Office of Natural Resources Revenue Office of Natural Resources Revenue (ONRR) U.S. Department of Interior Data Mining Services Presented by Lorraine Corona Manager, Data Mining Services Industry Compliance Accurate Revenues & Data Professionalism & Integrity

Office of Natural Resources Revenue Office of Natural Resources Revenue (ONRR) U.S. Department of Interior Data Mining Services 2

Office of Natural Resources Revenue U.S. Department of Interior o Volume Comparison 2013 sales months through current Some carryover of 2012 sales months that are in process Prior sales months if missing $ and not on STRAC/ACM workplans o RSFA Statute of Limitation Edit downgrade to warning Current reporting covering all sales months o Net Negatives 2013 sales months through current Possible future edit FY 2015 Workplan 3

Office of Natural Resources Revenue o Agreement Approval Monitoring Review of new approved/revised agreements 90 days after approval - review of adjustments back to agreement effective date All sales periods (coordinated with VC, STRAC & ACM) o Repetitive reporting 2013 sales months through current o Pricing Offshore GOM Oil Imputed price compared to EMAO provided crude-specific thresholds 2013 sales months through current FY 2015 Workplan continued 4

Office of Natural Resources Revenue o Processed Gas PC03 w/o PC sales months o Trending for Anomalies Anomalies for all sales periods FY 2015 Workplan continued 5

Office of Natural Resources Revenue Office of Natural Resources Revenue (ONRR) U.S. Department of Interior Office of Natural Resources Revenue What are Data Mining’s thresholds and how are they applied? o Data Mining selects exceptions to work based on several criteria Thresholds % of difference Repeat offences 100% missing Randomly o Exceptions must be resolved to within a narrow tolerance 6 Thresholds

Office of Natural Resources Revenue Office of Natural Resources Revenue (ONRR) U.S. Department of Interior Office of Natural Resources Revenue Data Requests to Operators o 1 st communication of identified exceptions includes: Excel spreadsheet with volume comparison data Company ID and name 30 day due date - Analyst can grant a 30 day extension. Additional extensions require supervisor and/or DMS manager approval o Seeking information from Operator: Is the OGOR data correct? Who are the Interest Owners and what % do they own? Who took the volume and how much did they take? o Information must be provided regardless of audit activities. o Necessary reporting adjustments will be coordinated with audit. o Adjustments must NOT be made on CMP Communications

Office of Natural Resources Revenue Office of Natural Resources Revenue (ONRR) U.S. Department of Interior Office of Natural Resources Revenue Data Requests to Payors o Request will include: Missing volumes specific to Payor (Takes or Entitled volume) or other reporting issue (net negatives, RSFA, repetitive reporting, pricing issue, etc.) Company ID and name 30 day due date - analyst can grant a 30 day extension. Additional extensions require supervisor and/or DMS manager approval o Necessary reporting adjustments will be coordinated with audit o Adjustments must NOT be made on CMP Communications continued

Office of Natural Resources Revenue Office of Natural Resources Revenue (ONRR) U.S. Department of Interior Office of Natural Resources Revenue Orders/NONCs/Civil Penalties o Orders will be issued if Data Request is not responded to by due date o Extensions cannot be granted o Appeal rights apply o Failure to respond to an Order will result in a Notice of Non- Compliance o NONCs/Civil Penalties Non-response to Orders Missing Indian OGORs or 2014s Repeat offenders 9 Communications continued

Office of Natural Resources Revenue Office of Natural Resources Revenue (ONRR) U.S. Department of Interior Office of Natural Resources Revenue Additional Information on Data Mining Services’ Communications o Large bundles of Data Requests will not be sent all at once o Large companies will be asked if they prefer to receive all their exceptions at once. If they do, they will be asked to submit a plan for resolving the exceptions. Once approved by the DMS manager, the due dates outlined in the plan must be adhered to or an Order will be issued 10 Communications continued

Office of Natural Resources Revenue o Missing reports and volumes o Missing NGLs o Platform imbalances o Invalid adjustments Duplicates Correction of volumes w/o change in royalty values o Agreement misreporting Missing agreement numbers Incorrect reporting of allocations Incorrect lease and/or agreement numbers Lease level –vs- agreement level Incorrect reporting of overlapping agreements o Invalid deductions (i.e. marketable condition/field fuel) What is Data Mining finding? 11

Office of Natural Resources Revenue Office of Natural Resources Revenue (ONRR) U.S. Department of Interior Office of Natural Resources Revenue Gas Plant Factors o Data Mining uses a plant factor derived from the Bentek averages available to ONRR or the actual gas plant statement data submitted by industry o MMBtu is converted to an Mcf equivalent o CBM that goes to a processing plant and leases with inert gases (higher content of CO2, nitrogen and H2S) require a manual review of the gas plant statement 12 Processed Gas Issues

Office of Natural Resources Revenue FY2010FY11FY12FY13FY14 Volume Comparison$346,604.61$2,863,249.62$16,691,609.77$18,818,173.91$36,076, RSFA$515,154.12$2,121,977.54$1,113,408.88$161,182.92$28, Net Negative $546.44$382,370.76$609,255.98$670, Net Zero $1,996.14$0.00 Repetitive $73,567.83$ Royalty Rate $521.38$0.00 Pricing $47, Processed Gas $383, TOTAL$861,758.73$4,985,773.60$18,187,389.41$19,664,698.16$37,207, Grand Total$80,906, Data Mining Statistics 13

Office of Natural Resources Revenue o New Processes in FY 2015 Overlapping agreements project Pricing - GOM condensate, dry gas o Future Processes Pricing review of additional commodities/areas Approvals for venting and flaring Chronic over-sufficient royalty estimates and other chronic misreporting Additional adjustment monitoring – Adjustments after closed audit periods – Original line monitoring – Duplicate adjustments Process Updates 14

Office of Natural Resources Revenue Office of Natural Resources Revenue (ONRR) U.S. Department of Interior Office of Natural Resources Revenue 15 Questions Lorraine Corona Industry Compliance Accurate Revenues & Data Professionalism & Integrity