December 17, 2013
Interior Nominees Commit to Take Steps to Fix Issues Raised in New GAO Report
Washington, D.C. – The Interior Department must act to ensure taxpayers receive a fair return on oil and gas produced on federal lands, Energy and Natural Resources Chairman Ron Wyden, D-Ore., said in response to a new Government Accountability Office report issued today.
“There remains an obligation to the American taxpayers to make sure they are getting a fair return for commercial use of their public lands. Since a major share of on-shore royalties also go to states and Indian tribes, shortcomings in royalty collections also short those states and Tribes,” Wyden said.
“Today the Government Accountability Office released a report that raises concerns about how well the Department has been doing to ensure that taxpayers are getting a fair return for oil and gas development on both off-shore and on-shore public lands. I think it’s fair to say that it is not clear the Interior Department, and especially BLM, has always kept up with the times,” Wyden continued.
In an Energy Committee hearing today, Janice Schneider, the nominee to serve as Assistant Secretary of the Interior for land and minerals management, and Neil Kornze, nominated to lead the Bureau of Land Management, committed to address issues that may be costing taxpayers millions of dollars each year.
“I agree that the U.S. taxpayer should be getting a fair return for the use of public lands and the outer continental shelf,” Schneider said. “Those benefits can also flow to the states and tribes as appropriate. I look forward, if confirmed, to reviewing this new GAO report and working with members of the committee on this issue.”
“I think we’re making progress on some fronts and if confirmed you can be sure we’ll be making sure we will continue to take fair return for the taxpayer very seriously,” Kornze said.
While America is in the midst of an unprecedented boom in oil and natural gas production, taxpayers may be missing out, while oil companies profit, as a result of outdated regulations and policies governing how much revenue from oil and gas produced on public land goes back to taxpayers. It has been decades since Interior updated royalty rates for oil and gas production on federal land, an oversight that could cost taxpayers more than a billion dollars over the next decade, according to GAO and Interior Department reports.
The new GAO report found that Interior decided it could not change the terms of onshore oil and gas leases, because it has not updated its own regulations. Meanwhile, the U.S. charges among the lowest royalty and lease rates in the world, according to GAO and DOI.
The Government Accountability Office has repeatedly warned that taxpayers may not be receiving a fair return on these resources, in reports issued in 2007 and 2008, and again in 2011, when GAO added oil and gas resources to a list of programs “at high risk of waste abuse and mismanagement.”
As far back as 1981, a commission chartered by the Interior Department recommended raising onshore royalties and improving management of oil and gas leases.
In 2012, companies generated $66 billion from sales of oil and natural gas produced on federal lands and waters, according to GAO. Interior collected $9.7 billion in royalties from those companies.
Interior currently charges 18.75 percent royalties on new offshore leases, but just 12. 5 percent for onshore leases, despite similar market conditions. Increasing the royalty rate would increase revenue by an estimated $1.25 billion over 10 years, according to Interior.
Interior oversees oil and natural gas development on more than 260 million of land onshore, 700 million acres of subsurface rights, and more than 1.7 billion offshore acres offshore.