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GAO Says Interior Still Doesn’t Know How Much Taxpayers Are Getting Ripped Off

April 14, 2010 

 

Confirming the Project On Government Oversight’s (POGO) long-held concerns, a Government Accountability Office (GAO) report issued today, “Oil and Gas Management: Interior’s Oil and Gas Production Verification Efforts Do Not Provide Reasonable Assurance of Accurate Measurement of Production Volumes,” found that the Department of the Interior has been lax in ensuring that taxpayers are receiving their fair share in return for oil and gas royalties.

“It’s outrageous that the Interior Department still cannot show taxpayers that they are getting a fair deal for their natural resources,” said POGO Executive Director Danielle Brian. “Many of these problems are decades old, and progress is moving at a snail’s pace.”  

The GAO concluded that the Interior Department could not provide “reasonable assurance” that they had accurately measured production volumes because Offshore Energy and Minerals Management (OEMM) and the Bureau of Land Management (BLM) failed to consistently apply regulations, train engineers and inspectors, and include necessary production documents. As a result, the GAO said, Interior discovered that on several occasions meters had been incorrectly calibrated. They even found pipeline configurations in gas plants that may have allowed gas to avoid being measured for royalty payments. Additionally, the OEMM inspectors told the GAO that company staff changed calibration schedules without notice, which prevented the inspectors from overseeing calibration.

The GAO also found that software allowing the remote monitoring of gas production and allowing inspection staff to enter results from the field was behind schedule and years away from widespread use, demonstrating minimal progress after 10 years of development at costs over $1.5 million. In 2003, POGO noted that the Minerals Management Service’s (MMS) computer compliance system was a complete failure, and raised concerns because the MMS Contracting Officer involved in awarding the contract left the agency to go to work for the company that won the contract.

The GAO’s findings are consistent with the Department of the Interior Inspector General’s (DOI IG) recent findings that BLM and MMS “failed to carry out effective oversight and management” to ensure that all royalty income was collected.  POGO applauds the Interior Department’s recently announced plans to review federal oil and gas leasing royalty policies, but urges the Department to not wait nine months to act. Instead they should review numerous previous government reports on the issue and consider implementing recommendations that could increase taxpayer revenue now.

This report confirms concerns Jack Grynberg has raised about DOI’s ability to measure natural gas production. "Oil Industry Tycoon Disputes Royalty Claims Made by Government" -

Related Resources:
Representative Carolyn Maloney Introduces Legislation: "Progress on Improving Royalty Management?" 

Drilling the Taxpayer: Department of Interior’s Royalty-In-Kind Program – September 18, 2008

POGO letter to Daniel Riemer, chair of the Royalty Policy Committee (RPC), addressing the Subcommittee on Royalty Management’s recommendations to improve Department of Interior royalty collections – January 8, 2008


Founded in 1981, the Project On Government Oversight (POGO) is a nonpartisan independent watchdog that champions good government reforms. POGO's investigations into corruption, misconduct, and conflicts of interest achieve a more effective, accountable, open, and ethical federal government.

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