docket so we will appreciate everyone adhering time limits fine yellow like comes on you have two minutes left on land and by the way you don't have to use all of your time necessarily but  anyway when the red light comes on we ask you to conclude as quickly as possible unless you're answering the court's question also we appreciate record citations when those are appropriate and it please the court in one thousand nine hundred and eighty two congress enacted the federal will and gas royalty management act and constrained to the department of interior enforcement discretion with a forward to here penalty hierarchy for thirty years interior respected the limits of that hierarchy until this case this is a test case to resolve whether interior can expand its powers under section seven thousand nine hundred dollars d of the statute in cases involving a failure to correct world he reports after a notification of an error has been given to alessi i'd like to focus on three principal areas in my time with the court this morning the st is to accept responsibility for stadol as reporting errors and orient those errors within the context of the penalty scheme the nd is to focus on the key canons of construction that control the case particularly the canon of consistent usage which i believe is the controlling principle and the rd is to consider the future implications of interiors position for future cases because this appeal will not only decide a single penalty for a single set of fact studded twenty five thousand dollars a day penalty i do your honor because i think that this is an instance of the camel's nose under the tent i think interior recognize that pursuing the maximum penalty or anything that looked more aggressive would make this a more substantial target and by imposing a modest penalty a penalty that could have been imposed under sections a and ultimately be they hope to avoid searching scrutiny yes your honor are there cases out  there when i don't know the state of the history of interior enforcement effort with respect to their maximum penalties so i'm not in a position to speak to how frequently they assess the maximum penalty but of course the important consequence is that the threat of the penalty exists and the threat itself is a significant hammer that can be used with leverage against the regulated industry in a way that congress didn't contemplate in sections a and b of the scheme i'd like to begin my remarks this morning by acknowledging the facts of our case and offering something of a miracle because i don't want there to be any mistake about this issue settle was wrong for failing to correct its role to reports when the errors were called to its attention we acknowledge the importance of royalty reporting and acknowledge the importance of the obligation to correct errors that correction wasn't made probably here and we are not proud of but that fact does not give the government carte blanche to impose any penalty it wishes to impose acting at its own discretion like a king dispensing justice but at what point  stat oil pay pay the royalties you want of the royalties were paid in may of two thousand and twelve the notice of penalty was ultimately issued in february of two thousand and twelve and the past to roll teams were paid in may of two thousand and twelve there had been a conversation ongoing between interior and the steadily all staff accountant over those roles reports over the preceding year and for reasons that the record doesn't disclose the corrections were not made previously and they roll to use were ultimately paid with interest but not until after the notice of guideline when if ever where the corrections made the corrections were made i believe your honor at the same time may two thousand and twelve some reason i thought it was later ok there may have been i believe the record may suggest that of the twenty one months at issue there may have been one or two months that were still trailing to be corrected but in substance the corrections had been made by may of two thousand and twelve i have suggested to the court that the facts of our case do not give interior card launch and i would submit that the regulatory scheme provides an appropriate mechanism to deal with this situation congress provided that a failure to correct after notice has been given is subject to an explicit penalty scheme under sections a and b section one thousand seven hundred and nineteen dollars that provision specifically provides that interior shell issue a notice of noncompliance that gives the regulated entity twenty days of a grace period to correct upon penalty of suffering then a five hundred dollars per day civil penalty if it's  any time after the th day after its order to correct and it could have could stadol to the choice of correcting within twenty days or incurring penalties there was no barrier to application of the scheme that congress implemented and we had knowledge  that scheme was applicable the order to report itself cited sections a and b the regulation that implements sections a and b as the penalty scheme that would be implicated if there was a failure to correct interior simply determined in its unlimited discretion that it was going to go directly to section d knowing and willful penalty without any formal notice to stay out of oil or to anyone in the regulated industry that of facts would trigger a section seventeen deep penalty and i think that that implicates the concerns of this court's decision in the mosque case and the supreme court's decision and smith kline beecham where the courts have recognized that when an agency discovers a new enforcement powers after years of inaction the court should be skeptical of its interpretation of those powers this statute was inforced for thirty years without any effort given any reason why the