CHAPTER 12 HOW TO APPEAL ONRR ORDERS AND CIVIL PENALTIES: TIMELINES, PROCEDURES, AND PRACTICAL TIPS
| Jurisdiction | United States |
(Oct 2018)
HOW TO APPEAL ONRR ORDERS AND CIVIL PENALTIES: TIMELINES, PROCEDURES, AND PRACTICAL TIPS
Associate
Holland & Hart
Denver, CO
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TINA R. VAN BOCKERN is an associate in Holland & Hart LLP's Environment, Energy, and Natural Resources Practice Group in Denver, CO. Ms. Van Bockern's practice focuses primarily on natural resource issues, including natural resources development on federal and state lands, environmental compliance in the oil and gas and mining industries, federal royalty compliance, and royalty litigation. Ms. Van Bockern graduated Order of St. Ives from the University of Denver Sturm College of Law. During law school, Ms. Van Bockern worked as a legal intern for the Department of Justice, Environment, and Natural Resources Division, and as a summer associate for Holland & Hart. Upon graduating, she served as a judicial law clerk for Judge Anne M. Mansfield, and as a judicial fellow for Judge Ann B. Frick, both in the Denver District Court.
Federal oil and gas royalty valuation and reporting is complicated. And despite your best efforts to comply, it is almost inevitable that you will receive an order from the Office of Natural Resources Revenue ("ONRR") to report and pay additional royalties, or maybe even a civil penalty assessment. This paper addresses the steps you must take to appeal the order or penalty, including the timeframes for your appeal, and the procedures for staying the effectiveness of the order and/or the running of interest pending appeal. In addition, this paper provides practical tips for developing the record in your appeal or potentially reaching a compromised settlement.1
I. Overview of the Appeals Process
The procedures for appealing ONRR "orders" (as defined by regulation2 and discussed below) and ONRR civil penalties are different. Accordingly, the two appeals processes will be addressed separately.
In a nutshell, an appeal from an ONRR "order" involves a two-step process.3 First, a lessee must appeal to the ONRR Director (for orders involving Federal leases)4 or to the Director of the Bureau of Indian Affairs ("BIA Director") (for orders involving Indian leases).5 Second, if a lessee is adversely affected by a Director decision, then appeal may be taken to the Department of the Interior's ("Department") Office of Hearings and Appeals ("OHA"), Interior Board of Land Appeals ("IBLA").6
Similarly, an appeal from an ONRR civil penalty or notice of noncompliance is taken in two steps. First, a lessee requests a hearing on the record before an Administrative Law Judge
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("ALJ") within the OHA Hearings Division.7 Second, if a lessee is adversely affected by the ALJ's decision, then appeal may be taken to the IBLA.8
Once an appellant challenging either an order or a penalty has exhausted its appeal remedies through the Department and obtained a final decision from the IBLA,9 then an appellant may seek judicial review.
II. Appeals from ONRR Orders
A recipient of an ONRR "order" that is adversely affected by the order may appeal.10 You may not appeal an action that is not an "order."11 ONRR's regulations specify what is and is not considered an "order" for purposes of appeals:
Order . . . means any document issued by ONRR or a delegated State that contains mandatory or ordering language that requires the recipient to do any of the following for any lease subject to this part: Report, compute, or pay royalties or other obligations, report production, or provide other information.
(1) Order includes:
(i) An order to pay (Order to Pay) or to compute and pay (Order to Perform a Restructured Accounting); and
(ii) An ONRR or delegated State decision to deny a lessee's, designee's, or payor's written request that asserts an obligation due the lessee, designee, or payor (Denial).
(2) Order does not include:
(i) A non-binding request, information, or guidance, such as:
(A) Advice or guidance on how to report or pay, including a valuation determination, unless it contains mandatory or ordering language; and
(B) A policy determination;
(ii) A subpoena;
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(iii) An order to pay that ONRR issues to a refiner or other person involved in disposition of royalty taken in kind;
(iv) A Notice of Noncompliance or a Notice of Civil Penalty issued under 30 U.S.C. 1719 and 30 CFR part 1241, or a decision of an administrative law judge or of the IBLA following a hearing on the record on a Notice of Noncompliance or Notice of Civil Penalty;
(v) A "Dear Payor," "Dear Operator," or "Dear Reporter" letter unless it explicitly includes the right to appeal in writing; or
(vi) Any correspondence that does not include the right to appeal in writing. 12
In the past, ONRR has dismissed appeals from ONRR documents that do not meet the definition of an "order," and such dismissals have been upheld by the IBLA.13 Typically, ONRR provides an enclosure with its orders explaining your appeal rights; however, if you are unsure of whether you received an appealable "order," you can contact ONRR for clarity and, at the same time, file a protective appeal while you confirm.
