, or owners in the definition 
of ``knowing or willful.''
    Our intent is to define ``knowing or willful'' as the lowest 
possible standard so that it encompasses all higher standards. 
Therefore, we are proposing that the definition of ``knowing or 
willful'' means gross negligence. ONRR believes that ``gross 
negligence'' requires only that it show a company or person has 
``fail[ed] to exercise even that care which a careless person would 
use.'' Black's Law Dictionary 1057 (7th ed. 1999) (citations omitted). 
We believe penalizing prohibited acts committed with a mental state 
equivalent to gross negligence is appropriate given Congressional 
intent in FOGRMA to establish a robust enforcement system and to ensure 
the integrity of the royalty accounting system. 30 U.S.C. 1701 and 
1711.
    Because gross negligence is the lowest standard ONRR would have to 
prove to establish that a company acted ``knowingly or willfully,'' the 
proposed definition encompasses situations in which a corporation or 
individual in a corporation acts with actual knowledge, as well as 
situations in which the corporation acts with deliberate indifference 
or reckless disregard. It does not require specific intent. It is 
intended to penalize companies whose management remains deliberately 
ignorant of the actions of their employees and agents. It is also 
intended to penalize companies whose management is in reckless 
disregard as to whether their employees and agents are committing 
prohibited acts.
    In addition, our intent is to hold persons who are subject to 
FOGRMA strictly and vicariously liable for the prohibited actions of 
their employees and agents. Although we believe this is already the 
case, the definition would specifically state that knowing or willful 
means the mental state of a person (which includes corporations), 
including the person's employees or agents. This means that the 
corporation/person has the same knowledge or willfulness as its 
employees and agents. The corporation/person is thus liable for the 
civil penalty even if the managers, principals, or owners may not have 
actual knowledge of specific prohibited acts their agents or employees 
commit.
    In doing so, the proposed rule is guided by judicial precedent, 
primarily interpreting the False Claims Act, which imposes strict 
vicarious liability on corporations for the knowledge of their 
employees and agents. American Society of Mechanical Engineers v. 
Hydrolevel Corp., 456 U.S. 556 (1982); United States ex rel. 
Shackelford v. American Management Inc., 484 F. Supp. 2d 669 (E.D. 
Mich. 2007); United States ex rel. Bryant v. Williams Building Corp., 
158 F. Supp. 2d 1001 (S.D. 2001); see also United States ex rel. Fago 
v. M&T Mortgage Corp., 518 F. Supp. 2d 108 (D.D.C. 2007) (noting 
different cases supporting strict vicarious liability).
    ONRR believes that this strict vicarious liability approach 
implements Congressional intent underlying FOGRMA for four reasons. 
First, FOGRMA mandates full accounting and payment of all royalties and 
other payments. Second, Congress specifically called for enhanced 
enforcement to ensure this mandate. Third, strict vicarious liability 
will prevent

[[Page 28864]]

corporations from avoiding liability by claiming that management lacks 
knowledge or willfulness and that the prohibited acts were solely the 
acts of rogue employees and agents. Fourth, strict vicarious liability 
will incentivize corporations and other persons to take all necessary 
steps to ensure that their employees and agents are not engaging in 
prohibited acts.
    FOGRMA section 109(d)(1), 30 U.S.C. 1719(d)(1), states that ONRR 
may assess civil penalties if you knowingly or willfully prepare, 
submit, or maintain false, inaccurate, or misleading information. This 
proposed rule defines ``maintenance of false, inaccurate, or misleading 
information'' for purposes of 30 U.S.C. 1719(d)(1), as meaning that you 
(1) provided information to an ONRR data system, or otherwise to ONRR 
for our official records, (2) later learn the information you provided 
was false, inaccurate, or misleading, and (3) do not correct that 
information or other information you provided to ONRR that you know 
contains the same false, inaccurate, or misleading information. This 
interpretation of 30 U.S.C. 1719(d)(1) is consistent with current ONRR 
practice.
    For example, assume that you unknowingly provide Reports of Sales 
and Royalty Remittance (Form ONRR-2014) to ONRR with an incorrect 
product code for the years 2008 through 2009 for gas produced from 
leases located in State X. Further, assume that ONRR informs you in 
January 2010 of the incorrect product code and you fail to correct the 
information on the Forms ONRR-2014 you provided to ONRR for the years 
2008 through 2009 for gas produced from leases located in State X in a 
timely manner. In that case, we would consider you to have knowingly or 
willfully maintained false, inaccurate, or misleading information on 
the Forms ONRR-2014 you provided to ONRR for the years 2008 through 
2009 for gas produced from leases located in State X. You would 
therefore be subject to an ILCP. In addition, if you had provided other 
Forms ONRR-2014 to ONRR for the years 2008 through 2009 for gas 
produced from leases located in State Y with the same inaccurate 
information, and failed to correct those Forms ONRR-2014, you have 
knowingly or willfully maintained false, inaccurate, or misleading 
information on the Forms ONRR-2014 for the years 2008 through 2009 for 
gas produced from leases located in State Y. Thus, you would be subject 
to an additional ILCP for those violations because your failure to 
maintain accurate information of the same type in different states is a 
problem with your system of which you were aware from the earlier 
notice.
    Under this proposed rule, for purposes of section 109, 30 U.S.C. 
1719(d)(1), ``submission of false, inaccurate, or misleading 
information'' means that (1) you provided information to an ONRR data 
system, or otherwise to ONRR for our official records, and (2) you 
knew, or should have known, the information you submitted was false, 
inaccurate, or misleading at the time you submitted the information.
    For example, assume that, like the example above, you provide Forms 
ONRR-2014 to ONRR with an incorrect product code for the years 2008 
through 2009. Further, assume that ONRR informs you of the incorrect 
product code in January 2010 and yet you continue to provide Forms 
ONRR-2014 to ONRR with an incorrect product code after January 2010. In 
that case, you have knowingly or willfully submitted false, inaccurate, 
or misleading information. You would be subject to an ILCP.
ONRR Service of NONCs, FCCPs, and ILCPs (Section 1241.4)
    We propose to redesignate the regulations currently located at 
Sec. Sec.  1241.51 and 1241.61 to this section rewritten in Plain 
Language, with changes and clarification discussed below.
    Both current 30 CFR 1241.51(b) and 1241.61 state that we serve 
NONCs and civil penalty notices by registered mail or personal service 
using the recipient's address of record under 30 CFR part 1218, subpart 
H, as 30 U.S.C. 1719(h) requires. Paragraph (a) of this new Sec.  
1241.4 would consolidate the two current sections to decrease 
redundancy.
    Paragraph (b) of this section would explain that we will consider 
an NONC, FCCP, or ILCP ``served'' on the date on which the delivery 
service delivers the documents to the address of record. Thus, we will 
consider a properly served document to be received by the addressee of 
record.
Request for a Hearing on the Record on an NONC, FCCP, or ILCP (Section 
1241.5)
    We propose to redesignate the regulations currently located at 
Sec. Sec.  1241.54, 1241.56, 1241.62, and 1241.64 to this section, 
rewrite them in Plain Language, and make the changes and clarification 
discussed below.
    Under the current regulations in 30 CFR part 1241, recipients of an 
NONC can request a hearing on either their liability for the NONC under 
Sec.  1241.54 or just on the amount of the penalty under Sec.  1241.56. 
Likewise, under the current regulations, recipients of an ILCP can 
either request a hearing on their liability for the ILCP under Sec.  
1241.62 or just on the amount of the penalty under Sec.  1241.64. We 
believe that having four sections to request a hearing that result in 
the same process is confusing and redundant. Therefore, this new Sec.  
1241.5 would consolidate all four current sections to clarify the 
hearing process and decrease redundancy.
    Paragraph (a) of this section would explain that you may still 
request a hearing on an NONC, FCCP, or ILCP before an Office of 
Hearings and Appeals (OHA) Hearings Division Administrative Law Judge 
(ALJ). You would have 30 days from receipt of an NONC, FCCP, or ILCP to 
file a hearing request. This provision is the same as the current 
regulations in 30 CFR 1241.54 (hearing request for an NONC) and 1241.62 
(hearing request for liability for an ILCP). However, this provision 
would change current regulations at 30 CFR 1241.56(b) (hearing request 
for an FCCP) and 1241.64(b) (hearing request on the amount of civil 
penalties assessed in an ILCP). The current rules allow only 10 days 
for you to request a hearing on a civil penalty assessment. This rule 
would extend the period within which to request a hearing to 30 days.
    For us to consider your hearing request to be timely filed, we 
would have to receive all of the following within 30 days of your 
receipt of an NONC, FCCP, or ILCP: (1) a nonrefundable processing fee 
of $300 under proposed subparagraph (a)(1); (2) a Request for Hearing 
under proposed subparagraph (a)(2); and (3) a bond or other surety 
instrument or demonstration of financial solvency under 30 CFR part 
1243 under proposed subparagraph (a)(3). ONRR would consider your 
Request for Hearing filed when it receives all of the items required 
under this paragraph (a), not when you mail or fax the items to ONRR. 
Thus, there would be no 10-day grace period like the current 30 CFR 
1290.105(c)(1) (2011) or 43 CFR 4.422(a) (2011).
    Under Sec.  1241.6 of this proposed rule, like the current rules 
for appeals of offshore decisions and orders in 30 CFR part 1290, you 
must pay a $300 nonrefundable processing fee electronically through the 
Pay.gov Web site at https://www.pay.gov/paygov/. The proposed rule also 
would explain that you could find information on how to pay using 
Pay.gov on the ONRR Web site at www.onrr.gov/ReportPay/payments.htm.

