Mineral Resources:

Timely Processing Can Increase Rent Revenue From Certain Oil/Gas Leases

RCED-87-98: Published: Jun 18, 1987. Publicly Released: Jun 18, 1987.

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GAO reviewed Bureau of Land Management (BLM) procedures in Colorado and Wyoming to determine whether BLM increased rental rates in a timely manner for leases overlying known geologic structures (KGS).

GAO noted that, as of September 1986, BLM increased rents on 8.5 percent of Colorado's and Wyoming's federal oil and gas leases because BLM determined that they were overlying KGS. GAO found that the Colorado and Wyoming BLM offices: (1) did not make timely increases in 1984 and 1985, resulting in lost revenue of $552,614; and (2) did not increase rental rates for all leases determined to overlie KGS, causing an additional revenue loss of at least $15,123. GAO also found that BLM had inadequate internal controls to ensure that: (1) it informed state offices of all KGS determinations; (2) state offices increased rental rates once they were informed; and (3) state offices processed rental rates in a timely manner.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Through an instruction memorandum, dated May 7, 1987, BLM directed its field offices to immediately establish a system of consecutive numbering for KGS memos, and to send copies of KGS determinations simultaneously to both the oil and gas adjudication unit and records unit to expedite the rental rate process.

    Recommendation: To preclude further lost rent revenue for leases overlying KGS, the Secretary of the Interior should direct the Director, BLM, to establish adequate internal controls to ensure that BLM staff responsible for increasing rental rates are made aware of all KGS determinations. For example, such controls might include consecutive numbering of KGS determination memoranda and maintaining a log of all leases in processing.

    Agency Affected: Department of the Interior

  2. Status: Closed - Implemented

    Comments: Through an instruction memorandum, dated May 7, 1987, BLM directed its field offices to complete rental rate increases within 8 weeks from the time the KGS determination is received to the date that the notice of rental increase is sent.

    Recommendation: To preclude further lost rent revenue for leases overlying KGS, the Secretary of the Interior should direct the Director, BLM, to establish a specific time frame for processing KGS rental rate increases, such as the 8-week time frame used by the Interior Inspector General, and ensure that responsible BLM staff are aware of the established time frame.

    Agency Affected: Department of the Interior

  3. Status: Closed - Implemented

    Comments: Through an instruction memorandum, dated May 7, 1987, BLM directed its field offices to immediately conduct a review of all acreage which has been determined to be in a KGS to ensure that such acreage has had a rental rate increase.

    Recommendation: To preclude further lost rent revenue for leases overlying KGS, the Secretary of the Interior should direct the Director, BLM, to instruct each state office to determine if other leases subject to KGS determinations have not had rental rates increased as required and ensure that rental rates are increased appropriately.

    Agency Affected: Department of the Interior

 

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