A. Step One: Appealing an ONRR Order to the ONRR or BIA Director
1. Time to Appeal
You may appeal an ONRR order to the ONRR or BIA Director by filing a Notice of Appeal in the office of the official issuing the Order.14 The timeframe for filing your Notice of Appeal depends on the type of order you received. If you received an Order to Pay or Denial involving Federal or Indian leases, or an Order to Perform Restructured Accounting involving Indian leases (as these terms are used in the above definition of an "order"), then you must file your Notice of Appeal within 30 days of service.15 If, however, an Order to Perform Restructured Accounting involving Federal oil and gas leases was issued by a delegated State, then a Notice of Appeal must be filed within 60 days of service.16 17
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You may not request and will not receive an extension of time for filing a Notice of Appeal.18 However, if the office does not receive your Notice of Appeal within the applicable 30- or 60-day time period, your Notice of Appeal may be considered timely if it was received "not later than 10 days after the required filing date" and it "was transmitted to the proper office before the filing deadline . . ."19
The timely filing of your Notice of Appeal "is a jurisdictional requirement,"20 therefore, if your Notice of Appeal is not timely filed, the "Director will not consider the Notice of Appeal and the case will be closed."21
2. Staying the Effectiveness of the Order
When you appeal an ONRR Order, you may stay the effectiveness of the order pending appeal by posting a bond or other surety, or demonstrating financial solvency ("self-bond").22 You must meet the bonding or self-bonding requirement (discussed below), within 60 days after you receive the order.23
For ONRR orders where the amount at issue is less than $10,000 for Federal leases or $1,000 for Indian leases, ONRR does not require additional bonding.24 Instead, ONRR will use the lease surety posted with the Bureau of Land Management or Bureau of Indian Affairs as collateral for the obligation, respectively.25
For ONRR orders above these thresholds, ONRR requires that you submit an ONRR-specified surety instrument on a form specified in the ONRR instructions, which are available on ONRR's website26 and will be provided to you as an enclosure to your order. Acceptable surety instruments you may submit include: Administrative Appeal Bonds (Form ONRR-4435), Letters of Credit (Form ONRR-4436), Certificates of Deposit, (Form ONRR-4437), and U.S. Treasury Securities.27 The surety instrument must include the amount being appealed plus any accrued interest and projected interest for a one-year period.28 If your appeal is not decided within one year, you must increase the surety annually to cover estimated interest.29
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Self-bonding is an option available for staying appeals involving Federal (but not Indian) leases.30 To self-bond, the appellant must demonstrate financial solvency by submitting a request to self-bond along with a copy of an audited consolidated balance sheet.31 If the appellant's net worth minus the amount of all issues being appealed (including interest) is greater than $300 million, ONRR will deem the company financially solvent and will not require it to post a surety instrument.32 If the company does not meet the $300 million requirement, it may submit a $50 filing fee and ONRR will determine whether the company is financially solvent using information obtained from a business information or credit reporting agency.33 Appellants must continue to demonstrate financial solvency by submitting a consolidated balance sheet, and tax return if requested, to ONRR annually on the date ONRR first determined their financial solvency.34 If ONRR's bond-approving officer determines that you are no longer financially solvent, you must post a bond or other ONRR-specified surety instrument.35
ONRR's determination of a surety amount or financial solvency is the final decision of the Department and is not subject to administrative appeal.36 In addition, neither an appeal nor the posting of a bond or self-bonding suspends the running of interest on the amount of additional royalties demanded in the order during the pendency of the appeal. The only way to stop the accrual of interest is to pay the additional royalties under protest.37
3. Challenging the Order
During the same 30- or 60-day period applicable for filing your Notice of Appeal,38 you must also file a "statement of reasons, or written arguments, or brief that includes the arguments on the facts or laws that you believe justify reversal or modification" of the order.39 Unlike the Notice of Appeal, you can request and obtain an extension...
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