[[Page 28865]]

    We determined that $300 is an appropriate nonrefundable processing 
fee as explained below. We request comments on the amount of the 
processing fee, payment by Electronic Funds Transfer, and what form of 
identification you should include with the fee.
    The Department's authority to recover its costs for the processing 
of complaints involving violations and penalty assessments is in the 
Independent Offices Appropriation Act of 1952, 31 U.S.C. 9701 (IOAA). 
Office of Management and Budget (OMB) Circular No. A-25, 58 FR 38144 
(adopted 1959; revised July 15, 1993), establishes Federal policy 
regarding user charges under the IOAA. Interior Solicitor Opinion M-
36987 (December 5, 1996). Further, the Department of the Interior 
Accounting Handbook (DAH), paragraph 6.4.3, requires bureaus to follow 
OMB Circular A-25 regarding cost recovery of the bureau or office costs 
for services which provide special benefits or privileges to an 
identifiable non-Federal recipient even if the public incidentally 
benefits as well. Thus, as part of this proposed rulemaking, we 
analyzed previously proposed rules' processing fees (discussed 
immediately below) for reasonableness according to the factors in IOAA 
section 501(b), 31 U.S.C. 9701(b), and the guidance contained in the 
Department of the Interior Handbook and OMB's Circular No. A-25.
    Concerns were raised regarding fees proposed in other rules by the 
former MMS. Open and Nondiscriminatory Movement of Oil and Gas as 
Required by the Outer Continental Shelf Lands Act, 72 FR 17047 (April 
6, 2007) (OCS Rule). We are explaining how we determined the 
appropriate fee to proactively address any similar concerns with this 
proposed rule.
    The United States Court of Appeals for the District of Columbia 
Circuit has upheld charging processing fees under the IOAA for 
administrative appeals. Ayuda, Inc. v. Attorney General, 848 F.2d 1297 
(D.C. Cir. 1988)(``Ayuda''); United Transportation Union-Illinois 
Legislative Board v. Surface Transportation Board, No. 97-1038, 1997 
U.S. App. LEXIS 37560, (D.C. Cir., Nov. 10, 1997). In Ayuda, the Court 
held that processing fees for administrative appeals ``are for a 
`service or thing of value' [under the IOAA, 31 U.S.C. 9701(a)] which 
provides the recipients with a special benefit.'' 848 F.2d at 1301.
    Like the appellant in Ayuda, the party seeking review of an NONC, 
FCCP, or ILCP under this rule is the regulated party. Thus, we have 
determined that under the IOAA we have authority to recover the costs 
to process these hearing requests because hearing requests provide ``a 
private benefit that incidentally includes some public benefit'' (DAH, 
paragraph 6.4.3).
    A fee established under the IOAA must be: ``(1) fair; and (2) based 
on (A) the costs to the Government; (B) the value of the service or 
thing to the recipient; (C) public policy or interest served; and (D) 
other relevant facts'' 31 U.S.C. 9701(b). Factors 2A through 2D mirror 
four of the six factors under section 304(b) of the Federal Land Policy 
and Management Act of 1976 (FLPMA), 43 U.S.C. 1734(b), for determining 
the reasonableness of costs for which the Secretary may seek 
reimbursement from those filing applications or other documents 
pertaining to onshore public lands. The ``reasonableness factors'' set 
out in FLPMA are: (a) ``Actual costs (exclusive of management 
overhead);'' (b) ``the monetary value of the rights or privileges 
sought by the applicant;'' (c) ``the efficiency to the government 
processing involved;'' (d) ``that portion of the cost incurred for the 
benefit of the general public interest rather than for the exclusive 
benefit of the applicant;'' (e) ``the public service provided;'' and 
(f) ``other factors relevant to determining the reasonableness of the 
costs'' Id. Although the FLPMA factors apply only to onshore lands, the 
Department believes that using the FLPMA factors to determine fees is 
eminently ``fair'' under the IOAA because of the similarity between the 
factors used under both statutes and the open-ended ``other relevant 
facts'' element of the IOAA.
    We propose to implement the IOAA by applying each of the FLPMA 
factors for hearing requests processed under this proposed rule. We 
first estimated the actual cost to ONRR and the Hearings Division for 
processing the hearing request. We then considered each of the other 
FLPMA factors to determine whether any factor might cause us to lower 
the fee to below actual cost. We then considered whether any of the 
remaining factors would militate against setting the fees at less than 
actual cost. We then decided the amount of the fee, which cannot be 
more than the actual processing cost. Accordingly, for hearing requests 
of NONCs, FCCPs, and ILCPs, we are proposing that requesters pay a fee 
set at $300.
Factor (a)--Actual Costs
    Actual costs would mean the financial measure of resources the 
Hearings Division and we expend or use to process a hearing request. 
This includes, but is not limited to, the costs to receive Requests for 
Hearings, prepare or respond to motions for summary decision, consider 
pleadings before the Hearings Division, issue decisions, prepare or 
respond to discovery requests, and take any other relevant action. 
Actual costs include both direct and indirect costs, exclusive of 
management overhead. Management overhead costs mean costs associated 
with the ONRR and OHA directorates. Section 304(b) of FLPMA requires 
that we exclude management overhead from chargeable costs. Because we 
are applying the FLPMA factors to implement the IOAA, we are excluding 
management overhead costs from this analysis.
    Direct costs include an agency's expenditures for labor, material, 
and equipment usage connected with processing a hearing request. For 
our costs to process a hearing request, we calculated actual costs by 
estimating the average time it would take ONRR personnel to perform 
current similar processes for appeals of ONRR royalty orders under 30 
CFR part 1290. The processes include accepting and date stamping the 
hearing request, deciding if the hearing request was timely and 
properly filed, and forwarding the request to the Hearings Division if 
it was timely filed. We estimate that this process would take four 
hours at a total cost of $201 based on an average of our personnel, 
material, and equipment usage expenses. We calculated the $201 by 
multiplying $33.46 ([2011 hourly rate for an employee at the grade of 
GS-11, Step 5] x 1.5 [benefits cost factor]) by the 4 hours, rounding 
to the nearest whole dollar ($200.76, rounded up). This method of 
calculating costs is a generally accepted practice in both the private 
and public sectors. Our indirect costs include items such as rent and 
overhead (excluding management overhead). Our average indirect cost for 
fiscal years 2011 and 2012 is 16.2 percent of total costs. ONRR assumes 
total costs are equal to the sum of direct and indirect costs. To 
account for our indirect costs, we divided our direct costs of $201 by 
83.8 percent (1 - .162), which estimates our total cost to be $240 
($239.86 rounded up).
    The costs of processing a hearing request to the Hearings Division 
under 43 CFR part 4 would cover the following steps:
    (1) Considering all substantive pleadings, requests to supplement 
the record, and extension requests;
    (2) Acting on any requests; and
    (3) Researching, writing, and issuing a decision.

[[Page 28866]]

    In addition to the $240 in costs ONRR will incur to accept and 
process Requests for Hearings, ONRR will incur additional costs to 
conduct discovery and a hearing, including preparing any exhibits for 
responses to motions for summary decision, making or responding to 
discovery requests, preparing exhibits for trial, etc. The average 
personnel costs of a case in FY2011, when we began tracking hours spent 
on the hearing phase, equaled $20,749 per case. This does not include 
costs associated with travel, Solicitor's Office representation, court 
reporters, and deposition or hearing transcripts. We calculated this 
cost by first multiplying the total hours each Office of Enforcement 
employee reported working on the hearing phase by the employee's hourly 
pay and adding all of the resulting figures to reach a pay total of 
$103,745. We then divided that number by the 5 cases we handled in FY 
2011 to derive the average $20,749 per case. Those cases did not go to 
hearing but we conducted discovery. We then divided the $20,749 in 
direct costs by 83.8 percent, to account for indirect costs, for a 
total estimated cost for this part of the process of $24,760. Thus, the 
total estimated average cost to ONRR to process a hearing request is 
$25,000 ($240 plus $24,760).
    For the Hearings Division's actual costs, we used a different 
approach, since 100 percent of the Division's costs relates to 
processing requests for hearings. We first calculated the Division's 
total direct and indirect costs for FY 2009--2011, including personnel 
salaries and benefits, rent and utilities, travel, court reporting, 
supplies, postage, books and publications, and equipment. Those costs 
averaged $1,933,800 per year. We then divided the total average costs 
by the average number of cases completed during the three years, 123 
per year. Thus, we estimated that the Hearings Division's total average 
costs to conduct a hearing on an NONC, FCCP, or ILCP would be $15,722 
($1,933,800 divided by 123 equals $15,721.95, rounded up).
    Based on these calculations, the total actual costs to the 
Department of processing a single hearing request would average more 
than $40,722 ($25,000 for ONRR plus $15,722 for the Hearings Division).
Factor (b)--Monetary Value of the Rights and Privileges Sought
    ``The monetary value of the rights and privileges sought'' means 
the objective worth of a hearing request, in financial terms, to the 
requester. The value to a requester is the opportunity to have an error 
corrected if there is an error in an NONC, FCCP, or ILCP (See Ayuda, 
848 F.2d at 1301).
    However, the monetary value of this opportunity will vary 
depending, in part, on the amount of the civil penalty under review. It 
also will vary depending on the extent to which the requester 
challenges not only the penalty amount, but also liability for the 
alleged violation(s). There would be additional value to the requester 
challenging liability because we will consider the requester's history 
of noncompliance in determining the penalty for any future violation(s) 
(see proposed Sec.  1241.70(a)(2)). This ``liability value'' is 
difficult to quantify. Finally, the monetary value will vary depending 
on the likelihood of the requester's prevailing in the hearing. Given 
these variables, we rejected the idea of trying to calculate monetary 
value on a case-by-case basis as too speculative, time-consuming, 
wasteful of resources, and subject to dispute. However, based on our 
experience, the penalty, and hence the monetary value, will always be 
higher than the proposed fee of $300.
    Consideration of this factor includes examining equitable 
considerations related to monetary value, rather than precise figures. 
However, given the nature of these hearings, we believe the monetary 
value to requesters of having an error corrected would be great.
    However, a major equitable consideration is whether the level of 
cost reimbursement could burden the requester to such an extent that 
the hearing request would actually end up being of no monetary value to 
the requester whatsoever, since the requester will also have its own 
costs of participating in the hearing process. A hearing with a small 
potential value to the requester, but which triggers high processing 
costs, would be an instance where the fee might reasonably be set at a 
figure less than the actual cost of processing due to this factor. 
Thus, after considering this factor, we decided that it was reasonable 
to set a fee greatly below our actual costs so as not to frustrate 
Congress' intent under FOGRMA, 30 U.S.C. 1719(e), to give recipients of 
penalties an opportunity for a hearing on the record. This is because 
recipients of penalty notices might not request a hearing if the fee 
equaled our substantial actual costs.
Factor (c)--Efficiency to the Government Processing Involved
    ``The efficiency to the government processing involved'' means the 
ability of the agency to process a hearing request with a minimum of 
waste, expense, and effort. Implicit in this factor is the 
establishment of a cost recovery process that does not cost more to 
operate than is necessary and unduly increase costs recovered.
    Given the variables noted above, we believe it would be inefficient 
to attempt, on a case-by-case basis, to set a processing fee that 
accounts for both our actual costs and the value of the hearing 
opportunity to the requester.
    Moreover, we are basing the procedures that we would use to process 
NONCs, FCCPs, and ILCPs on standardized steps for similar ONRR and 
Hearings Division processes. This would eliminate duplicative and 
extraneous procedures, resulting in efficient government processing.
Factor (d)--Cost Incurred for the Benefit of the General Public 
Interest
    ``The cost incurred for the benefit of the general public 
interest'' (public benefit) means agency expenditures in connection 
with the processing of a hearing request for studies or data 
collection, if any, determined to have value or utility to the United 
States or the general public apart from document processing. It is 
important to note that this factor addresses funds expended in 
connection with a hearing request. There is another level of public 
benefit that includes studies that we are required, by statute or 
regulation, to perform regardless of whether we receive a hearing 
request. However, we have excluded the cost of such studies from our 
cost recovery calculations from the outset. Therefore, no reduction 
from costs recovered is necessary in relation to these studies.
    We concluded that the processing of a hearing request would not 
produce studies or data collection that might benefit the public to any 
appreciable degree. Accordingly, we did not adjust the proposed fee 
based on this factor.
Factor (e)--Public Service Provided
    ``The public service provided,'' means direct benefits with 
significant public value that we expect as a result of a hearing 
request. This factor considers the benefit resulting from the ultimate 
decision in the hearing, while the previous factor related to the 
benefits of the document processing itself. It is important to note 
that a decision may benefit the public whether or not the decision is 
favorable to the requester.
    Deciding a hearing request provides a public service because the 
primary function of the hearing process is to correct errors. This 
helps to ensure the ``fair and proper administration of [our] 
operations . . . .'' (Ayuda, 848 F.2d at 1301). Indeed, ``the public 
has a keen interest in the correctness of administrative decisions'' 
Id. The public

