Feds hit Chevron with $1.1 million fine for offshore accounting *updated*

The government has slapped Chevron with a $1.1 million fine for improperly claiming deductions for transporting oil in connection with some of its Gulf of Mexico leases.

The Interior Department announced the civil penalty today, nearly a week after Chevron paid the fine. The company also has corrected its previous inaccurate royalty reports, which were filed last year.

“It is imperative that companies report accurately and promptly pay all royalties due from energy production on federal leases,” said Greg Gould, the Interior Department’s acting deputy assistant secretary for natural resources revenue.“We intend to collect every dollar due.”

Chevron was cited for claiming deductions for transporting oil produced on the leases. Although similar deductions may be allowed for some federal offshore oil and gas leases, they are barred under legacy leases Chevron held that were initially issued by Louisiana in the 1940s. Those so-called “Section 6” leases were later converted to federal leases but retain provisions barring the oil transportation deduction.

According to the Office of Natural Resources Revenue, Chevron included such deductions in a royalty report to the government early last year, and the agency denied the claim in April 2010. But Chevron later resumed claiming the deduction in subsequent royalty reports.

Companies that produce oil and gas on federal offshore leases pay the government royalties on the extracted energy.

In a statement, Chevron noted that the company “did not dispute the order.”

“We have paid the penalty and now believe we have put this unfortunate situation behind us,” Chevron said.

It is unclear how much Chevron improperly deducted in transportation costs. But the government said Chevron corrected all of the inaccurate reports it previously submitted.

The penalty is one of 10 that have been assessed by the federal Office of Natural Resources Revenue, since the agency was created within the Interior Department last October. The move was designed to separate the former Minerals Management Service’s conflicting missions of collecting revenue from offshore drilling while simultaneously policing the industry.

The ONRR also has recently collected bigger, multi-million-dollar penalties and settlements from Shell Oil Co., and Anadarko Petroleum Corp., in connection with other, unrelated disputes. The government also fined BP $5.2 million last year for misreporting.

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