Energy Management:

States' Use and DOE Oversight of Exxon and Stripper Well Overcharge Funds

RCED-88-152: Published: Jun 14, 1988. Publicly Released: Jul 18, 1988.

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In response to a congressional request, GAO evaluated states' use of over $3 billion from certain oil overcharge cases to determine whether: (1) states' use of the funds, including interest, met legislative and judicial requirements; and (2) the Department of Energy's (DOE) plans for monitoring states' use of the funds also met the requirements.

GAO found that: (1) the seven states it reviewed planned to use the funds on allowable projects, such as providing restitution to injured parties through energy conservation or energy assistance; (2) DOE approved the states plans to use $57.8 million, or 16 percent of the funds, for road and bridge repair, research, and other projects that directly benefited state and local governments, but which DOE had previously considered not to be restitutionary or energy-related; and (3) DOE relied on states to carry out on-site monitoring of the funds' use. GAO also found that: (1) DOE procedures for monitoring state use of nongrant funds were inadequate because they did not provide on-site monitoring or establish expectations for states; (2) as of June 30, 1987, the states approved plans to spend an estimated $67 million on nongrant projects; (3) DOE relied on field offices to develop monitoring procedures to ensure that states spent interest earned from the funds on energy-related programs; (4) five of the seven states it reviewed met the requirement to credit interest earned to oil overcharge accounts, while the other two credited approximately $3 million in interest to other program accounts; and (5) two states used about $17.7 million of the funds to supplant state funds, while another used $1.7 million to reduce its funding of a project.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: DOE believed its existing procedures are adequate and, accordingly, plans to take no action to implement the recommendation.

    Recommendation: The Secretary of Energy should direct the Assistant Secretary for Conservation and Renewable Energy to: (1) formulate, for stripper well funds used for nongrant projects, monitoring procedures that comply with the Petroleum Overcharge Distribution and Restitution Act of 1986 requirement that all stripper well funds distributed to states be monitored in a manner substantially similar to the distribution of funds under the Warner Amendment; and (2) ensure that DOE field offices develop and implement monitoring procedures that adequately detect states' improper use of interest earned on Exxon and stripper well funds and states' use of Exxon and stripper well funds to supplant state funds.

    Agency Affected: Department of Energy


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