Mineral Revenues:

Coal Lease Readjustment Problems Remedied but Not All Revenue Is Collected

RCED-87-164: Published: Aug 25, 1987. Publicly Released: Sep 9, 1987.

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In response to a congressional request, GAO provided information on: (1) the Department of the Interior's Bureau of Land Management's (BLM) progress in readjusting federal coal leases scheduled for readjustment through September 30, 1986; (2) the adequacy of BLM collection of royalties and rent resulting from the required readjustments; and (3) the adequacy of the bonds it required from lessees to protect the federal government against the loss of revenue that accrued while lessees appealed readjustments.

GAO found that: (1) between 1976 and 1984, BLM failed to readjust 149 federal coal leases by their lease anniversary dates and, as a result, lost an estimated $187 million in royalty and rent payments; (2) BLM appears to have corrected the problem, since from 1985 through the end of fiscal year 1986, BLM readjusted all but one federal coal lease on time; (3) as of September 30, 1986, the Minerals Management Service (MMS) had not collected over $12.6 million in royalties and rent in five states because of inadequate financial management controls; and (4) BLM frequently failed to protect the government's financial interest by not requiring bond amounts that were adequate to cover the revenues that accrued while lessees appealed the readjustments.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: BLM has agreed to send MMS a copy of its nationwide quarterly lease readjustment report. MMS checks the information contained in the report against its records. If its records identify missing documents, MMS contacts the appropriate BLM state office and requests the missing documents.

    Recommendation: The Secretary of the Interior should instruct the Director, BLM, to incorporate in the BLM coal lease readjustment procedures a list of specific lease readjustment documents that state offices should provide to MMS.

    Agency Affected: Department of the Interior

  2. Status: Closed - Implemented

    Comments: BLM has agreed to send MMS a copy of its nationwide quarterly lease readjustment report. MMS checks the information contained in the report against its records. If its records identify missing documents, MMS contacts the appropriate BLM state office and requests the missing documents.

    Recommendation: The Secretary of the Interior should instruct the Director, BLM, to establish a system to consistently provide lease readjustment documents from state offices and other lease documents to MMS.

    Agency Affected: Department of the Interior

  3. Status: Closed - Implemented

    Comments: A final rule was issued in the Federal Register on September 26, 1988, revising 43 C.F.R. 3451.2 to require that lessees make rent and royalty payments at the readjusted rates while the lease is under appeal.

    Recommendation: The Secretary of the Interior should instruct the Director, BLM, to ensure that BLM continues to develop and issue a regulation requiring lessees to pay the readjusted rates while a lease is under appeal with the Interior Board of Land Appeals (IBLA).

    Agency Affected: Department of the Interior

  4. Status: Closed - Implemented

    Comments: In response to the GAO report, MMS collected $20.6 million in royalties, rent, and interest as of December 31, 1989.

    Recommendation: The Secretary of the Interior should instruct the Director, MMS, to ensure that the MMS financial management system identifies the nonpayment or underpayment of rent.

    Agency Affected: Department of the Interior

  5. Status: Closed - Implemented

    Comments: A final rule was issued in the Federal Register on September 26, 1988, revising 43 C.F.R. 3451.2 to require that the lessee make rental and royalty payments at the readjusted rates while the lease is under appeal.

    Recommendation: Pending the issuance of a regulation requiring lessees to pay the readjustment rates while a lease is under appeal with IBLA, the Director, BLM, should notify BLM state and district office staff and MMS officials that the term appeal, in current BLM regulations, refers to the IBLA appeal.

    Agency Affected: Department of the Interior: Bureau of Land Management

 

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