regulatory scheme that congress dictated was insufficient to deal with data will conduct why did interior find it necessary to depart from a standard operating procedure me let me ask you a question if i if i understand this reporting skiing correctly this is basically the reports are basically like division orders or oil and gas division orders they tell you how much it's been produced they tell you where i think that's generally accurate you're on and then they tell you what government percentage royalty is that's correct i think that's generally accurate ok is there anything cumulative about such orders from month to month my understanding and i could certainly be corrected without a later consequence unless of course there's some scheme going on to embezzle or something right yes and under the penalties game as interior interprets it for each day that those reports remain on file without being corrected interior reads that as a continuing violation so if you penalties each day let me turn in the context of the candids of construction that i think are applicable here i focus particularly on the canon of consistent usage because the key aspects of this argument i think are undisputed everyone agrees that in every instance in which the word maintains is used elsewhere in fog among it refers only to possession of the lessees internal records and the key provisions that i urge the court consider here are section seven hundred and thirteen and section seven hundred and twenty four of the statute those are the provisions that impose the substantive obligation to maintain records and in those contexts it's an ambiguous that the word maintains were st only to  if maintained in this context only applies to the records in the house then the import would be important the there's an arbitrary distinction between keeping the records false in the house and reporting the records falsely to the agency you want to let me speak to both of those objections with respect to the coat of many colors argument i think this court has rejected that argument in the context of the word maintains in its th alia's decision in follows the government was here arguing that word maintains in the same statute meant two different things in two separate sections and judge jolly said that argument is foreclosed by the canon of consistent usage and i submit that that's compatible with what the u s supreme court has repeatedly said most importantly in the last couple of years where it said that in all but the most unusual situations a word must be given the same meaning in each section of the statute so it's the burden of the government to overcome that strong presumption now with respect to the organ meant that there would be some anomaly about not imposing penalties on this sort of conduct i submit that that just misconceived the statutory scheme there is a penalty that is provided in sections a and b for failure to correct after notice congress has determined what it considers to be the appropriate calibrated penalty for these facts interior simply doesn't want to pursue it if a regulated entity knowingly files false reports at the outset there's no question under seventeen thousand dollars that is a subject for a knowing and willful penalty but that's not the case we have here we have a case in which the regulated entity made an innocent mistake was notified of the error or fail to correct it that is precisely the scenario that sections a and b speak to and so not only the consistent usage canon but the canon of specificity dictate giving effect to the scheme that congress implemented and not allowing interior the discretion to supplant that with its own policy joe and the reason i think it's especially important not to give interior that discretion is because of the implications of this interpretation for future cases by leapfrogging straight to that section d penalty interior has discarded the congressional scheme and whatever you think of the righteousness of a penalty such as this one on these facts the consequences going forward are troubling there is no limiting principle to interior's reading of section seven thousand nine hundred and eighty and if you read nothing else in the record i urge you to read pages seven hundred and sixty eight thousand two hundred and eighty three of the record that is the passage in the hearing before the district court where the district court recognized this problem the court noted the government's interpretation post slippery slope issues because it lacked any clear will about how to differentiate conduct that subject to a and b from conduct that interior now says is subject to d and it lacks any clear rule about when the penalty would a quill  mean in a way you're arguing that in a vacuum because he does say knowingly or willfully and that's that by the constraints of what your client a has acceded to that it's off the table but your honor my point is about a matter of statutory interpretation of judging whether this reading of the word maintains is correct and so the point is not about knowing conduct with respect to settle in this instance the point is about the ability of interior to leverage its rule in the future by sending a notice not a formal notice of noncompliance as the statute contemplates but simply an order to correct and then taking a position thirty days later failing to correct it means that that regulated party faithfully as i came st of all what the record reveals is the notice originally was sent to an individual who had left the company when interior followed up with stadol well to determine why the original order to correct had not been complied with the record reveals the individual who received it had left the company there was a staff accountant who received the inquiry that staff accounting gauge and discussion with interior trying to get