Presidential appointment and Congressional confirmation of the director of the Department of Interior's Minerals Management Service (MMS) "would provide additional oversight and scrutiny of the agency, as well as elevate the status of one of the largest non-tax revenue operations within the federal government," a taxpayer watchdog group is slated to tell a Congressional subcommittee last week.
In response to a December report to the MMS Royalty Policy Committee, Project on Government Oversight (POGO) Executive Director Danielle Brian is set to tell a House subcommittee on energy and mineral resources that "it is easy to conclude that MMS and its revenue collection agency, Minerals Revenue Management (MRM), are failing to effectively collect taxpayer money."
The December report was conducted by the Royalty Management Subcommittee under the auspices of the Royalty Policy Committee, an independent advisory board appointed by the Interior secretary to advise the MMS on royalty management issues and other mineral-related policies (see NGI, Dec. 24, 2007).
Interior Secretary Dirk Kempthorne established the subcommittee in November 2006 in an effort to quell congressional criticism of Interior's royalty-collection practices, which came under attack for the agency's failure to include price ceilings in 1998 and 1999 Gulf of Mexico leases (see NGI, Nov. 20, 2006). The Government Accountability Office has estimated the oversight could cost the federal government up to $10 billion dollars in lost royalties over the life of the flawed leases.
POGO also recommends moving the compliance and audit function out of MMS. "The same people responsible for working with companies to see that federal lands are used to their greatest leasing potential and working in partnership with those companies to sell royalty oil should not also be in charge of auditing those companies," Brian's testimony reads.
She also calls for "an independent public study of the royalty in kind program and its use to fill the nation's Strategic Petroleum Reserve...to determine if this is in the best interest of the taxpayers. While this program may have many benefits, evidence is mounting that it compromises the integrity of the agency and squanders taxpayer money through inefficiencies."
Additionally, POGO urges Congress to reject the recommendation that a trust fund be created with interest used to fund audit and compliance activities that lack Congressional approval. "Rather, we urge the Congress to reign in all spending activities outside the annual Congressional appropriations process."
Finally, POGO recommends that Congress carefully consider moving to market indices for gas valuation, whether for affiliated transactions or not, in light of attempted price manipulation by some parties.
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