[[Page 28867]]

benefits even though the requester invokes the hearings procedures for 
their own benefit and therefore receives a ``service or a thing of 
value,'' see id. We therefore decided that it was reasonable to set a 
fee below actual costs based on this factor.
Factor (f)--Other Factors
    The final reasonableness factor is ``other factors relevant to 
determining the reasonableness of the costs.'' Under this factor, we 
considered fees that other government entities charge for processing 
similar filings (see October 28, 1996 proposed rulemaking, 61 FR at 
55609 and April 6, 2007 proposed rulemaking, 72 FR at 17054). We also 
examined what numerous State jurisdictions charge to file a complaint 
in a civil action. These fees ranged from $150 to $400 with an average 
of approximately $300.
    After considering all of the reasonableness factors, we concluded 
that it is reasonable under the factor of public service (e) to set the 
fee for filing a hearing request at $300 instead of at the actual cost. 
None of the other factors militate against setting the fees below 
actual costs. Moreover, because the proposed $300 fee meets the 
reasonableness factors of FLPMA, it also would be fair under the IOAA. 
However, if we decide to promulgate an alternate process in the final 
rule after considering comments, the final fee could differ from that 
proposed in this rulemaking.
    We invite comments concerning the proposed processing fee. 
Specifically, we request comments on the effect the proposed fee could 
have on the filing of hearing requests.
    Subparagraph 1241.5(a)(2) would explain that you must file your 
Request for Hearing with the ONRR Enforcement Operations Officer at the 
address stated in the NONC, FCCP, or ILCP. Your hearing request would 
have to explain your reasons for challenging the NONC, FCCP, or ILCP 
and include the following attachments: (1) a copy of the NONC, FCCP, or 
ILCP that you are challenging; and (2) a copy of the Pay.gov receipt 
confirmation page demonstrating our receipt of your payment of the 
processing fee under Sec.  1241.6.
    Under proposed Sec.  1241.5(a)(3), the final item you would have to 
provide to file a hearing request would be a bond or other surety 
instrument or demonstration of financial solvency under 30 CFR part 
1243. This would continue the requirement in the current regulations 
that a hearing requester post a bond or other surety instrument or 
demonstrate financial solvency for any unpaid penalties due under the 
FCCP or ILCP to stay the requirement to pay the penalties. The same 
standards and requirements prescribed in 30 CFR part 1243 would apply.
    The bond amount would have to include (1) the principal amount of 
any unpaid penalties due under the FCCP or ILCP, (2) interest on the 
principal amount, and (3) any additional penalties that have accrued 
since we issued the FCCP or ILCP. For example, if we issue an ILCP to 
you on March 1, 2012, assessing penalties through January 30, 2012, and 
you request a hearing on March 31, 2012, the bond would include the 
original penalty assessed and any additional penalties that accrued 
between January 30, 2012, and March 31, 2012, plus interest. As 
discussed below, under proposed Sec.  1241.12, your posting of a bond 
or other surety instrument, or demonstration of financial solvency, 
would not stay the accrual of penalties during the pendency of the 
hearing. However, it would stay your payment obligation.
    Proposed Sec.  1241.5(b) would explain that the 30-day period under 
paragraph Sec.  1241.5(a) for us to receive your Request for Hearing, 
processing fee, and bond, other surety instrument, or demonstration of 
financial solvency cannot be extended for any reason. Subparagraph 
(b)(1) would explain that, if we do not receive all three items within 
30 days after you are served the NONC, FCCP, or ILCP, we will not 
consider any Request for Hearing you submit to be filed and will return 
it to you. Subparagraph (b)(2) would explain that, if we return your 
unprocessed Request for Hearing for failure to timely file your Request 
for Hearing, remit the full amount of the processing fee, and post a 
bond or other surety instrument or demonstrate financial solvency, you 
may not appeal that decision.
    Under proposed Sec.  1241.5(c), if we receive your Request for 
Hearing, full amount of the processing fee, and bond or other surety 
instrument, or demonstration of financial solvency within 30 days after 
you are served the NONC, FCCP, or ILCP, we would forward your Request 
for Hearing to the Hearings Division.
    Proposed paragraph (d) would provide that your hearing request on 
an ILCP must state whether you are contesting your liability for the 
ILCP, the penalties assessed, or both. If your hearing request did not 
state whether you are contesting your liability for the ILCP or the 
penalties assessed, or both, you would be deemed to have requested a 
hearing only on the amount of the penalty assessed. In other words, you 
would have waived your right to a hearing on your liability for the 
penalty assessed if you did not specifically contest your liability.
    Proposed paragraph (e) would continue the current provision 
allowing you to request a hearing regardless of whether you correct the 
violations identified in the NONC, FCCP, or ILCP.
Processing Fee Payment (Section 1241.6)
    Like the current offshore appeal regulations in 30 CFR part 590, 
Sec.  1241.6 would provide that you must pay the fee using Pay.gov and 
include with your payment your taxpayer identification number, payor 
identification number, and the NONC, FCCP, or ILCP case number.
Enforcement Actions Not Subject to a Hearing (Section 1241.7)
    In proposed Sec.  1241.7, we would specify matters for which you 
may not request a hearing. Paragraph (a) would provide that you may not 
request a hearing on your liability for a violation in an FCCP if the 
violation for which we cited you is your failure to comply with an 
order you did not appeal under 30 CFR part 1290.
    This provision would supersede the decision of the Interior Board 
of Land Appeals (IBLA) in Merit Energy Co. v. Minerals Management 
Service, 172 IBLA 137 (2007). In Merit, when Merit did not pay or 
appeal an ONRR order, we issued an NONC to enforce the order. Merit 
then not only requested a hearing on the NONC to the Hearings Division 
under the former 30 CFR part 241, but also requested a hearing on the 
merits of the order. The ALJ held that Merit could not challenge the 
merits of the order in part 241 hearing because it had failed to appeal 
the order under former 30 CFR part 290, subpart B. The ALJ then 
referred the matter to the IBLA. The IBLA disagreed with the ALJ and 
held that the hearing could address the merits of the order because 
Merit was entitled to challenge its ``underlying liability'' for 
penalties under former part 241 (172 IBLA at 149-51).
    Because we believe that a hearing requester should not have two 
opportunities to seek review of an ONRR order, and thereby undermine 
the interest in timely due process and the finality of ONRR orders, 
this proposed rule would make clear that, if you receive an ONRR order 
and neither pay nor appeal that order under current 30 CFR part 1290, 
that order is the final decision of the Department. Thus, that order 
would not be reviewable in any

[[Page 28868]]