clarification trying to determine the accuracy the records and make a resolution it didn't happen as promptly as it should have happened and i acknowledge it but this ingestion that there was recalcitrant or defiance is not supported at all by this record it was candidly sloppiness but you have to think about not this whole case but the implication for the future and interiors position has no limiting principle and threatens a significant consequence going forward thank you all right to we'll hear from m interpretation that stadol has advanced would cause a significant loophole in it would cause problems in the future i mean well congress an act of the father mother because it was determined that there was too much reliance on the industry being on the honor system and so congress was making an effort to put the burden on the industry and i think maybe a hypothetical would explain why stab wounds construction of the term maintain is problematic not just in this case but in future cases under their construction as i understand it what it would mean is that stadol if it inadvertently submits false reports but then a few days later knows that the information of the government is using in the database is false it doesn't have any incentive to do anything about it until they argue the government tells them that the information is inaccurate so a company can sit on its hands not do anything at all and unless the government figures it out on its own which it happened to do in this particular case there's no incentive because and under their construction no penalty can run until your you send the government send them a notice under seven thousand nine hundred and eighty and why not correct that the whole point of these reports is to assure that the government is getting paid the government in terms of energy development in making future trend development but but primarily it's used for making sure that the royalties are paid and collected and i think to your to your honor's question about the money got paid and there was hypothetical about that would fall within knowingly or willfully and it would also be covered by the term submit if they submit a false inaccurate or misleading report realizes that they made an error at that point they didn't make those didn't initially knowingly willfully submit the false data out but a week later they realize oh wow we've really under reported or there's a there's a discrepancy here under their construction there is no incentive for the company to tell the government anything about it because no penalties would run the government would have to discover this on its own and what congress intended here would it be even said in the legislative history is that we don't want the government to have to auditing auditing internal files what do you say to the argument the imposition of the d one scale of penalty here is based on can also be applied in situations where you'd otherwise have semi a or b which is to say the government notices a discrepancy or the government is in contact with the company and notices  discrepancy which puts the company on notice and therefore to magically the next step can be one thousand seven hundred and nineteen but but a company doesn't know whether the government's going to come down with that hammer i think it in this case as your honor noted that you know this might have been a harder case if they didn't stipulate to the new in your willful element here but the congress intended for couple billeted to guide the discussion that's employed and i think i think to answer your  question you would have to have or you have the government would have a burden to prove that the information was knowingly or willfully maintained and there's a regulation here that's also at play like think they took that off the table so that we don't have the question of knowingly or willfully before us but we do have the overall operation of the statute and of course mind you the threat of criminal prosecution when i think i do think that it's a you don't you think somebody like justice course such would get a little can concerned if this to me a mere mere problem of record keeping since the money is all paid up is treated as a potential criminal violation i think that congress record keeping was the heart of what fog was about and of course there are burdens the government would have to congress are worried about money and we are i mean the same as congress isn't going to put us in jail when we pay the right amount of taxes but we may have an error in our tax return that we don't correct for seven years and i think i understand your honour's question and i do think works if essentially you want to him potentially imposes a level of criminal penalty for something that is alternatively an a or b pylea i understand i think will two points st of all the criminal the criminal had been employed there would be a higher burden of proof beyond reasonable doubt and so forth but in terms of the structure i think it is important to look at the text and the text of these penalties here is they are not exclusive and they are not sequential it does not congress did not require that the agency go through each step because seven thousand nine hundred and eight is quite broad it actually doesn't specifically by its terms cover false information what it covers is any violation of the statute any violation of  information it just didn't provide its report that would be governed under a that's arguably an even worse violation because then the government doesn't get any money at all well the government would know if there's no report but if the government is getting false reports or you know the government has inaccurate information it's more difficult for the government to know that because it's not the keeper of the it doesn't have the information didn't initiate