MMS will increase staff as part of its 2010 audit strategy

The US Minerals Management Service will add 19 new auditors and continue to target leaseholders that have been identified as high-risk, MMS Director S. Elizabeth Birnbaum said as the US Department of the Interior agency announced its auditing plan for 2010 on Feb. 17.

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, Feb. 19 -- The US Minerals Management Service will add 19 new auditors and continue to target leaseholders that have been identified as high-risk, MMS Director S. Elizabeth Birnbaum said as the US Department of the Interior agency announced its auditing plan for 2010 on Feb. 17.

“MMS auditors will also be taking a closer look at smaller energy producers that may not have been audited as frequently in the past,” she said. Audits and other compliance activities which the agency performs can range from limited scope reviews that examine one or more specific areas to full-scale audits that review all aspects of a company’s reports and payments over several years, she noted.

The agency, which manages federal land on the US Outer Continental Shelf and is responsible for oil and gas leasing there, collects royalties from mineral and energy producers with onshore leases on federal and American Indian lands as well as operations offshore on the OCS.

MMS said it receives monthly royalty payments from 2,000 companies and individuals covering nearly 30,000 producing leases. It uses specific criteria to identify leaseholders and properties which are more likely not to be in compliance. Properties may range from a single lease to a unit including numerous leases, the agency said.

During fiscal 2008 and 2009, MMS audited or reviewed more than 900 companies and more than 6,300 producing federal properties, it added. In 2009, it collected more than $157 of additional royalties, interest, and civil penalties, including $65 million in audit and other enforcement activities; $34 million through sophisticated automated detection systems, including interest due on late payments, and $54 million through follow-up enforcement actions including civil penalties and negotiated settlements.

“Our goal for 2010 is to cover 86% of high-risk companies and 43% of high-risk mineral producing properties,” Birnbaum said. By comparison, the US Internal Revenue Service generally audits 1-5% of individual income tax returns, based on income, and 11-27% of larger companies and corporations, depending on company assets, she noted.

Contact Nick Snow at nicks@pennwell.com.

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