subsequent action to enforce that order under 30 CFR part 1241.
    Paragraph (b) would provide that you also may not request a hearing 
on courtesy notices we issue to you under Sec.  1241.12(a) of this part 
informing you of additional penalties that have accrued. If we issue 
you an FCCP or ILCP, and you do not request a hearing on those notices, 
you may not then request a hearing on any subsequent notices informing 
you of additional penalties that accrue after we issue the initial 
notice. The only way for you to administratively challenge penalties 
accruing after issuance of a FCCP or ILCP would be to file a request 
for hearing on the FCCP or ILCP in the first instance.
Procedures for Hearing Requests (Section 1241.8)
    Under the current process in this part, hearings are generally 
conducted under OHA regulations in 43 CFR part 4 and include discovery 
(including requests for documents, interrogatories, and admissions), 
depositions, and a trial (with witnesses, exhibits, etc.). Under the 
current process, after recipients of NONCs, FCCPs, and ILCPs request a 
hearing, in most instances, discovery begins before any briefings that 
might dispose of legal issues and factual matters for which there is no 
genuine issue of material fact in dispute.
    Proposed Sec.  1241.8 would explicitly allow motions for summary 
decision to be filed at any time after the case is referred to the 
Hearings Division, including before discovery commences to narrow the 
disputed issues. We propose making this explicit because the current 
process of conducting discovery for all matters is costly and 
administratively burdensome for both the Department and the hearing 
requesters. We specifically request comments on this procedure.
    Therefore, proposed paragraph (a) would provide that, after we 
forward your hearing request to the Hearings Division under Sec.  
1241.5(c), you or we could file a motion for summary decision. Under 
proposed paragraph (b), the opposing party could file a response to a 
motion for summary decision within 60 days after the opposing party is 
served with the motion. Paragraph (c) would provide that the moving 
party could file a reply to a response within 30 days after it was 
served with the response. Paragraph (d) would state that motions for 
summary decision, responses, and replies must meet the requirements of 
Sec.  1241.9.
    Under proposed paragraph (e), if, after briefing, the ALJ 
determines that there is no genuine issue of material fact and a party 
moving for summary decision is entitled to a decision as a matter of 
law, the ALJ may grant the motion in whole or part. Under proposed 
paragraph (f), if no party files a motion for summary decision or the 
ALJ denies the motion(s) for summary decision, the ALJ would, to the 
extent necessary, authorize discovery, conduct a hearing, and issue a 
decision.
    We are also proposing a new paragraph (g) to clarify that by 
establishing our prima facie case in the NONC, FCCP, or ILCP we have 
met our initial burden. You would then have the burden of showing by a 
preponderance of the evidence that you are not liable or that the 
penalty amount should be reduced. We specifically request comments on 
this new paragraph (g).
    We also propose to limit an ALJ's discretion to reduce the penalty 
assessed when the ALJ finds that the factual basis for imposing a civil 
penalty exists under new paragraph (h). Subparagraph (h)(1) would 
prohibit the ALJ from reducing the penalty below half of the amount 
assessed. Subparagraph (h)(2) would preclude the ALJ from reviewing the 
exercise of discretion by ONRR to impose a civil penalty. Finally, 
subparagraph (h)(3) would prohibit the ALJ from considering any factors 
in reviewing the amount of the penalty other than those specified in 
Sec.  1241.70.
    We are limiting ALJ review of the penalty assessed for several 
reasons. First, as stated below, we will be posting civil penalty 
matrices on our Web site in order to have greater transparency. We 
believe that such transparency warrants limiting review of penalty 
amounts because a lessee will have advance notice of its potential 
penalty liability for any violation of law. Second, this proposal is 
consistent with other Federal civil penalty regulations, for example 42 
CFR 488.438(e), that limit ALJ review to determining whether the 
penalty was reasonable using the factors specified in the civil penalty 
regulation. See Capitol Hill Community Rehabilitation and Specialty 
Care Center, HHS Docket No. A-97-110, Departmental Appeals Board 
Decision No. 1629, 1997 HHSDAB LEXIS 576 at *8 (1997). We believe that 
limiting an ALJ review to the same factors ONRR is subject to when 
assessing penalties makes eminent sense given that the penalty amount 
assessed is within ONRR discretion in the first instance. Finally, the 
penalties we have assessed to date are already far below the maximum 
authorized by statute. Thus, we see no merit in further reductions 
during the hearings process unless the penalty amount is not reasonable 
in light of regulatory factors.
    Lastly, proposed paragraph (i) would make clear that the provisions 
of 43 CFR 4.420-4.438 apply to requests for hearings under this part 
unless they are inconsistent with specific provisions in this part. For 
example, parties could request extensions of time to file motions and 
responses under 43 CFR 4.422(d) because that paragraph does not 
conflict with this subpart.
Requirements and Standards for Motions for Summary Decision and 
Responses (Section 1241.9)
    This section would explain the requirements and standards you and 
we must follow when filing motions for summary decision, responses, and 
replies. It would explain typical requirements and standards for 
summary judgment motions and responses such as a verified statement of 
facts.
    For example, proposed paragraph (c) would explain how to establish 
facts. For the purpose of summary decision, the ALJ would accept as 
true all material facts the moving party sets forth and properly 
supports unless the opposing party's response specifically controverts 
those facts. However, in the alternative, the parties could establish 
material facts for the purpose of summary decision by an agreement 
enumerating those facts.
Appeal of an ALJ's Decision (Section 1241.10)?
    This section would remain the same, stating that you may appeal to 
the Interior Board of Land Appeals under 43 CFR part 4, subpart E, if 
you are adversely affected by the ALJ's decision.
Judicial Review of an IBLA Decision (Section 1241.11)
    This section also would remain the same, stating that you may seek 
judicial review of the decision of the Interior Board of Land Appeals 
under 30 U.S.C. 1719(j). It also would continue to provide that a suit 
for judicial review in the District Court would be barred unless you 
file within 90 days after the final decision of the Interior Board of 
Land Appeals.
    We note that a motion for reconsideration under 43 CFR 4.403 does 
not extend the 90-day period within which to seek judicial review 
unless the IBLA grants the motion and issues a new decision on 
reconsideration. In that case, the 90-day period would run from the 
date of the decision on reconsideration.

[[Page 28869]]

Penalty Accrual When You Request a Hearing (Section 1241.12)
    Paragraph (a) of this section would provide that penalties would 
continue to accrue if you do not correct the violations identified in 
the FCCP or ILCP even if you request a hearing. Paragraph (b) would 
eliminate the provisions in the current regulations at 30 CFR 
1241.55(b) and 30 CFR 1241.63(b) allowing a hearing requester to 
petition for a stay of the accrual of civil penalties during the 
pendency of the proceeding.
    We are proposing to eliminate these provisions for several reasons. 
First, Sec.  109 of FOGRMA explicitly states that penalties shall 
continue to accrue ``for each day such violation continues'' (30 U.S.C. 
1719(a), (b), (c), and (d)). There is no provision in FOGRMA for a stay 
of such daily accrual due to a hearing. Second, although hearing 
requesters routinely petition for a stay, consistent with the statutory 
provision that penalties continue to accrue daily, we routinely oppose 
those petitions, and the ALJs routinely deny them.
    Third, under 43 CFR 4.21(a), ``when the public interest requires,'' 
the Director of the Office of Hearings and Appeals or an Appeals Board 
may override an initial automatic stay and ``provide that a decision . 
. . shall be in full force and effect immediately.'' In the case of 
civil penalties ONRR issues under this part, we believe that the 
accrual of civil penalties for uncorrected violations is always in the 
public interest, since every violation will affect either production 
accountability or royalty income. Therefore, rather than continue the 
practice of allowing lessees to request a stay, and our opposing those 
stays, this rulemaking would provide that penalties will continue to 
accrue during the pendency of the proceeding.
    Finally, this position is consistent with other penalty 
regulations. For example, Department of Health and Human Services civil 
penalty regulations state that, if a penalty assessment is upheld after 
a hearing, the penalties are calculated for ``the number of days of 
noncompliance until the date the facility achieves substantial 
compliance, or, if applicable, the date of termination when . . . the . 
. . decision of noncompliance is upheld after a final administrative 
decision . . . .'' 42 CFR 488.440(b)(1). In other words, the penalty 
continues to accrue throughout the hearing process.
    We welcome comments on our proposal not to stay the accrual of 
penalties during the hearing process. Please include legal citations 
and references with your comments.

Subpart B--Notices of Noncompliance and Civil Penalties

Violation of a Statute, Regulation, Order, or Lease Term (Section 
1241.50)
Effect of Correcting NONC Violation(s) (Section 1241.51)
    The two sections above would be the same as current 30 CFR 1241.51 
and 1241.52, respectively. However, we propose to rewrite the sections 
in Plain Language.
Effect of Not Correcting NONC Violation(s)(Section 1241.52)
    We propose to redesignate the regulation currently located at Sec.  
1241.53 to this section rewritten in Plain Language, with one change 
and some clarification discussed below. The penalty would no longer run 
from the date of the NONC. Rather, under proposed subparagraph 
(a)(1)(i), if you do not correct the violations listed in the NONC, the 
penalty would begin to run on the day you were served with the NONC. We 
do not believe it is fair for penalties to begin to run prior to a 
recipient's receipt of the NONC.
    Proposed paragraph (b) would clarify when penalties escalate if you 
do not correct all of the violations identified in the NONC within 40 
days after you are served the NONC or within 20 days following the 
expiration of any longer time the NONC specifies. In such instances, we 
could increase the penalty to a maximum of $5,500 per day for each 
violation the NONC identified that you did not correct, and it would 
increase on the 41st day after you are served with the NONC or on the 
21st day after the expiration of any longer time the NONC specifies.
Penalties Without Prior Notice and Opportunity To Correct (Section 
1241.60)
    This proposed section is the same as existing Sec.  1241.60 
rewritten in Plain Language, with changes discussed below and some 
clarification.
    Proposed subparagraph (b)(1)(ii) would explain that we could 
consider your failure to keep, maintain, or produce documents to be a 
knowing or willful failure or refusal to permit an audit. In such 
instances, we would assess penalties of up to $11,000 per day per 
violation, for each day you failed to keep, maintain, or produce 
documents, without first giving you an opportunity to correct the 
violation. On March 10, 2011, we sent a Dear Reporter Letter to all 
reporters explaining recordkeeping requirements and the consequences of 
failure to produce documents upon request. We sent the Dear Reporter 
Letter certified mail to document which companies we have warned of the 
penalty consequences for the failure to keep, maintain, or timely 
provide documents. This preamble also puts you on notice of your 
recordkeeping requirements and what we may do if you fail to comply 
with those requirements.
    Thus, we are proposing this provision to codify existing practice 
and to make clear to lessees that there are serious consequences if 
they fail to timely comply with ONRR or agent (State or Tribal) 
requests for documentation or data for audit, compliance reviews, and 
investigations.
    It is important to note that selling leases does not exempt the 
seller or purchaser from records maintenance requirements. In addition, 
merged companies carry records maintenance requirements into the 
purchasing or surviving companies.
    Delays in providing documents may result in curable NONCs under 
proposed Sec.  1241.50. However, we will likely treat delays in 
providing documents and outright refusal to provide documents as a 
knowing or willful failure to permit an audit under this paragraph, 
resulting in an ILCP instead of an NONC. Consistent with current 
policy, we will consider each audit step that ONRR cannot perform for 
lack of requested documents as a violation.
    Although we are specifically proposing that failure to permit an 
audit would be considered ``knowing or willful'' consistent with the 
existing rule and current practice, the language of FOGRMA suggest that 
failure to permit an audit may not require us to show it was knowing or 
willful. FOGRMA, 30 U.S.C. 1719(c) states that any person who--
    ``(1) knowingly or willfully fails to make any royalty payment by 
the date as specified by statute, regulation, order or terms of the 
lease;
    (2) fails or refuses to permit lawful entry, inspection, or audit;
    or
    (3) knowingly or willfully fails or refuses to comply with 
subsection 102(b)(3), shall be liable for a penalty of up to $10,000 
per violation for each day such violation continues.'' (Emphasis added)
    Based on the Plain Language of section 1719(c)(2), it appears that 
ONRR may penalize failure to permit an audit without proving it was 
committed ``knowingly or willfully.'' We specifically request comments 
on whether we should eliminate the