with the government and so but i think my point is that seven thousand nine hundred and eighty is quite bro covers a broad array of conduct it could even for example be something like i and a lessee violating a lease term failing to plug up a well before it abandoned that that's a very serious matter because if you don't plug  of sanctions would lead the reasonable person to blame and perhaps to believe that they are it's tiered in that you're right that the that the sanctions go up but it's not exclusive there is  if we had gone through discovery but standard oil left all that on the table and i think made this somewhat an easier case because we're just looking at the pure definition of me but in an ordinary case the government would have to go through the step to showing that the conduct was knowing or willful at the time well i have to say here that the fact that that is off the table it seems to me doesn't make and we don't draw an assumption either way about nor knowing the willful in this case that is that it seems to me that when you're talking about maintaining and well you can answer his question about consistent usage but also it seems to me when you're talking about maintaining you're talking about something that is an active and not a passive action so in other words i think one of judge atlases examples was a student maintaining good grades well the student doesn't just sit there to maintain good grades a student has to be actively engaged in studying and performing and likewise if you maintain a library you have to dust the books periodically so they don't you know get roaches so how do you how do you explain maintain in terms of just filing a report and not doing  plain meaning of the boring maintain includes keeping up and also affirming and if you think of the word in terms of you want to maintain an argument or maintain their innocence that the regulation here that actually puts the duty and specifies that they have a duty to and ten point three that was in existence at the time of this conduct that regulation clearly puts that duty to not only the requires electronic submission of these reports but it also says that if you discover an error in a report that you submitted you have to keep that up you have to go in and amend and provide accurate information so that i might my i would submit that that regulation creates the an onus on the reporter in the pay to not only submit but to maintain the information on the database so that's an ongoing obligation that the that the these that the people who are engaging in this and who are getting leases they have that ongoing obligation the judge jones was referring to and then they can go back in and have access and that's that's actually an important question about having access to change the information right i think the word maintain while they would like to to argue that it only means to holding it up and possess the important i think element of of that is that you have the control the ability to control you can't have the obligation or burden to maintain something if you don't have the ability to access and control but here they did in not only did they have the ability they had the duty to do so under the regulations it's specifically applied to these reports and if i may answer the question about the other usages of the word maintain in  transporting oil and section seven hundred and thirteen simply says that the secretary may issue regulations to require people to have to maintain a certain items but they doesn't talk about what maintain means i think itself well it sounds to me as of all those other uses for your virtue are activists like as i commented i think in the you know as i mentioned before the deplaning dictionary definitions include not only keeping something but to keep it up but also to affirm and in this context and we're dealing with an electronic database where the government goes in and is checking that information i think that the regulations that would be my best him sir to your question about the active nature of the duty i think the regulation places that burden on the all the payer to essentially have an obligation to go back into whatever they're putting on the database is an affirmative representation of the da the other concern i have is as i also had the same concern in the mosque case was of the industry goes along with the software production under this law for thirty years with nothing and ninety one a and b are the appropriate standards and now they're maintaining suddenly some ninety one i don't think there's any indication that the agency has ever taken a different interpretation here there's no question of an but they have maintained have they not they have kept up the illusion i don't i don't think that's we wouldn't we push back on that your honor and i think it's different again from the mosque case where you actually had the agency going out and telling in that case you telling the contractors that you are not you know you're not going to be subject to these penalties here there is no indication that the agency has ever taken a different approach and you know if anything you sort of just me but you know you have a lot of it's not been applied for thirty years people can and there are other sections of the same law that capture the same kind of that you have to be at least overlapping with much what it's like a dui law where you may the police may have teared penalties for do you i but some people get away with repeated violations at a very low level and then all of a sudden for the st time they put someone in jail well i think that here you know what the agency tells me is that and i think it's evident in this case they normally try compliance they normally try to reach out and get compliance before issuing penalties and this was a very unusual situation normally