ONRR could improve ability to assess royalty collections, GAO finds

The US Department of the Interior’s Office of Natural Resources Revenue met annual performance goals for its royalty compliance program in 6 of the 8 years from fiscal 2010 through 2017.

Jul 2nd, 2019

The US Department of the Interior’s Office of Natural Resources Revenue met annual performance goals for its royalty compliance program in 6 of the 8 years from fiscal 2010 through 2017. But additional actions could improve its ability to assess royalty collection efforts, the Government Accountability Office said in a report that was released on July 1.

It noted that ONRR officials said the agency did not meet its compliance goals for 2 years because of a shift in the agency’s goals that created a short-term misalignment of planned work and available resources.

ONRR’s fiscal 2017 goals for its compliance program were to obtain a return of $2 of additional royalties for every dollar spent on compliance activities and to collect a defined amount of additional royalties, the report said.

The compliance goals generally with the agency’s requirement that resources should not be expended without an expected return, it indicated. “However, these goals may not align with the agency’s mission to collect, account for, and verify royalty payments and other statutory requirements because the goals do not address accuracy—or the extent to which its compliance work is covering, for example, royalty payments,” the GAO report said.

It suggested that by establishing a goal that addresses accuracy, for example, by covering a portion of royalty payments with its compliance activities, ONRR could increase the extent to which it had reasonable assurance that its compliance program is fully accounting for federal oil and gas royalty payments.

Recommendations made

The report made seven recommendations for improving federal royalty compliance further. DOI concurred with all of them.

US House Natural Resources Committee Democrats noted that legislation they introduced in 2017, the Sustainable Energy Development Reform Act, included a provision that would have strengthened ONRR’s oversight of royalty compliance and eliminate loopholes that oil and gas producers could use to reduce revenue payments.

US House Natural Resources Committee Chairman Raul M. Grijalva (D-Ariz.), who sponsored the 2017 bill, said the new GAO report demonstrates the need for similar legislation, especially considering the Trump administration’s push to extract and sell every last ounce of oil and gas from federal land regardless of environmental, financial, or public health consequences.

“Whether it’s in the Arctic National Wildlife Refuge or near historical treasures like Chaco Canyon, this administration cries ‘energy dominance’ and issues permits regardless of the consequences,” he said.

“We need to rethink that strategy, and where drilling does occur, we need to make sure industry stops taking advantage of loopholes that take money out of taxpayers’ pockets,” Grijalva said. “Government agencies need to make sure taxpayers get a full return when oil and gas companies enjoy the privilege of drilling on public lands, and this report suggests that’s not always happening.”

Contact Nick Snow at nicks@endeavorb2b.com.

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