[[Page 28870]]

requirement that failure to permit an audit be committed ``knowingly or 
willfully'' in the final rule. Please include legal citations to 
support your comments.
    Proposed subparagraph (b)(2) would explain that ONRR may assess 
penalties of up to $27,500 per day per violation for each day the 
violation continues if you knowingly or willfully prepare, maintain, or 
submit false, inaccurate, or misleading reports, notices, affidavits, 
records, data, or any other written information.
    We are also codifying our practice of penalizing repeat violations 
under this paragraph. Specifically, the proposed rule would state that, 
if you have received an email, preliminary determination letter, order, 
NONC, ILCP, or any other written communication identifying a violation, 
and you fail to make the correction or correct that violation, and 
commit substantially the same violation in the future, then, in some 
instances, we may consider the uncorrected or repeat violation to be 
knowing or willful preparation, maintenance, or submission of false, 
inaccurate, or misleading reports, notices, affidavits, records, data, 
or any other written information under this paragraph. For example, if 
you receive such a communication and do not correct the errors, we may 
consider that to be knowing or willful maintenance of false, 
inaccurate, or misleading reports or data in our system.
    The proposed rule also would amend current 30 CFR 1241.53(a), 
1241.53(b), 1241.60(a), and 1241.60(b) by adjusting the $500, $5,000, 
$10,000, and $25,000 FOGRMA civil penalty amounts for inflation 
consistent with the Federal Civil Penalty Inflation Adjustment Act of 
1990 (Inflation Adjustment Act), Pub. L. 101-410, 104 Stat. 890-892 
(uncodified, but found in a note to 28 U.S.C. 2461). The Inflation 
Adjustment Act requires agencies to increase civil penalties every 4 
years based on specific inflation factors. We have not previously 
adjusted FOGRMA civil penalties for inflation but propose to do so in 
this rulemaking.
    Consistent with the Inflation Adjustment Act, we identified the 
percentage of the Consumer Price Indices for all Urban Consumers (CPI-
U) for June of the preceding year (2011) and June of the year the civil 
monetary penalties were set by law (FOGRMA 1982) and computed the 
potential adjustment as 136.6 percent. However, the maximum penalty 
increase that may be applied under a 1996 amendment to the Inflation 
Adjustment Act, Public Law 104-134, 110 Stat. 1321-373, is only ten 
percent. Therefore, in this proposed rule, we would adjust the FOGRMA 
maximum penalties of $500, $5,000, $10,000, and $25,000 to $550, 
$5,500, $11,000, and $27,500 respectively, in the new 30 CFR 
1241.53(a)(2), 1241.53(b), 1241.60(b)(1), and 1241.60(b)(2).

Subpart C--Penalty Amount, Interest, Collections, and Criminal 
Penalties

Penalty Assessment (Section 1241.70)
    Paragraph (a) would retain the existing regulatory criteria used to 
determine the amount of the penalty to assess: (1) the severity of the 
violations; (2) your history of noncompliance; and (3) the size of your 
business. To determine the size of your business, we may consider the 
number of employees in your company, parent company or companies, and 
any subsidiaries and contractors. For example, if your company has 10 
employees, but employs 400 contractors as agents to do its business, we 
would consider the size of your company to be 410 employees. This would 
not include all employees of the contractor, just those who actually 
conduct business on your behalf.
    Proposed paragraph (b) would explain that we would not consider the 
royalty consequences of the underlying violation when determining the 
amount of the civil penalty for violations under Sec. Sec.  1241.50, 
1241.60(b)(1)(ii), and 1241.60(b)(2). For example, assume that we 
issued a penalty to a lessee for the knowing or willful submission of 
false or inaccurate reports under Sec.  1241.60(b)(2). Assume further 
that after the lessee corrected its reporting to comply with the 
penalty notice, there was no royalty consequence--what industry refers 
to as ``net zero'' errors. In that case, we would not issue a reduced 
penalty merely because there was no royalty consequence. This is 
consistent with our existing practice and FOGRMA legislative history.
    Research on Congressional intent reveals several facts leading to 
the conclusion that the royalty consequences of a violation are not 
relevant in determining the severity of the penalty for violations 
subject to NONCs, reporting errors, and failures to permit audit, and 
that Congress already considered the royalty consequence when it 
established different penalties for different violations. First, 
Congress enacted the FOGRMA civil penalty provisions in response to the 
Linowes Commission Report. The report concluded, ``the industry is 
essentially on an honor system.'' The Commission found that:

    The [ONRR accounting] system does not provide for the 
verification of data reported by oil and gas lessees, and lease 
account records are so unreliable that federal royalty managers 
often do not know which lessees have paid royalties and which 
lessees have not. Penalties for late payment or underpayment are 
rarely imposed.

S. Rep. No. 97-512, at 9 (1982). Based on its findings, the Commission 
made 60 recommendations including that the Department seek legislation 
authorizing DOI to ``assess civil penalties for site security 
violations, nonpayments, late payments, underpayments, error-ridden 
reports, and failure to submit or update the required payor plan'' Id. 
Secretary Watt agreed with all the recommendations, id. at 10, and 
Congress ultimately enacted FOGRMA. What is clear from this history is 
that Congress was not solely concerned with ``payment'' errors but also 
with failure to submit data and reporting errors--regardless of the 
royalty consequences. Indeed, many reporting errors and failures to 
submit data result in delay of audits or an inability to audit in the 
first instance, which was a concern of Congress's in enacting FOGRMA.

    Moreover, regardless of whether a lessee owes additional royalties, 
there are consequences to failures to follow ONRR regulations, 
misreporting, and failures to permit audit because a lessee does not 
timely provide documents ONRR requests. For example, many companies' 
reporting is so erroneous that we cannot even audit to determine if 
there are royalty consequences. As stated above, this was a concern the 
Linowes Commission raised and that Congress addressed in FOGRMA. 
Specifically, the Linowes Commission recommended ``[t]hat the 
Department systematically cross-check production and sales records to 
determine if the correct amount of royalties are being paid'' (S. Rep. 
No. 97-512, at 10 (1982)). This is because the Commission found that 
``lease account records are so unreliable that federal royalty managers 
often do not know which lessees have paid royalties and which lessees 
have not'' id. at 9. Thus, it would contradict Congressional intent for 
ONRR to assess a lower penalty for failures to follow ONRR regulations, 
misreporting so egregious that we cannot audit, and failures to provide 
documents that prevent us from completing an audit simply because there 
is no royalty underpayment.
    As discussed below, when we propose the rule, we will be posting 
our penalty matrices. Those matrices show the penalty type and range of 
assessments for very small, small, and large companies. In addition, as 
those

[[Page 28871]]

matrices will demonstrate, in order to not issue penalties so high that 
a company cannot possibly pay, our assessments are already far below 
the maximum allowable under the law. For example, although FOGRMA 
authorizes penalties up to $10,000 per day per violation for knowing or 
willful failure to pay royalties, for a very small company (less than 
25 employees), our standard assessment is $100 per day per violation. 
However, mitigating factors may result in a lower assessment per day 
per violation and aggravating factors may result in a higher assessment 
per day per violation.
    Proposed paragraph (c) would state that we will post our penalty 
assessment matrices for FCCPs and ILCPs, and any adjustments to that 
matrix, on the ONRR Web site at www.onrr.gov/CivilPenalties/default.htm. In 1999, we published the civil penalty matrix, as it 
existed at that time, in response to a comment requesting that we 
provide more specific regulatory criteria for calculating civil 
penalties (64 FR 26240, 26242 (1999)). The commenters believed that the 
purpose of FOGRMA civil penalties is to encourage voluntary compliance. 
The commenters also believed there was a lack of transparency in 
calculation of the civil penalties.
    We agree that our civil penalty process could be more transparent. 
We also agree that knowing the potential monetary consequence of 
noncompliance would encourage voluntary compliance and deter 
violations. Currently, BSEE publishes its civil penalty matrix in a 
Notice to Lessees, which is available at the BSEE Web site, 
www.bsee.gov/Inspection-and-Enforcement/Civil-Penalties-and-Appeals/Civil-Penalties-and-Appeals.aspx. Additionally, every 3 years, BSEE 
publishes in the Federal Register any adjustments to the maximum civil 
penalty amount to reflect any increase in the Consumer Price Index. 
Like BSEE, we propose to publish the civil penalty matrices we use on 
the ONRR Web site at www.onrr.gov. However, unlike BSEE, we will post 
any adjustments to the matrices for inflation, or any other reason, on 
our Web site rather than through notices in the Federal Register.
Late Payment Interest on Penalty Assessments, Underpayments, and Unpaid 
Debts (Section 1241.71)
    This section would retain the provision of existing Sec.  
1241.71(a) that the penalties under this part are in addition to 
interest you may owe on any underlying underpayments or unpaid debt.
    ONRR proposes to modify existing Sec.  1241.71(b), which currently 
provides that interest will run from the date required under existing 
Sec.  1241.75(d). Existing Sec.  1241.75(d) requires you to pay 
penalties 40 days after you receive the penalty if you do not request a 
hearing and 40 days after decisions in various stages of the hearing 
and appeal process, if you do not or cannot appeal those decisions. 
However, this proposed rule would state that interest would run from 
the due date in the invoice accompanying the penalty notice until the 
date you pay the civil penalty assessed. This change is consistent with 
30 CFR 1218.50(b), which states ``[p]ayments made on an invoice are due 
as specified by the invoice.''
Penalty Payment (Section 1241.72)
Penalty Reduction (Section 1241.73)
Penalty Collection (Section 1241.74)
    We propose to redesignate the regulations currently located at 30 
CFR 1241.75, 1241.76, and 1241.77 to these sections, respectively, 
rewritten in Plain Language.
Criminal Violation(s) (Section 1241.75)
    We propose to redesignate the regulation currently located at 30 
CFR 1241.80 to this section rewritten in Plain Language.

