Mineral Revenues:

Interior Used Reasonable Approach to Assess Effect of 1988 Regulations

RCED-91-153: Published: May 30, 1991. Publicly Released: May 30, 1991.

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Pursuant to a congressional request, GAO examined the effect the Department of the Interior's March 1988 oil and gas product valuation regulations had on royalties from Indian and federal onshore and offshore leases, focusing on the: (1) anticipated and actual effects of the revised regulations; and (2) reasonableness of the methodology used by Interior's Mineral Management Service (MMS) to assess the regulations' effects.

GAO found that: (1) the regulations standardized the procedures for computing onshore and offshore gas processing allowances and established a uniform procedure for computing transportation allowances; (2) MMS believed that a change in the way processed gas was valued could decrease royalties from onshore leases, while changes in the way allowances were determined could either increase or decrease royalties, depending on the type of allowance; (3) after consideration of volume and price adjustments, onshore, Indian, and offshore lease royalties varied both before and after the revised regulations became effective; and (4) MMS methodology to assess the effect of the revised regulations on royalties was reasonable, but states and tribes expressed concern that the reports did not analyze data by individual state and tribe.

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