Editorial: Overhaul royalty collection at Interior

Tuesday, January 2, 2007  

"Starting in the Clinton administration, Washington began offering generous incentives in the form of royalty relief to oil companies to encourage deep-water exploration in the Gulf of Mexico. The motives � increasing domestic production, lowering prices, reducing America�s dependence on foreign oil � were all worthy. But judging by recent reports, the whole apparatus needs a thorough review and, more than likely, a thorough overhaul.

Representative Nick Rahall, a Democrat from West Virginia and the new chairman of the House Resources Committee, has promised just such a review. It is important that it be conducted in a nonpartisan spirit, and that the program not be rejected out of hand. But the question has to be asked whether the program is really worth it.

A new report from a private consulting firm suggests that it may not be. Commissioned by the Interior Department�s Minerals Management Service, the report projects that over a 40-year period beginning in 2003, the incentive program would lead to the discovery of only 1.1 percent more oil reserves than would be found with no incentives at all. This is a tiny impact that is far exceeded by swings in market prices, which have much more to do with whether a company is willing to risk millions of dollars on what could turn out to be dry holes.

Meanwhile, the report suggests, the royalty relief program would cost the American taxpayers $48 billion over the same time frame. If all that is true, the country will certainly be getting very little for its money."

Get the Story:
Editorial: Cleaning Up the Royalty Mess (The New York Times 12/26)
pwnyt

Inspector General Report:
Minerals Management Service's Compliance Review Process (December 2006)

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 - http://www.ost.doi.gov

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