Refunds of Excess Royalty Payments

GAO was asked whether the Department of the Interior could use the permanent appropriation contained in 31 U.S.C. 725q-1 to effect the refund of overpayments made by refiners purchasing Federal royalty oil produced from the outer continental shelf. Interior leases the right to extract crude oil from the outer continental shelf to private firms and takes some of the oil extracted under these leases as payment in kind. That oil is sold to small refiners in order to assure them of a constant supply in times of shortage. Interior routinely bills these small refiners at the same price for which the lessees are selling their portion of the oil. The oil purchases in question were subject to Department of Energy price controls. The lessee had received a limited exemption from the price controls because it had started a tertiary recovery project. Under this exemption, the lessee is permitted to sell enough oil to recover the expenses of the project at market price. Interior billed the refiners at the uncontrolled market price. The refiners paid the higher price, but filed appeals contesting Interior's right to bill them at that price. It was determined that Interior did not qualify to receive the market price for the Government's sale of the oil produced from this lease. Interior wished to return this excess, but since both refiners have canceled their contracts with Interior, crediting the overpayments against the refiner's future payments under their royalty oil contracts was impossible. Further, since the royalties and overcharges collected by Interior were deposited into the Treasury as miscellaneous receipts, there was no specific appropriation available to pay these refunds. Therefore, the appropriation created by 31 U.S.C. 725q-1 which concerns refunds of monies erroneously received and covered could be used to refund the overcharges collected from the refiners, if such refunds were otherwise proper.