Procedural Matters

1. Summary Cost and Royalty Impact Data

    This is a technical rule that would (1) apply our civil penalty 
regulations to solid mineral and geothermal leases consistent with 
Federal law, (2) adjust civil penalty amounts for inflation as required 
by Federal law, and (3) announce our practice of publishing our civil 
penalty assessment matrices on the ONRR Web site. These proposed 
changes would have no royalty impacts on industry, State and local 
governments, Indian Tribes, individual Indian mineral owners, and the 
Federal Government. As explained below, industry would not incur 
significant additional administrative costs under this proposed 
rulemaking. However, industry could realize some increased penalties 
under this proposed rulemaking. The Federal Government, and any States 
and Tribes that are eligible to share civil penalties under 30 U.S.C. 
1736, would benefit from these increased penalties.

A. Industry

    (1) Royalty Impacts. None.
    (2) Administrative Costs--Processing Fee. This rulemaking would 
result in an increase in administrative costs to industry due to our 
proposal to recover a portion of the Department's costs to process a 
hearing request by requiring requesters to pay a $300 processing fee. 
We received 15 hearing requests in the last three fiscal years, for an 
average of five per year. We therefore estimate that the processing fee 
would cost industry $1,500 ($300 x 5 hearing requests) in the first 
year and the same each year thereafter.
    (3) Penalties. This rulemaking may result in some increase in civil 
penalties that lessees must pay. First, consistent with the inflation 
adjustment in this proposed rule, we could increase civil penalty 
collections by ten percent. We collected an average of $1,022,462 in 
civil penalties annually for fiscal years 2007 through 2011. Thus, for 
the potential increases in civil penalties that we could collect due to 
the inflation adjustment, we based our calculations on ten percent of 
the annual average amount of civil penalties we currently collect under 
30 CFR part 1241. We calculated a possible increase in civil penalties 
we would collect from industry of $102,246 per year (10% x $1,022,462 
average total annual civil penalty collections).
    Second, we estimated the potential increase in civil penalties due 
to application of part 1241 to solid mineral and geothermal leases by 
estimating how many lessees, operators, and royalty payors of solid 
mineral and geothermal leases there are in relation to all mineral 
leases that reported production and royalties as of June 2012. That 
estimate came to 6 percent of our current mineral reporter universe 
(120 solids and geothermal payors and reporters divided by 1,970 total 
payors and reporters (oil and gas, solids, and geothermal)). Therefore, 
we multiplied the $1,022,462 in average annual civil penalties by 6 
percent (solid mineral and geothermal payors and reporters) to estimate 
an increase in civil penalties we collect of $61,348.
    Thus, we estimate the total impact to industry of implementing this 
proposed rule would be $163,594 annually ($102,246 for the inflation 
adjustment + $61,348 for application of part 1241 to solid mineral and 
geothermal leases). Accordingly, the impact to industry of implementing 
the new provisions of law would be minimal.

B. State and Local Governments

    (1) Royalty Impacts. None.
    (2) Administrative Costs. None.
    (3) Penalties. State governments having delegated audit authority 
under 30 U.S.C. 1735 would receive a 50 percent share of civil 
penalties collected as a result of their activities under

[[Page 28872]]

ONRR delegations of authority (30 U.S.C. 1736). However, how much a 
State government could receive due to the estimated increase discussed 
above would be purely speculative.

C. Indian Tribes and Individual Indian Minerals Owners

    (1) Royalty Impacts. None.
    (2) Administrative Costs. None.
    (3) Penalties. Indian tribal governments having cooperative 
agreements with ONRR under 30 U.S.C. 1732 would receive a 50 percent 
share of civil penalties collected as a result of their activities 
under ONRR delegations of authority (30 U.S.C. 1736). However, how much 
a tribal government could receive due to the estimated increase 
discussed above would be purely speculative.

D. Federal Government

    (1) Royalty Impacts. None.
    (2) Administrative Costs. The application of FOGRMA penalties to 
solid minerals and geothermal leases would produce a slight increase in 
the enforcement workload, which ONRR likely would absorb using current 
staff.
    (3) Penalties. As discussed above, we estimate that the Federal 
Government could receive $163,594 in increased civil penalties as a 
result of this rule if no State or Tribe shared in those civil 
penalties.

2. Regulatory Planning and Review (Executive Orders 12866 and 13563)

    Executive Order (E.O.) 12866 provides that the Office of 
Information and Regulatory Affairs (OIRA) of OMB will review all 
significant rules. OIRA has determined that this rule is not 
significant.
    Executive Order 13563 reaffirms the principles of E.O. 12866 while 
calling for improvements in the nation's regulatory system to promote 
predictability, to reduce uncertainty, and to use the best, most 
innovative, and least burdensome tools for achieving regulatory ends. 
The executive order directs agencies to consider regulatory approaches 
that reduce burdens and maintain flexibility and freedom of choice for 
the public where these approaches are relevant, feasible, and 
consistent with regulatory objectives. E.O. 13563 emphasizes further 
that regulations must be based on the best available science and that 
the rulemaking process must allow for public participation and an open 
exchange of ideas. We have developed this rule in a manner consistent 
with these requirements.

3. Regulatory Flexibility Act

    The Department of the Interior certifies that this proposed rule 
would not have a significant economic effect on a substantial number of 
small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et 
seq.). This proposed rule would affect large and small entities but 
would not have a significant economic effect on either.

4. Small Business Regulatory Enforcement Fairness Act (SBREFA)

    This proposed rule is not a major rule under 5 U.S.C. 804(2), the 
SBREFA. This proposed rule:
    a. Would not have an annual effect on the economy of $100 million 
or more. See Item 1 above.
    b. Would not cause a major increase in costs or prices for 
consumers, individual industries, Federal, State, local government 
agencies, or geographic regions.
    c. Would not have significant adverse effects on competition, 
employment, investment, productivity, innovation, or the ability of 
U.S.-based enterprises to compete with foreign-based enterprises.

5. Unfunded Mandates Reform Act

    This proposed rule would not impose an unfunded mandate on State, 
local, or tribal governments, or the private sector of more than $100 
million per year. This proposed rule would not have a significant or 
unique effect on State, local, or tribal governments, or the private 
sector. Therefore, we are not providing a statement containing the 
information that the Unfunded Mandates Reform Act (2 U.S.C. 1531 et 
seq.) requires. See Item 1 above.

6. Takings (Executive Order 12630)

    Under the criteria in section 2 of E.O. 12630, this proposed rule 
would not have any significant takings implications. This proposed rule 
would not be a governmental action capable of interference with 
constitutionally protected property rights. This proposed rule does not 
require a Takings Implication Assessment.

7. Federalism (E.O. 13132)

    Under the criteria in section 1 of E.O. 13132, this proposed rule 
would not have sufficient federalism implications to warrant the 
preparation of a Federalism Assessment. This proposed rule would not 
substantially and directly affect the relationship between Federal and 
State governments. A Federalism Assessment is not required.

8. Civil Justice Reform (E.O. 12988)

    This proposed rule would comply with the requirements of E.O. 
12988. Specifically, this rule:
    a. Would meet the criteria of Sec.  3(a) requiring that all 
regulations be reviewed to eliminate errors and ambiguity and be 
written to minimize litigation; and
    b. Would meet the criteria of Sec.  3(b)(2) requiring that we write 
all regulations in clear language and contain clear legal standards.

9. Consultation With Indian Tribes (E.O. 13175)

    The Department of the Interior strives to strengthen its 
government-to-government relationship with Indian Tribes through a 
commitment to consultation with Indian Tribes and recognition of their 
right to self-governance and tribal sovereignty. Under the Department's 
consultation policy and the criteria in E.O. 13175, we evaluated this 
proposed rule and determined that it would have no substantial direct 
effects on federally recognized Indian Tribes. Likewise, these proposed 
amendments to 30 CFR part 1241, subpart B, would not affect Indian 
Tribes because the changes are only technical in nature.

10. Paperwork Reduction Act

    This proposed rule does not contain information collection 
requirements and a submission to OMB would not be required under the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.). See 5 CFR 
1320.4(a)(2).

11. National Environmental Policy Act

    This proposed rule would not constitute a major Federal action, and 
it would not significantly affect the quality of the human environment. 
The procedural changes resulting from these amendments have no 
consequences with respect to the physical environment. We are not 
required to provide a detailed statement under the National 
Environmental Policy Act of 1969 (NEPA) because this rule qualifies for 
categorical exclusion under 43 CFR 46.210(c) and (i) and the DOI 
Departmental Manual, part 516, section 15.4.D: ``(c) Routine financial 
transactions including such things as . . . audits, fees, bonds, and 
royalties . . . (i) Policies, directives, regulations, and guidelines: 
That are of an administrative, financial, legal, technical, or 
procedural nature.'' We have also determined that this proposed rule 
does not involve in any of the extraordinary circumstances listed in 43 
CFR 46.215 that would require further analysis under NEPA.

[[Page 28873]]

12. Effects on the Energy Supply (E.O. 13211)

    This proposed rule would not be a significant energy action under 
the definition in E.O. 13211. A Statement of Energy Effects is not 
required.

13. Clarity of This Regulation

    Executive Orders 12866 (section 1(b)(2)), 12988 (section 
3(b)(1)(B)), and 13563 (section 1(a)), and the Presidential Memorandum 
of June 1, 1998, require us to write all rules in Plain Language. This 
means that each rule we publish must: (a) Be logically organized; (b) 
use the active voice to address readers directly; (c) use common, 
everyday words, and clear language rather than jargon; (d) be divided 
into short sections and sentences; and (e) use lists and tables 
wherever possible.
    If you feel that we have not met these requirements, send us 
comments by one of the methods listed in the ADDRESSES section. To help 
revise the rule, your comments should be as specific as possible. For 
example, you should tell us the numbers of the sections or paragraphs 
that you find unclear, which sections or sentences are too long, and 
the sections where you feel lists or tables would be useful, etc.

