By Cliff Montgomery – Apr. 2nd, 2009
The Government Accountability Office (GAO) today released a tough review exposing the InteriorDepartment’s poor oversight of oil and gas companies which are allowed to drill on U.S. soil.
Current Republican Party leadership loves to crow about the supposed benefits of allowing Big Oil and Gas todrill on our lands, while insisting that such corporations be allowed to act ‘without burdensome regulation’. Thislittle report serves as a timely corrective to such rhetoric.
The essential title of the study is rather bloated, but apt: Federal Oil and Gas Resource Management andRevenue Collection In Need of Stronger Oversight and Comprehensive Reassessment.We quote most of the report’s introduction below:
“In fiscal 2008, the Department of the Interior (Interior) collected over $22 billion in royalties and other feesrelated to oil and gas. Interior’s Bureau of Land Management (BLM) and Minerals Management Service (MMS)manage federal onshore and offshore oil and gas leases, respectively.
“Acquiring a federal lease gives the lessee the rights to explore for and develop the oil and gas resourcesunder the lease, including drilling wells and building pipelines that may lead to oil and gas production.
What GAO Found
“In recent years, GAO has conducted numerous evaluations of federal oil and gas management and foundmany material weaknesses. Specifically:
“In September 2008, we reported that
• Neither BLM nor MMS were meeting statutory obligations or agency targets for conducting inspections of certain leases and metering equipment used to measure oil and gas production.
• MMS’s royalty information technology (IT) system and processes lacked several important capabilities, including [the] monitoring [of] adjustments made by companies to their self-reported production and royalty data and identifying missing royalty reports in a timely manner.
[An earlier GAO study put the matter more succinctly: ‘Companies may legally make changes to both royaltyand production data in MMS’s royalty IT system for up to 6 years after the initial reporting month, and thesechanges may necessitate changes in the royalty payment.’]
• MMS’s use of compliance reviews, which are more limited in scope than audits, led to an inconsistent use of third-party documents to verify that self-reported industry data are correct.
• MMS’s annual reports to the Congress did not fully describe the performance of the royalty-in-kind program and, in some instances, may have overstated the benefits of the program.
• The federal government receives one of the lowest shares of revenue for oil and gas resources compared with other countries, and Interior has not systematically re-examined how the federal government is compensated for extraction of oil and gas for over 25 years.
“In October 2008, we reported that
• Some states do more than Interior to structure leases to reflect the likelihood of oil and gas production, which may encourage faster development.
“In June 2005, we reported that
• BLM has encountered persistent problems in hiring and retaining sufficient and adequately trained staff to keep up with workload as a result of rapid increases in oil and gas operations on federal lands and poor workforce planning.
“In recent reports, GAO has made a number of recommendations to improve the accuracy of royaltymeasurement and collections, [as well as] the overall management of federal oil and gas resources…which[Interior] generally agreed with and is taking steps to address.
“However, two important issues remain unresolved. Specifically, GAO made one recommendation and onematter for Congressional consideration that together call for a comprehensive re-evaluation of how Interiormanages federal oil and gas resources.
“Interior has not undertaken such a comprehensive review and until this is done, the public cannot havereasonable assurance that federal oil and gas resources are being appropriately managed for the public good.”
