The Department of the Interior’s Minerals Management Service, which collected over $9 billion in oil and gas royalties in fiscal 2007 through its royalty in kind program, needs to improve its oversight of natural gas production volumes, GAO has said.
Companies ply federal lands and waters under leases obtained from and administered by agencies of the Bureau of Land Management for onshore leases and MMS’s Offshore Energy and Minerals Management for offshore leases.
The companies compensate the government for producing oil and gas resources on federal lands either in cash or as product, but according to GAO-08-942R, MMS must make sure that it receives the volumes to which it is entitled.
It called on the director of MMS to improve verification of natural gas volumes owed to the government by using third-party production information, such as data from OEMM’s gas verification system, to verify reported production and royalties owed.
It also said MMS needs to improve calculations of the benefits and costs of the royalty-in-kind program and the information presented to Congress by calculating and presenting a range of the possible performances of the royalty-in-kind sales in accordance with OMB guidelines; reevaluating the process by which it calculates the early payment savings; disclosing the costs to acquire, develop, operate, and maintain royalty-in-kind-specific IT systems; and, disaggregating the oil sales data to show the variation in the performances of individual sales.
