Improvements Needed in the Department of the Interior's Measurement of Offshore Oil for Royalty Purposes

RCED-84-78: Published: Apr 30, 1984. Publicly Released: May 30, 1984.

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Pursuant to a congressional request, GAO reviewed the Department of the Interior's activities relating to the measurement of oil produced on the Outer Continental Shelf, focusing on: (1) identifying the procedures Interior uses to ensure that offshore oil production is measured accurately for royalty purposes; (2) determining whether offshore operators are complying with regulations concerning the accuracy of production measurement devices; (3) determining whether Interior uses production measurement data to ensure that sales volumes are reported accurately; and (4) reviewing the extent to which data are being considered for inclusion in the new Automated Royalty Management Program.

GAO found that, although regulations require that offshore operators test production measurement devices and report test results to Interior on a monthly basis, the Minerals Management Service (MMS) did not receive approximately 30 percent of the required reports during 1982. Further, MMS did not: (1) identify from test results some meters that were not functioning properly; (2) follow up on meters that were reported as operating improperly; or (3) take corrective measures, such as adjusting reported sales volumes for federal royalty purposes. MMS officials attributed the lack of control over test results to a shortage of personnel and indicated that an automated system for receipt, review, and follow-up of information might be the solution. Although Interior is developing two nationwide automated royalty management systems, it does not plan to include detailed meter-testing data to verify the accuracy of offshore oil sales volumes in either system. MMS plans to include this type of data in its regional automated information system, which may be used in conjunction with the nationwide systems. GAO believes that further measures will be needed in conjunction with the automated systems to fully ensure that accurate data are being used to compute royalties.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Interior matched a sample of meter-testing reports to run tickets until a computerized system became operational. The computer system has been developed and will be fully operational by January 1989.

    Recommendation: To better ensure that sales volumes are accurately reported for royalty payment purposes in the Gulf of Mexico Region, the Secretary of the Interior should require the Director, MMS, to implement plans for improved receipt and review of meter-testing reports and make greater use of the data it receives for this purpose. Through the use of additional staff recently assigned and adoption of automation, to the extent possible, meter-testing reports should be matched with run tickets on a selective basis.

    Agency Affected: Department of the Interior

  2. Status: Closed - Implemented

    Comments: Interior developed an automated Liquid Verification System to complete a 100-percent verification of the meter-testing reports with run tickets. MMS plans to have the system fully operational by January 1989.

    Recommendation: When the Auditing and Financial System and the Production Accounting and Auditing System (PAAS) becomes fully operational, the Secretary of the Interior should require the Director, MMS, to use the meter-testing and run ticket data from its Gulf of Mexico Region's automated information system in conjunction with PAAS, to verify that reported sales volume measurements are accurate by matching meter-testing reports with run tickets as a routine audit procedure.

    Agency Affected: Department of the Interior


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