Interior plans tougher energy royalty audits

The Interior Department is beefing up efforts to ensure companies are paying the royalties they owe from producing energy on federal lands.

Interior’s Minerals Management Service has completed a 2010 audit program that reflects an increase in staff and the number of audits planned, the agency said.

MMS Director Liz Birnbaum said the agency is adding 19 new auditors this year and will continue to target “high risk” companies. “MMS auditors will also be taking a closer look at smaller energy producers that may not have been audited as frequently in the past,” she said in a statement.

MMS has a lot to watch over – the agency said it receives monthly royalties from roughly 2,000 energy companies and people covering almost 30,000 leases.

Royalties from oil-and-gas production are a major source of non-tax revenue. But a series of reports by Interior’s inspector general and the Government Accountability Office in recent years highlighted numerous flaws in royalty collections.

Interior collected roughly $10 billion in royalties and other revenues from energy development on federal and American Indian lands in fiscal year 2009, although a portion is provided to states and tribes.