Mineral Revenues:

Opportunities To Increase Onshore Oil and Gas Minimum Royalty Revenues

RCED-86-110: Published: Jun 24, 1986. Publicly Released: Jun 24, 1986.

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GAO reviewed the Department of the Interior's administration of federal oil and gas leases to determine: (1) whether Interior has collected all minimum royalties due the government; and (2) if the current minimum rate is still appropriate.

GAO noted that the Bureau of Land Management maintains the official records on lease status and acreages subject to rents or royalties, and the Minerals Management Service (MMS) collects and disburses lease revenues to recipients. GAO found that: (1) although oil and gas rental rates have increased during the past 40 years, the minimum royalty rate of $1 per acre has not; and (2) in fiscal year 1985, MMS did not collect $1.7 million because it received no royalties from approximately 1.4 million acres.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: MMS initiated a project to clean up its database for minimum royalty and rent payments, and to install a program in the system to prevent future undercollections. The project was completed in 1987. The final savings has not yet been calculated, but will be included in a GAO accomplishment report.

    Recommendation: The Secretary of the Interior should require the Director, MMS, to recover uncollected or undercollected minimum royalties and related interest, as required by statute.

    Agency Affected: Department of the Interior

  2. Status: Closed - Implemented

    Comments: MMS initiated a project to clean up its database for minimum royalty and rent payments, and to install a program in the system to prevent future undercollections. The project was completed in 1987. The final savings has not yet been calculated, but will be included in a GAO accomplishment report.

    Recommendation: The Secretary of the Interior should require the Director, MMS, to monitor existing leases to ensure that minimum royalties are paid.

    Agency Affected: Department of the Interior

  3. Status: Closed - Not Implemented

    Comments: Congress considered several bills on oil and gas leasing. Among these were proposals to increase the minimum royalty and/or redefine minimum royalty. Congress and Interior do not see a need to push this issue now because of oil industry weaknesses.

    Recommendation: The Secretary of the Interior should develop and submit to Congress a legislative package amending the Mineral Lands Leasing Act of 1920 to specifically authorize him to adjust the minimum royalty rate. In the event legislation passes authorizing Interior to do so, the minimum royalty rates for newly issued leases should be adjustable during the lease terms according to their current circumstances.

    Agency Affected: Department of the Interior

  4. Status: Closed - Implemented

    Comments: MMS moved directly to database clean-up, therefore, it did not initiate the interim step.

    Recommendation: Until an automated computer monitoring system is developed, MMS should use the existing Minimum Royalty Schedule Data Listing report to carry out recommended actions.

    Agency Affected: Department of the Interior: Minerals Management Service

 

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