when you ask i would you let their reporters know that they're propagating false information they quickly come into compliance they did know in ten order dealt with the presumably inadvertent submission of information and that would not be a violation of one thousand seven hundred and nineteen d if it was an inverter but despite at least five attempts by the agency to obtain compliance by the time seven by the time two thousand and twelve rolled around we're dealing with a different kind of violation at that point it's a new violation because they're now knowingly or willfully maintaining the false information so i think the reason why the tw make it such that it was it was an appropriate one to wish to levy these kinds of penalties i think judge jones you also asked a question of stadol about the the fact that this was a fifty dollars penalty and doesn't that somehow show that so there is no notice to the people who are regulated as to what risks they are running well i think in terms of the notice of course here they got the penalty that was much in those who were in court just overruled a series of criminal statutes that talked about violent conduct pick and those were penalty enhancement provisions they were not the base crime they were enhancement provisions in the supreme court said at least two times th lower of course in any of the tears and so there's no prejudice to them but they had actual notice number one because in the prepared altie teleconference in august of two thousand and eleven i believe that the agency told them and they subject to penalties for knowingly or willfully maintaining false information now whatever stadol might argue about the interpretation of maintain they were certainly aware that the government viewed this conduct as annoying or willful failure and inexp let me begin by answering the question that two members of the court of post about the enforcement history from the interior i'm advised that the most significant case is the marathon oil case in which interior under seventeen thousand nine hundred c which is another knowing and willful provision assessed the maximum statutory penalty in that case at that time it was a ten thousand dollars penalty ultimately a ten million dollars total penalty was upheld by the district court and affirmed by the th circuit or what your out of that had to do with knowing willful errors in reporting i don't know the specific details but i do know that that is the history that we know about in the repor from interior let me speak to some of the points that were made by the government i want to address st the consistent usage point since i've told you i think it's the controlling case i think the government has no answer they point two  and seventeen but neither of those provisions has anything to do with the obligations of by the lessee section one thousand seven hundred and thirteen is the statute that imposes the substantive obligation to maintain on the made the point that it seems that maintaining most of its applications is an active concept and i want to affirm that point i think that's exactly right and it's what differentiates a failure to correct errors in reports from the a condition that it deceives the government because the government otherwise does not have information the maintaining in bat context is maintaining false records that will defeat a government audit investigation that is the conduct that's at issue in one thousand seven hundred and thirteen that's the predicate and so it's an active effort to deceive which is why it's criminal and which is why it's subject to the highest penalty which is nothing like the conduct here where the government knew about the error issued a failure to make a correction after or notice from the government it is this specifically applicable statute next your honor you alluded to the mosque decision and the concerns that this court rightly has when an agency discovers new and foresman powers after a long period of inaction counsel tries to distinguish most by saying in that case interior had taken an explicitly contrary position but moss was founded on the supreme court's decision  christopher which was not based on that scenario here's what the supreme court said in christopher whereas here an agency's announcement of its interpretation is preceded by a very lengthy period of conspicuous in action the potential for unfair surprises acute and that is exactly what we have here at the end of the argument the government suggested that somehow the penalty that was assessed was different from the notice the order to correct that was originally given that the violation changed over time this is the theory that the government has been proposing from the beginning that somehow conduct that is originally only subject to a and b can morph no i'm not denying that my client was notified in a telephone call my client was never given the formal notice of no not rocket science or your honor if if i may respectfully push back at that just a bit the only thing the stipulated record establishes is that a staff account was advised of the possibility of a knowing  violation there is no indication that anyone else its data will move but here's the point i want to make in response to a question with oh no i'm not i'm not suggesting that status quo was ignorant of the statute i don't have any ability to speak for the knowledge of the staff accountant who had this conversation but i don't pretend that static world wasn't aware of the statutes stadol knew of the history of enforcement for three decades of the statute which had never been applied in this context you want to ask me about a limiting principle i see my time's expired i can explain what i mean by that but if the court has heard enough i know you've got a long morning so i'll leave it to your discretion i think we