GAO: Outdated Interior regs costing taxpayers

Taxpayers might not be getting their fair return on billions of dollars worth of oil and gas production on federal lands and waters, federal auditors found.

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A Government Accountability Office (GAO) report released on Tuesday says the administration's complex onshore leasing system for oil and gas companies hasn't been "adjusted to the changing market conditions."

After finding in 2007 that the U.S. government receives one of the lowest percentages in the world on returns from oil and gas production, the Interior Department reevaluated its finance system in 2008 — the first time in more than 25 years the system had been changed.

But, in Tuesday's report — requested by Senate Energy and Natural Resources Committee Chairman Ron Wyden (D-Ore.) — the GAO found the Interior has since "discontinued its efforts to pursue revised regulations" while claiming it does not have enough information to adjust the royalty rates.

“Oil-and-gas production is reaching all-time highs, but taxpayers are missing out on hundreds of millions of dollars a year in revenues because the administration has not taken needed steps to modernize a nearly 100-year-old onshore royalty rate," said Jessica Goad of the Center for American Progress.

"There’s just no good reason why taxpayers should be getting the same return for their oil and gas resources as they were in the 1920s.”

In 2012, companies reportedly brought in $66 billion from oil and gas production on federal lands, while paying $10 billion back to the federal government.

But "without periodically conducting such assessments, the Interior cannot know whether there is a proper balance between the attractiveness of federal leases for investment and appropriate returns for federal oil and gas resources, limiting Interior's ability to ensure a fair return," the report states.

Currently, Western states charge a higher royalty rate than the federal government for oil and gas drilling.

According to a report from the Center for Western Priorities, issued earlier this year, Texas, for example, charges 25 percent for the onshore royalty rate — double the federal rate.

In response to the report, Rhea Suh, Interior's assistant secretary for policy, management and budget, said the department plans to address the recommendations to update its policies.

Interior will move forward with a new rule making process that grants Interior Secretary Sally Jewell "broad flexibility in setting onshore royalty rates," Suh said.