The US Minerals Management Service’s proposed budget for fiscal 2008 includes $1.45 million for the first of a 2-year initiative to institute an interactive payment reconciliation and billing system. There’s more to it than leaseholders not getting away with saying the check is in the mail.
To a great extent, they can’t do it now. MMS collects fees and royalties not only for its own federal leases but also for those issued by the Bureau of Land Management and American Indian tribes, said Lucy Denett, MMS’s associate director for minerals revenue management. Reconciling payments with outstanding balances can be challenging. It involves close to 29,000 producing oil and gas, coal, geothermal, and other leases. There also are separate “lines” when a lease produces more than one commodity. Leases also can have three or four partners, each reporting and paying. Finally, lease terms can vary by location and the issuing agency.
The result is more than 600,000 fee and royalty lines for MMS’s Minerals Royalty Management (MRM) division to process each month. “We’re a major collection and auditing operation,” Denett told OGJ.
Payments, reports
She said the system already is automated, with 99% of the total payments made as electronic fund transfers directly to the US Department of the Treasury. MRM simultaneously receives a report and has to match that information with payments received. Both are due within 30 days. MRM then has 30 additional days to disburse shares to states or tribes.
The process requires a myriad of internal controls to work. If a report and payment differ, an MRM auditor telephones the lessee to discuss the discrepancy. MMS is seeking the money to improve this part of the operation so a lessee and an MRM auditor can simultaneously examine submitted documents and payments on their own computers. A discrepancy may not be the lessee’s fault; sometimes an agency has neglected to set up the correct account to receive the payment.
“The more automated and transparent we are, the better the process will be,” Denett said.
Both sides benefit
Moving this reconciliation process online should benefit both parties, she suggested. “A company may have thousands of lines and get a bill from us filled with information,” she said.
Once adopted, the new system would signal when a basic error such as incorrect lease numbers, omitted production or financial information and incorrect addition occurs. The report would then be automatically rejected and returned with missing areas highlighted.
Denett said MRM has been working with the Council of Petroleum Accountants Societies and the Department of the Interior’s royalty policy committee and royalty taskforce to develop the improvements.
“Companies have been asking for this. There are so many leases, so many lines, so many adjustments. We need to be able to communicate, share information where appropriate and make sure payments are being made and processed correctly,” she said.
