GAO again faults Interior royalty collection efforts

Over the past several years, reports by the Government Accountability Office, the Interior Department’s inspector general and others have highlighted problems with Interior’s oil-and-gas royalty collection practices.

A major part of the system is still a mess, GAO said in its latest study made public Wednesday.

The report finds that regulators lack “reasonable assurance” that oil and natural gas produced on federal leases is being accurately measured. That’s important because such measurements are needed to ensure that producers are paying what they owe.

Getting it right is a big deal because royalties from oil-and-gas production on federal lands are among the government’s biggest sources of non-tax revenue, generating over $6.5 billion last year despite slumping energy prices.

“Interior’s offshore and onshore production accountability inspection programs are not consistently setting or meeting program goals for inspecting oil and gas leases and do not sufficiently address key factors affecting measurement accuracy,” the report states.

“Limited oversight, gaps in staff skills, and incomplete tools hinder Interior’s ability to manage its production verification programs,” it adds.

The Project on Government Oversight, a watchdog group, said the report shows that Interior is failing to correct longstanding problems.

“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 in a prepared statement. “Many of these problems are decades old, and progress is moving at a snail’s pace.”

The report contains a suite of recommendations for bettering the system, such as improving the consistency between offshore and onshore measurement rules, better tracking of changes in industry measurement technologies, better tracking of measurement meters, improved staff training and many others.

Interior, in a response to the report, generally agreed with the recommendations. The audit was conducted between October of 2008 and March of this year.