Here at PDI, we just heard from Dennis Cameron of WPX Energy and Pam Williams of Shell, who spoke on the impact of federal unbundling on royalty compliance. As of April of 2012, unbundling audits have increased exponentially and remaining compliant with the changing set of rules has become time-consuming and nye impossible, because many of the pieces of documentation are not kept in locations available to those creating compliance reports. This leaves compliance experts “gathering data from documents, contracts, and even email” according to Williams. She has even personally “called down people in the field to ask for information about equipment costs, compressor discharge pressures, etc” in order to gather the information she needed to even begin tracking unbundled tax compliance. We’ve talked a lot about chasing down information from various parts of the company, the gap between field and office, and even briding the emerging generation gap as experts retire, and unbundling has all of the common characteristics of a scenario where business collaboration can make all the difference.
For instance, with new unbundling regulations, companies now need to report on pipeline fee, pipeline costs, compressor discharge pressure, component fees, dehydration units and more. And even with the advanced information systems in place at Shell, Williams questioned, “Can our systems really handle that?” because much of the information is just simply not integrated into the system as it operated in the past. Unsurprisingly, the core suggestion from Williams was that collaboration was “not just a good idea you really need to do this: form a cross-functional team. . . The regulatory changes represent learning for folks that handle audits because you learn about operational items you didn’t know before.” Suddenly E&P audits include information about the midstream section of operations, for instance.
What’s most interesting to me is that in most cases the data is admittedly already being captured, but it’s simply being stored in a system that’s disconnected from the whole. And so the core issue really comes down to information accessibility, but it’s very hard to invest in a product or specific solution, because of all of the current changes. After telling the audience to expect to incur expenses going forward because “unbundling is here to stay,” Cameron warned, “As soon as you say ‘one size fits all’ you’ll come up with a system or product that misses the boat.” The key components in answering compliance issues with technology are 1) to provide a system that can adapt to solve a changing problem, 2) to base that system on the core activity that already occurs, supporting the behavior that already occurs rather than shaping it to meet a generic system, 3) to focus the business collaboration solution around providing information, and let humans, therefore, draw conclusions.
Cameron concluded with the following: “We’re going to become more adept at getting this information generated, but the question is, how?” I’d suggest he have a talk with our consultants, or at least check out some of our resources on compliance management.