Laramie Energy leads Piceance Basin oil and gas producers when it comes to missing or incomplete monthly oil and gas well production reports to state regulators from 2016-18, according to a list released by the state this week.
Laramie’s 971 missing reports — the fourth-most of any oil and gas producer in the state during that time frame — may be partly explained by reporting challenges arising from its acquisition of wells from other companies.
The Colorado Oil and Gas Conservation Commission released the list in response to requests by media including The Daily Sentinel after a state audit made public in January found that up to two-thirds of oil and gas producers in the state failed to submit as many as 50,055 production reports from 2016-18. The audit, which didn’t identify the companies involved, drew widespread attention because it raised the possibility that companies may be underpaying severance taxes that are tied to oil and gas production and go to the state and to local governments. It said the COGCC fails to ensure that companies consistently report production, and up to 8,407 reports were missing in the case of one large producer alone.
The data released this week shows that Kerr McGee topped the list statewide in missing reports from 2016-19, at 3,942. Kerr McGee is a part of Anadarko, which last year was acquired by Occidental Petroleum.
Noble Energy, another major producer in eastern Colorado, had 3,742 missing reports, and Bonanza Creek Energy Operating ranked third, with 1,891 missing reports.
XTO Energy and Terra Energy Partners, which both produce in the Piceance Basin, ranked ninth and 10th in the list of companies with missing reports, with 284 and 242, respectively. Some other Piceance producers also are on the COGCC list with far fewer missing reports.
The list released by the COGCC differs somewhat from the 2016-18 data used by the state auditor’s office because the COGCC data has been updated since that audit occurred. The COGCC list reflects the fact that some 10,000 reports have been uploaded into its data system after being submitted by companies after the audit or having previously been in COGCC’s queue to be processed.
The audit noted that oil and gas severance taxes aren’t determined directly by production, and instead are based on the income generated from production. But it said the production provides the foundation for calculating the tax owed, being important for verifying the accuracy of taxes being paid. At the time of the audit’s release, state House of Representatives Speaker KC Becker said it showed that companies aren’t paying millions of dollars of taxes they owe. However, the state Department of Revenue doesn’t believe any severance taxes were missed as a result of the missed reports, according to spokesman Daniel Carr.
“The only time we pull these (production) reports is when we’re auditing these companies,” he said Thursday. It only conducts about 10 such audits a year, according to the state audit report.
Carr said production reports are just a small part of what is considered in a tax audit process, and are used to look for any possible big disparity between what comes out of the ground and the sales a company is reporting for tax purposes.
Said COGCC spokeswoman Megan Castle, “Our production reports are not the primary basis for their severance tax collection.”
The reports are used for more than just tax audits. The COGCC has a levy on production that helps fund it, the reports help enable mineral rights owners to verify that they’re being properly paid, and they let the COGCC know a well’s current operational status.
The agency says that nearly 60% of the roughly 42,000 missing reports in its database involve wells either not currently producing and not required to pay severance tax, or producing at levels low enough to be exempt from the tax.
Chelsie Miera, executive director of the West Slope Colorado Oil & Gas Association, said in a prepared statement, “The politically driven premise that our oil and natural gas industry companies are cheating on their taxes by underreporting production is blatantly false.”
In an interview, she said one issue Laramie and other companies are facing is production reporting challenges at the COGCC when wells change ownership.
Many of the Piceance Basin’s thousands of wells have changed hands over the past several years. Miera said companies file a change-of-ownership form with the COGCC, but she’s hearing it can take on average from four to six months for those forms to be approved. She said during that period, production reports by the new owner of wells are rejected by the agency.
Also, she said, companies are required to report production from each underground formation a well taps, as well as the well’s overall production. She said her understanding is that the COGCC reporting system wasn’t allowing for formation-specific reports, resulting in missing reports even though total production by each well continue to be reported.
“We are very confident we are very truthful in our production reporting,” Miera said.
Castle said her agency is looking at the reporting issues and encouraging companies with missing or incomplete reports to contact COGCC
Representatives for other industry groups this week said the COGCC data indicates that less than 1% of required production reports from 2016-18 were missing or kicked back to the companies due to errors.
In response to the state audit, the agency is taking steps including starting next month to notify companies of missing or incomplete production reports, and potentially pursuing enforcement of companies that fail to comply.
No companies were fined in the case of the reporting issues raised in the state audit. Last week, the group Colorado Rising for Communities, a sister organization of Colorado Rising, called on the COGCC to pursue enforcement and fines against the companies that didn’t file reports during the audit period and said it may pursue legal action against them.
“Anything short of strong action will certainly solidify in the minds of many Coloradans that our own state agencies have no interest in protecting Colorado,” Joe Salazar, Colorado Rising’s executive director, said in a news release.
The agency say an enforcement statute of limitation applies a year beyond the date of an alleged violation. Colorado Rising says the reporting problems involve continuing violations to which the limitation doesn’t apply.