Processing Magazine

Audit finds U.S. Government could lose millions in gas royalties

September 15, 2009

Congressional auditors reveal the federal government risks losing millions of dollars in royalties from natural gas production because it does not promptly determine and collect when it gets shortchanged, according to the Associated Press. The Government Accountability Office said in a report that the Minerals Management Service, which manages oil and gas production on public lands, does not have the tools or staff necessary to check that companies are paying the government what it is owed in royalties. The report specifically looks at royalty-in-kind. Under this program, companies producing gas on federal lands and offshore pay the government with gas rather than cash. The government then sells the gas. The agency estimates that it is owed $21 million, but the figure could be larger. That''s because the government is not verifying how much gas company’s produce and it does not include interest, because MMS has not determined when interest should accrue on unpaid royalties. The government collected more than $12 billion in royalties last year from oil and gas production offshore and on federal lands. About $2.4 billion came from natural gas royalty-in-kind payments. The report is the latest to expose shortcomings in the government''s management of oil and gas revenue. Earlier reports found problems with the oil royalty-in-kind program and highlighted how the U.S. government receives much less percentage-wise than what other countries collect from their oil and gas production.