Ranking Member Grijalva, Rep. Lowenthal Request GAO Assessment of Oil and Gas Royalty Enforcement to Improve Taxpayer Returns

Washington, D.C. – Ranking Member Raúl M. Grijalva (D-Ariz.) and Rep. Alan Lowenthal (D-Calif.), ranking member of the Subcommittee on Energy and Mineral Resources, today requested a Government Accountability Office (GAO) assessment of the Department of the Interior’s (DOI) Office of Natural Resources Revenue (ONRR) to determine whether its royalty collection program properly holds oil and gas companies accountable for revenues those companies owe to the American public. ONRR collects money from private companies leasing oil and gas from federal and Tribal land, and GAO has not examined its revenue collection enforcement system since it was created following the dissolution of its predecessor Minerals Management Service (MMS).

“We don’t know whether companies extracting and selling our resources are reporting accurately or paying their fair share to the public, and that is unacceptable,” Grijalva said today. “The American people deserve to know their shared resources are being managed properly. At the same time, the Trump administration is trying to cut billions of dollars from Interior’s budget, and royalty collections are one of our country’s biggest sources of revenue. Let’s make sure we know the value of what we’re talking about before we make cuts we’ll regret for years.”

“Smart, responsible management must include commonsense measures to ensure companies are paying the royalties they owe for their production of taxpayer-owned resources,” Rep. Lowenthal said. “This study will illuminate the extent to which the Office of Natural Resources Revenue is exercising proper oversight over the reporting and royalty payment process, making the process more open and transparent.”

As the letter, available at http://bit.ly/2nzDyiC, points out, MMS during the Bush administration audited relatively few mineral lessees in favor of conducting less stringent “compliance reviews.” These reviews “require fewer personnel and can be an effective way of maximizing limited resources,” the letter says, but in 2006 the DOI Office of Inspector General released a report finding several weaknesses in how MMS was conducting compliance reviews and evaluating their effectiveness.

The following year, DOI’s specially formed Subcommittee on Royalty Management issued a report on revenue collections that made a number of recommendations related to the MMS audit and compliance program. GAO has yet to examine the implementation of those recommendations or, since its formation in 2011, ONRR’s enforcement operations more generally.

The letter asks GAO to examine six issues:

(1)          How does ONRR develop its compliance strategy for determining appropriate audit and other compliance activities to ensure companies accurately report data used to collect royalties?

(2)          To what extent does ONRR coordinate with the State and Tribal Royalty Audit Committee and Interior bureaus undertaking compliance activities to support its compliance strategy?

(3)          What types of compliance activities is ONRR conducting; i.e., types of audits and scope of compliance reviews?

(4)          How does the cost of compliance activities compare with the collections resulting from compliance activities?

(5)          To what extent is ONRR meeting its requirements and goals for conducting compliance and audit activities?

(6)          Has ONRR properly implemented the recommendations of the OIG and SRM reports?

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