14. Public Availability of Comments

    We will post all comments, including names and addresses of 
respondents, at www.regulations.gov. Before including your address, 
phone number, email address, or other personal identifying information 
in your comment, be advised that we may make your entire comment--
including your personal identifying information--publically available 
at any time. While you can ask us in your comment to withhold your 
personal identifying information from public view, we cannot guarantee 
that we will be able to do so.

List of Subjects in 30 CFR part 1241

    Notices of noncompliance, Civil penalties.

    Dated: April 18, 2014.
Rhea Suh,
Assistant Secretary for Policy, Management and Budget.

    For the reasons stated in the preamble, the Office of Natural 
Resources Revenue proposes to revise 30 CFR part 1241 to read as 
follows:

PART 1241--PENALTIES

Subpart A--General Provisions
Sec.
1241.1 What is the purpose of this part?
1241.2 What leases are subject to this part?
1241.3 What definitions apply to this part?
1241.4 How will ONRR serve NONCs, FCCPs, and ILCPs?
1241.5 How do I request a hearing on the record on an NONC, FCCP, or 
ILCP?
1241.6 How do I pay the processing fee?
1241.7 What ONRR enforcement actions are not subject to a hearing?
1241.8 What procedures apply to my hearing request?
1241.9 What are the requirements and standards for a motion for 
summary decision and response?
1241.10 May I appeal the ALJ's decision?
1241.11 May I seek judicial review of the IBLA decision?
1241.12 Does my hearing request affect the penalties?
Subpart B--Notices of Noncompliance and Civil Penalties

Penalties With a Period To Correct

1241.50 What may ONRR do if I violate a statute, regulation, order, 
or lease term relating to a lease subject to this part?
1241.51 What if I correct the violation(s) identified in an NONC?
1241.52 What if I do not correct the violation(s) identified in an 
NONC?

Penalties Without a Period To Correct

1241.60 Am I subject to penalties without prior notice and an 
opportunity to correct?
Subpart C--Penalty Amount, Interest, Collections, and Criminal 
Penalties
1241.70 How does ONRR decide the amount of the penalty to assess?
1241.71 Do I owe interest on both the penalty assessed and any 
underlying underpayment(s) or unpaid debt(s)?
1241.72 When must I pay the penalty?
1241.73 May ONRR reduce my penalty once it is assessed?
1241.74 How may ONRR collect my penalty?
1241.75 May the United States criminally prosecute me for violations 
under Federal and Indian oil and gas leases?

    Authority:  25 U.S.C. 396 et seq., 396a et seq., 2101 et seq.; 
30 U.S.C. 181 et seq., 351 et seq., 1001 et seq., 1701 et seq.; 43 
U.S.C. 1301 et seq., 1331 et seq., 1801 et seq.

Subpart A--General Provisions


Sec.  1241.1  What is the purpose of this part?

    This part applies to you if you are the recipient of a Notice of 
Noncompliance (NONC), Failure to Correct Civil Penalty Notice (FCCP), 
or Immediate Liability Civil Penalty Notice (ILCP). This part explains:
    (a) When you may receive an NONC, FCCP, or ILCP;
    (b) How we assess civil penalties; and
    (c) How to appeal an NONC, FCCP, or ILCP.


Sec.  1241.2  What leases are subject to this part?

    This part applies to:
    (a) All Federal mineral leases onshore and on the Outer Continental 
Shelf; and
    (b) All federally administered mineral leases on Indian tribal and 
individual Indian mineral owners' lands, regardless of the statutory 
authority under which the lease was issued or maintained; and
    (c) All leases, easements, rights of way, and other agreements 
subject to 30 U.S.C. 1337(p).


Sec.  1241.3  What definitions apply to this part?

    (a) Unless specifically defined in paragraph (b) of this section, 
the terms in this part have the same meaning as 30 U.S.C. 1702.
    (b) The following definitions apply to this part:
    Agent means any individual or other person--
    (i) With the actual authority of;
    (ii) With the apparent authority of; or
    (iii) Designated by a person subject to FOGRMA who acts or purports 
to act on behalf of the person subject to FOGRMA.
    ALJ means an administrative law judge in the Hearings Division.
    FCCP means a Failure to Correct Civil Penalty notice, which 
assesses civil penalties if you fail to correct the violations in a 
NONC.
    Hearings Division means the Departmental Cases Hearings Division, 
Office of Hearings and Appeals.
    IBLA means the Interior Board of Land Appeals, Office of Hearings 
and Appeals.
    ILCP means an Immediate Liability Civil Penalty notice, which 
assesses civil penalties for specified violation(s) without providing a 
prior opportunity to correct the violation(s).
    Information means any data you provide to an ONRR data system, or 
otherwise provide to ONRR for our official records, including but not 
limited to, any reports, notices, affidavits, records, data or 
documents you provide to us, any documents you provide to us in 
response to our request, and any other written information you provide 
to us.
    Knowing or willful means that a person, including its employee or 
agent, with respect to the prohibited act, acts with gross negligence.
    Maintenance of false, inaccurate, or misleading information means 
you provided information to an ONRR data system, or otherwise to us for 
our official records, and you later learn the information you provided 
was false, inaccurate, or misleading, and you do not correct that 
information or other information you provided to us that you know 
contains the same false, inaccurate, or misleading information.
    NONC means a Notice of Noncompliance, which states the

[[Page 28874]]

violation(s) and how to correct the violations to avoid civil 
penalties.
    Notices means NONCs, FCCPs, and ILCPs as defined in this section.
    ONRR (we, our) means the Office of Natural Resources Revenue.
    Prohibited act means any act or failure to act subject to civil 
penalties under 30 U.S.C. 1719(c) or (d).
    Submission of false, inaccurate, or misleading information means 
you provide information to an ONRR data system, or otherwise to us for 
our official records, and you knew, or should have known, the 
information that you provided was false, inaccurate, or misleading at 
the time you provided the information.
    You (I) means the recipient of an NONC, FCCP, or ILCP.


Sec.  1241.4  How will ONRR serve notices?

    (a) We will serve NONCs, FCCPs, and ILCPs by registered mail or 
personal service to the addressee of record under 30 CFR 1218.520 
consistent with 30 CFR 1218.540(b).
    (b) We will consider the notice served on the date it was delivered 
to the addressee of record.


Sec.  1241.5  How do I request a hearing on the record on a notice?

    (a) You may request a hearing on the record before an ALJ on an 
NONC, FCCP, or ILCP by filing a request with ONRR. We will consider 
your Request for Hearing filed when we receive all of the items 
required under this paragraph, not when you mail or fax the items to 
us. For your Request for Hearing to be filed, we must receive all of 
the following from you within 30 days after you are served the notice:
    (1) A nonrefundable processing fee of $300 under Sec.  1241.6.
    (2) A Request for Hearing that:
    (i) You file with the ONRR Enforcement Operations Officer at the 
address stated in the NONC, FCCP, or ILCP;
    (ii) Explains your reasons for challenging the notice; and
    (iii) Includes the following attachments:
    (A) A copy of the notice, that you are challenging; and
    (B) A copy of the Pay.gov receipt confirmation page demonstrating 
our receipt of your payment of the processing fee under Sec.  1241.6.
    (3) A bond or other surety instrument or demonstration of financial 
solvency under 30 CFR part 1243 for:
    (i) The principal amount of any unpaid penalties due under the FCCP 
or ILCP;
    (ii) Interest on the principal amount; and
    (iii) Any additional penalties that have accrued since ONRR issued 
the FCCP or ILCP.
    (b) The 30-day period for you to meet all of the requirements of 
paragraph (a) of this section cannot be extended for any reason.
    (1) If we do not receive all of the items you are required to 
submit under paragraph (a) of this section, then we cannot consider 
your Request for Hearing to be filed and will return it to you.
    (2) If we return your unprocessed Request for Hearing under 
paragraph (b)(1) of this section, then you may not appeal that 
decision.
    (c) If ONRR receives all of the items you are required to submit 
under paragraph (a) of this section, 30 days after you are served the 
notice, then we will forward your Request for Hearing to the Hearings 
Division.
    (d) If you request a hearing on an ILCP, your hearing request must 
state whether you are contesting your liability for the ILCP or the 
penalties assessed, or both. If your hearing request does not state 
whether you are contesting your liability for the ILCP or the penalties 
assessed, or both, you will be deemed to have requested a hearing only 
on the amount of the penalty assessed.
    (e) You may request a hearing even if you correct the violations 
identified in the NONC or ILCP.


Sec.  1241.6  How do I pay the processing fee?

    (a) You must pay the $300 fee electronically through the Pay.gov 
Web site at https://www.pay.gov/paygov. You must provide the following 
information with the payment:
    (1) Your taxpayer identification number;
    (2) Your payor identification number, if applicable; and
    (3) The NONC, FCCP, or ILCP case number.
    (b) Information on how to pay using the Pay.gov Web site is 
available on the ONRR Web site at www.onrr.gov/ReportPay/payments.htm.


Sec.  1241.7  Which ONRR enforcement actions are not subject to a 
hearing?

    You may not request a hearing on:
    (a) Your liability for a violation in an FCCP if the violation is 
your failure to comply with an order you did not timely appeal under 30 
CFR part 1290; and
    (b) A courtesy notice we send to you under Sec.  1241.12(a) 
informing you that additional penalties have accrued.


Sec.  1241.8  What procedures apply to my hearing request?

    (a) After we forward your Request for Hearing to the Hearings 
Division under Sec.  1241.5(c), then either party may submit a motion 
for summary decision.
    (b) The opposing party may file a response to a motion for summary 
decision within 60 days after service of the motion.
    (c) The moving party may file a reply to a response to a motion for 
summary decision within 30 days after service of the response.
    (d) Motions for summary decision and responses must meet the 
requirements of Sec.  1241.9.
    (e) The ALJ will grant a party's motion for summary decision, in 
whole or in part, if there is no genuine issue of material fact and the 
party is entitled to a decision as a matter of law.
    (f) If neither party files a motion for summary decision or the ALJ 
denies the motion for summary decision, then the ALJ will, to the 
extent necessary, authorize discovery, conduct a hearing, and issue a 
decision.
    (g) You have the burden of showing that you are not liable or that 
the penalty amount should be reduced by a preponderance of the 
evidence.
    (h) In issuing any decision on a hearing request, if the ALJ finds 
that the factual basis for imposing a civil penalty exists, the ALJ may 
not:
    (1) Reduce a penalty below half of the amount assessed;
    (2) Review the exercise of discretion by ONRR to impose a civil 
penalty; or
    (3) Consider any factors in reviewing the amount of the penalty 
other than those specified in Sec.  1241.70.
    (i) The provisions of 43 CFR 4.420-4.438 apply to hearings under 
this part except when they are inconsistent with the provisions of this 
part.


