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Mineral Revenues: Progress Has Been Slow in Verifying Offshore Oil and Gas Production

RCED-90-193 Published: Aug 31, 1990. Publicly Released: Jan 11, 1991.
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Highlights

Pursuant to a congressional request, GAO reviewed the Department of the Interior's actions to: (1) verify the accuracy of reported offshore oil and gas production; and (2) annually inspect certain offshore lease sites.

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of the Interior Because of the need to ensure that the volume of oil and gas produced from federal leases is accurately reported for purposes of determining royalties, the Secretary of the Interior should direct the Director, MMS, to include FMP in the Pacific region in the automated oil verification program.
Closed – Implemented
MMS included FMP in the Pacific region in the automated oil verification system, beginning with June 1990 production data.
Department of the Interior Because of the need to ensure that the volume of oil and gas produced from federal leases is accurately reported for purposes of determining royalties, the Secretary of the Interior should direct the Director, MMS, to complete the gas verification pilot program and move quickly to implement an ongoing production verification program. At a minimum, MMS should verify gas volumes for all high-producing leases and leases with a history of noncompliance, as well as randomly verify production from a sample of the remaining leases.
Closed – Implemented
In a 1993 pilot study, MMS verified the gas production reported by three large producers for three months and found discrepancies in 7 percent of the statements reviewed; the pilot's final report, suggested phasing in a gas verification system. In 1997, MMS proposed rules that would require companies to submit the data needed to ensure accurate measuring and reporting of gas production and would provide the agency the authority to collect such data. In May 1998, MMS published its final rule implementing a system to verify that gas sales are reported accurately. MMS' initial sampling approach requires that production from high-producing leases be verified for a specific month annually and that production from other leases be verified for a specific month biennially. Although the sampling approach does not explicitly target leases with histories of noncompliance, any compliance problems noted by field inspectors will be followed up to determine if the problem affects reported production.
Department of the Interior Because of the need to ensure that the volume of oil and gas produced from federal leases is accurately reported for purposes of determining royalties, the Secretary of the Interior should direct the Director, MMS, to define the terms significant quantities of oil or gas and history of noncompliance and ensure that lease sites meeting those criteria are annually inspected as required by FOGRMA.
Closed – Not Implemented
MMS has not defined the terms "significant quantities of oil or gas" and "history of noncompliance" to ensure that lease sites meeting these criteria are annually inspected as required by FOGRMA. Instead, MMS believes that its annual inspections of all offshore facilities for safety and environmental purposes largely satisfy the FOGRMA inspection mandate.

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Topics

Data collectionFederal property managementGas leasesInspectionNoncomplianceOffshore oil resourcesOil leasesPublic landsReporting requirementsRoyalty payments