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Summary: Under current law, Oil and Gas companies operating on leased state land must be constantly prepared to receive notice of a financial audit from the Railroad Commissioner, Attorney General, Governor, or other authority. HB 2571 would establish a penalty for companies that intentionally withhold required information from an auditor. The legislation provides for a 60 day grace period to turn over relevant information before administrative penalties go into effect and then starts a graduating escalation of penalties over time after the 60th day. The legislation includes a good faith exemption so that companies are not assessed a penalty for withholding information in good faith and make a written request to extend the deadline.
Analysis: Without commenting on the necessity or value of requiring these companies to be continually prepared for an audit at any given time, we recognize that it is ineffective and inefficient to create rules without a method to enforce them. HB 2571 sets up a fair system for these companies and the government entities to make sure that auditors get the information they need in a timely fashion and the companies have a reasonable time to comply before administrative penalties are assessed. HB 2571 supports a limited scope of government by ensuring that regulatory compliance requirements are reasonable and that penalties are calculated to incentivize compliance without being excessive or capricious. While we are generally opposed to creating new fees and penalties where none existed, this legislation allows the government to enforce a currently unenforceable existing statute only relating to companies doing business with the state. This is clearly within the proper scope of state government. We encourage legislators to support HB 2571.