By Cliff Montgomery – July 24th, 2011
“[The Department of] Interior does not have reasonable assurance that it is collecting its share of billions of dollars of revenue from oil and gas produced on federal lands…and waters,” declared a major government study released earlier this year.
It’s an especially important issue during this time of tight federal budgets.
The United States Government Accountability Office (GAO) provides a biennial report to Congressional Committees which pinpoints those federal activities currently “at high risk for waste, fraud, abuse mismanagement or in need of broad reform,” according to the most recent High-Risk List released this February.
“The 2011 high-risk update included one new issue area, Management of Federal Oil and Gas Resources,” tellingly stated the GAO study.
Two issues–the Pentagon’s Personnel Security Clearance Program and the 2010 Census–have been taken off the list.
Below, The American Spark provides major quotes from the report:
Why GAO Did This Study
“The federal government is the world’s largest and most complex entity, with about $3.5 trillion in outlays in fiscal year 2010 funding a broad array of programs and operations.
“GAO maintains a program to focus attention on government operations that it identifies as high risk due to their greater vulnerabilities to fraud, waste, abuse, and mismanagement or the need for transformation to address economy, efficiency, or effectiveness challenges.
“Since 1990, GAO has designated over 50 areas as high risk and subsequently removed over one-third of the areas due to progress made.
“This biennial update…identifies any new high-risk area needing attention by Congress and the executive branch. Solutions to high-risk problems offer the potential to save billions of dollars, improve service to the public, and strengthen the performance and accountability of the U.S. government.”
New High-Risk Area
“For 2011, we are designating one new high-risk area—Management of Federal Oil and Gas Resources.
“GAO and others—including the Department of the Interior’s Office of the Inspector General and Interior’s Royalty Policy Committee—have identified significant problems with Interior’s management of federal oil and gas resources, which provide an important source of energy for the United States, create jobs in the oil and gas industry, and generate billions of dollars annually in revenues that are shared between federal, state, and tribal governments.
“These include human capital and other challenges that jeopardize Interior’s management of federal oil and gas resources.
“The April 2010 explosion and fire on the Deepwater Horizon drilling rig, which resulted in a tragic loss of life and catastrophic oil spill in the Gulf of Mexico, also increased attention on Interior’s oversight of its oil and gas resources, including its efforts to manage risk associated with oil and gas exploration and production, as well as its permitting and inspection processes to ensure operational and environmental safety.
“The National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling reported in January 2011 that this disaster was the product of several individual missteps and oversights by BP, Halliburton, and Transocean, which government regulators lacked the authority, the necessary resources, and the technical expertise to prevent.
“Historically, within Interior, the Bureau of Land Management (BLM) managed onshore federal oil and gas leases, while the Minerals Management Service (MMS) managed offshore leases and collected royalties for all leases.
“In May 2010, in response to the Deepwater Horizon incident, the Secretary of the Interior announced a major reorganization of Interior’s management of federal oil and gas resources. This reorganization eliminated MMS and transferred offshore oversight responsibilities to the newly created Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) and revenue collection to a new Office of Natural Resource Revenue.
“Interior has acknowledged that this restructuring will be complicated and require careful and deliberate planning.
“GAO is designating federal management of oil and gas resources, including production and revenue collection, as high risk because of: (1) shortcomings in Interior’s revenue collection policies, (2) weaknesses in Interior’s human capital management, and (3) inherent challenges Interior faces in reorganizing its offshore and revenue collection functions.
“In recent years, GAO has made more than 50 recommendations to the Secretary of the Interior to address weaknesses in Interior’s revenue collection and human capital policies and [to] modify its practices for managing oil and gas resources.
“Interior has been acting on many of these recommendations, but as of December 2010, many recommendations remain unimplemented and ongoing GAO work and other studies will likely identify additional challenges and recommendations.
“Interior will be challenged to successfully implement existing and future recommendations and undertake a major reorganization while operating in a constrained resource environment.”