Sec.  1241.9  What are the requirements and standards for a motion for 
summary decision and response?

    (a) Motion requirements. For a motion for summary decision to be 
properly made and supported, the party filing a motion for summary 
decision must:
    (1) Rely on more than mere allegations in its own pleadings;
    (2) Concisely state the material facts which the party contends are 
undisputed;
    (3) Verify those facts with supporting affidavits, declarations, or 
other evidentiary materials;
    (4) Include references to the specific portions of the record which 
verify those facts; and
    (5) State why the party is entitled to summary decision as a matter 
of law.
    (b) Response requirements. When a motion for summary decision is

[[Page 28875]]

properly made and supported, an opposing party's response must:
    (1) Not rely merely on allegations or denials in its own pleadings, 
but must:
    (i) Concisely state the material facts that the opposing party 
contends are disputed;
    (ii) Verify that those facts are disputed with supporting 
affidavits, declarations, or other evidentiary materials; and
    (iii) Include references to the specific portions of the record 
that verify that those facts are disputed: and/or
    (2) State why the moving party is not entitled to summary decision 
as a matter of law.
    (c) Establishing facts. (1) All material facts set forth by the 
moving party and properly supported by the record will be taken as true 
and considered undisputed for the purpose of a summary decision unless 
specifically controverted by the opposing party's response.
    (2) The parties may stipulate to by an agreement of the parties 
enumerating those facts.


Sec.  1241.10  May I appeal the ALJ's decision?

    If you are adversely affected by the ALJ's decision, you may appeal 
that decision to IBLA under 43 CFR part 4, subpart E.


Sec.  1241.11  May I seek judicial review of the IBLA decision?

    You may seek judicial review of the IBLA decision under 30 U.S.C. 
1719(j) in Federal District Court. You must file a suit for judicial 
review in district court within 90 days after the final IBLA decision.


Sec.  1241.12  Does my hearing request affect the penalties?

    (a) If you do not correct the violations identified in the FCCP or 
ILCP, the penalties will continue to accrue, even if you request a 
hearing. We may issue courtesy notices to you informing you of any 
additional penalties that have accrued after we issue an FCCP or ILCP.
    (b) Neither the ALJ nor the IBLA may stay the accrual of penalties 
pending a decision on your hearing request.

Subpart B--Notices of Noncompliance and Civil Penalties

Penalties With a Period To Correct


Sec.  1241.50  What may ONRR do if I violate a statute, regulation, 
order, or lease term relating to a lease subject to this part?

    If we believe that you have not followed any requirement of a 
statute, regulation, or order, or the terms of a lease subject to this 
part, we may serve you with an NONC explaining:
    (a) What the violation is;
    (b) How to correct the violation to avoid civil penalties; and
    (c) That you have 20 days after the date on which you are served 
the NONC to correct the violation, unless the NONC specifies a longer 
period. The period for you to correct the violations specified in the 
NONC cannot be extended for any reason.


Sec.  1241.51  What if I correct the violation(s) identified in an 
NONC?

    If you correct all of the violations we identified in the NONC 
within 20 days after the date on which you are served the NONC, or any 
longer period the NONC specifies, then we will close the matter and 
will not assess a civil penalty. However, we will consider the 
violations as part of your history of noncompliance for future penalty 
assessments under Sec.  1241.70(a)(2).


Sec.  1241.52  What if I do not correct the violation(s) identified in 
an NONC?

    (a) If you do not correct all of the violations we identified in 
the NONC within 20 days after the date on which you are served the 
NONC, or any longer period the NONC specifies, then we may send you an 
FCCP.
    (1) The FCCP will state the amount of the penalty you must pay. The 
penalty will:
    (i) Begin to run on the day on which you were served with the NONC; 
and
    (ii) Continue to accrue for each violation identified in the NONC 
until it is corrected.
    (2) The penalty may be up to $550 per day for each violation 
identified in the NONC that you have not corrected.
    (b) If you do not correct all of the violations identified in the 
NONC within 40 days after you are served the NONC, or within 20 days 
following the expiration of any longer time the NONC specifies, then we 
may increase the penalty to a maximum of $5,500 per day for each 
violation identified in the NONC that you have not corrected. The 
increased penalty will:
    (1) Begin to run on the 41st day after the date on which you were 
served the NONC, or on the 21st day after the expiration of any longer 
time the NONC specifies; and
    (2) Continue to accrue for each violation identified in the NONC 
until it is corrected.

Penalties Without a Period To Correct


Sec.  1241.60  Am I subject to penalties without prior notice and an 
opportunity to correct?

    (a) We may assess penalties without first giving you an opportunity 
to correct the violation. We will inform you of violations without a 
period to correct by issuing an ILCP explaining:
    (1) What the violation is;
    (2) How to correct the violation; and
    (3) The amount of the civil penalty assessed.
    (b) We may assess civil penalties of up to;
    (1) $11,000 per day per violation for each day the violation 
continues if you knowingly or willfully:
    (i) Fail to make any royalty payment by the date specified by 
statute, regulation, order or terms of the lease; or
    (ii) Fail or refuse to permit lawful entry, inspection, or audit. 
We may consider your failure to keep, maintain, or produce documents to 
be a knowing or willful failure or refusal to permit an audit; and
    (2) $27,500 per day per violation for each day the violation 
continues for knowing or willful preparation, maintenance, or 
submission of false, inaccurate, or misleading reports, notices, 
affidavits, records, data, or any other written information. You also 
may be deemed to have knowingly or willfully prepared, maintained, or 
submitted false, inaccurate, or misleading information if you have 
received an email, preliminary determination letter, order, NONC, ILCP, 
or any other written communication identifying a violation, and you:
    (i) Fail to correct that violation; or
    (ii) Correct that violation but commit substantially the same 
violation in the future.

Subpart C--Penalty Amount, Interest, Collections, and Criminal 
Penalties


Sec.  1241.70  How does ONRR decide the amount of the penalty to 
assess?

    (a) We will determine the amount of the penalty to assess by 
considering:
    (1) The severity of the violations;
    (2) Your history of noncompliance; and
    (3) The size of your business. To determine the size of your 
business, we may consider the number of employees in your company, 
parent company or companies, and any subsidiaries and contractors.
    (b) We will not consider the royalty consequences of the underlying 
violation when determining the amount of the civil penalty for 
violations under Sec. Sec.  1241.50, 1241.60(b)(1)(ii), and 
1241.60(b)(2).
    (c) We will post the FCCP and ILCP assessment matrix and any 
adjustments to that matrix, on the ONRR Web site at www.onrr.gov/CivilPenalties/default.htm.

[[Page 28876]]

Sec.  1241.71  Do I owe interest on both the penalty assessed and any 
underlying underpayment(s) or unpaid debt(s)?

    (a) The penalties under this part are in addition to interest you 
may owe on any underlying underpayment(s) or unpaid debt(s).
    (b) If you do not pay the penalty assessed by the due date in the 
bill accompanying the FCCP or ILCP, you will owe late payment interest 
on the penalty amount under 30 CFR 1218.54 from the date the civil 
penalty payment was due until the date you pay the civil penalty 
assessed.


Sec.  1241.72  When must I pay the penalty?

    (a) If you do not request a hearing on an FCCP or ILCP under this 
part, you must pay the penalties assessed by the due date specified in 
the bill accompanying the FCCP or ILCP.
    (b) If you request a hearing on an FCCP or ILCP under this part, 
the ALJ affirms the civil penalty, and:
    (1) You do not appeal the ALJ's decision to the IBLA under Sec.  
1241.10, you must pay the civil penalty amount determined by the ALJ 
within 30 days of the ALJ's decision; or
    (2) You appeal the ALJ's decision to the IBLA under Sec.  1241.10, 
the IBLA affirms a civil penalty, and:
    (i) You do not seek judicial review of the IBLA's decision under 30 
U.S.C. 1719(j), you must pay the civil penalty amount determined by the 
IBLA within 120 days of the IBLA decision; or
    (ii) You seek judicial review of the IBLA decision, and a court of 
competent jurisdiction affirms the penalty, you must pay the penalty 
assessed within 30 days after the court enters a final non-appealable 
judgment.


Sec.  1241.73  May ONRR reduce my penalty once it is assessed?

    The ONRR Director or his or her delegate may compromise or reduce 
civil penalties assessed under this part.


Sec.  1241.74  How may ONRR collect my penalty?

    (a) If you do not pay a civil penalty we assess by the date payment 
is due under Sec.  1241.72, we may use all available means to collect 
the penalty including, but not limited to:
    (1) Requiring the lease surety, for amounts owed by lessees, to pay 
the penalty;
    (2) Deducting the amount of the penalty from any sums the United 
States owes to you;
    (3) Referring the debt to the Department of the Treasury for 
collection under 30 CFR part 218, subpart J; and
    (4) Using the judicial process to compel your payment under 30 
U.S.C. 1719(k).
    (b) If we use the judicial process to compel your payment, or if 
you seek judicial review under 30 U.S.C. 1719(j), and the court upholds 
the assessment of a penalty, the court will have jurisdiction to award 
the amount assessed plus interest assessed from the date of the 
expiration of the 90-day period referred to in 30 U.S.C. 1719(j). The 
amount of any penalty, as finally determined, may be deducted from any 
sum owing to you by the United States.


Sec.  1241.75  May the United States criminally prosecute me for 
violations??

    If you commit an act for which a civil penalty is provided in 30 
U.S.C. 1719(d) and 30 CFR 1241.60(b)(2), the United States may pursue 
criminal penalties as provided in 30 U.S.C. 1720 in addition to any 
authority for prosecution under other statutes.

[FR Doc. 2014-11552 Filed 5-19-14; 8:45 am]
BILLING CODE 4310-T2-P