Interior’s Royalty Collections Probably Coming Up Short, Officials Say
Washington,
Tuesday, March 01, 2011 -
Interior’s Royalty Collections Probably Coming Up Short, Officials Say
CQ TODAY ONLINE NEWS – ENERGY
March 1, 2011 – 2:11 p.m.
By Geof Koss, CQ Staff
Despite a widely touted reorganization, the Interior Department probably still is not collecting all the revenue owned to the federal government for oil and gas drilling on public lands, independent government officials told key House lawmakers Tuesday.
The department’s ability to accurately collect revenue — a longstanding problem — was among the management concerns cited by the Government Accountability Office and the Interior Department’s own acting inspector general in an appearance before the House Interior-Environment Appropriations Subcommittee. In the past, watchdogs have said the government may have lost out on tens of billions of dollars it was owed in royalties.
While noting that the department is working on an internal review of its revenue collection policies that will likely be released later this year, GAO’s director of natural resources and the environment, Frank Rusco, said federal regulators remain too dependent on industry data to determine the revenue taxpayers are owed.
“We do not have third-party verification or direct verification of production,” Rusco said, despite the fact that industry keeps detailed records of the oil and gas it produces.
He said there was not evidence of “systemic” under-reporting by industry, but added “we don’t know what we don’t know.” As a result, he said, it is likely that the federal government is collecting significantly less in revenue from energy producers than many states and other countries.
Revenue collection has long been a problem for Interior, which is in the process of reorganizing the office that formerly regulated oil and gas development — the Minerals Management Service — into the new Bureau of Ocean Energy Management, Regulation and Enforcement. The reorganization has come under intense scrutiny since last year’s Gulf of Mexico oil spill.
Mike Simpson, the Idaho Republican who chairs the Interior-Environment spending panel, called it “almost stunning that we can’t determine whether we’re getting accurate amounts of revenue that is due to the federal government.”
California Republican Ken Calvert suggested that Interior should contract out revenue collection to private parties. “We’re talking about real money here,” he said of the estimates that tens of billions of dollars may have gone uncollected.
Cynthia M. Lummis, R-Wyo., proposed that states be allowed to take over revenue collection. “I really think my state does a better job with its collections,” she said.
Management Issues
The concern about uncollected revenue was among the many management issues Interior faces with the reorganization, witnesses testified.
Rusco cited the struggle to balance “continued delivery of services with transformational activities.” In a tight budget climate, GAO also cited concerns about Interior’s ability to properly collect billions of dollars in revenues while maintaining a balance between resource production and environmental protection and safety.
Furthermore, GAO noted that the reorganization left unaddressed many issues associated with onshore oil and gas production.
Republicans and the oil and gas industry have harshly criticized Interior over new drilling policies implemented after last year’s spill, expressing particular displeasure at what they view as unnecessary delays in approving new offshore drilling permits. Congress is expected to provide a funding increase to support the reorganization, in part to increase inspections needed to win permits under the new regulatory regime.
Administration critics will get a chance to query Interior Secretary Ken Salazar about his department’s actions on drilling when he appears Wednesday before the Senate Energy and Natural Resources Committee and a day later before the House Natural Resources Committee.
Meanwhile, the department’s announcement Monday that it would issue the first deep-water drilling permit since the gulf oil spill won tepid applause, though critics signaled they will not be satisfied until more drilling projects are given the green light.
“The administration must now take its foot off the brakes and fully pursue exploration in the gulf and outer continental shelf as we cannot afford further inaction,” said House Energy and Commerce Chairman Fred Upton, R-Mich.
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