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Congress urged to study royalty collection at DOI

The chief investigator for Congress is urging lawmakers to ensure taxpayers are receiving the fair value for oil and gas drilling on federal lands.

In his first-ever letter to the top lawmakers, the head of the Government Accountability Office (GAO) identified royalty collection as a top priority for the 110th Congress. Citing rising oil and gas prices, comptroller general David M. Walker suggested the energy industry is getting rich on the backs of the American public.

"About 35 percent of the oil and 26 percent of the natural gas produced in the United States come from federal and Native American lands," Walker said in the November 17 letter.

The Minerals Management Service, an agency of the Interior Department, collects oil and gas royalties for development on federal and Indian lands. MMS has a trust responsibility to ensure tribes and individual Indians receive the money they are owed.

Walker said MMS collected about $8 billion in royalty payments in fiscal year 2005. That's about an 8 percent increase from 2001, the start of the Bush administration, which has encouraged more development.

But the amount pales in comparison to the 90 percent increase in oil prices and the 30 percent increase in gas prices during the same time, "raising questions about whether these royalties reflect the full value these companies should pay," he added.

Walker recommended Congress examine the issue once Democrats take over the House and Senate in January 2006. He cited a potential loss of $60 billion in oil and gas revenues due to leases on federal lands that give energy companies "relief" from paying the royalties.

Republicans already started to investigate the controversy after it was reported in The New York Times. In September, Rep. Tom Davis (R-Virginia), and Rep. Darrell Issa (R-California), two outgoing leaders on the House Government Reform Committee, held hearings with the provoking title: "Interior Department: A Culture of Managerial Irresponsibility and Lack of Accountability?"

The hearings elicited some headline-grabbing testimony from Earl E. Devaney, Interior's inspector general. "Simply stated, short of a crime, anything goes at the highest levels of the Department of the Interior," Devaney said.

Key Democrats plan to continue the charge. Rep. Nick Rahall (D-West Virginia), who is in line to head the House Resources Committee, has vowed to "royalty holidays" for oil and gas companies.

Whereas Republicans focuses on leases for federal lands, Rahall and other Democrats could put more heat on Indian trust issues. Tribes who sit on the State and Tribal Royalty Audit Committee, whose role was recently reduced by the Bush administration, say they have been shortchanged billions by MMS.

Sen. Tim Johnson (D-South Dakota), a leading member of the Senate Indian Affairs Committee, also requested a GAO investigation into the Office of Special Trustee, whose management and ethics behaviors have been called into question. OST is responsible for ensuring the royalties from MMS are put into the right accounts for tribes and individual Indians.

GAO Letter:
Suggested Areas for Oversight for the 110th Congress (November 17, 2006)

Inspector General Testimony:
Devaney Interior Department: A Culture of Managerial Irresponsibility and Lack of Accountability? (September 2006)

Inspector General Report:
Allegations Concerning Senior Officials of the Office of Special Trustee for American Indians (May 2005)

Relevant Links:
Government Accountability Office:
Office of Special Trustee -