The U.S. Department of the Interior (DOI) continues to face challenges in collecting revenues from onshore oil and gas production on federal lands and the hiring and retention of staff, and must continue implementing recommendations made by U.S. Government Accountability Office (GAO) to address both issues.
DOI continues to face challenge in both areas for onshore oil and gas following the reorganization in July 2012 of DOI’s oversight for offshore oil and gas activities, GAO noted in its 2013 High Risk report. As part of this reorganization, two separate bureaus, the Bureau of Ocean Energy Management (BOEM) and the Bureau of Safety and Environmental Enforcement (BSEE), were established in place of the U.S. Minerals Management Service.
GAO in 2010 reported that the Bureau of Land Management (BLM) and the U.S. Minerals Management Service (MMS), the predecessor agency of BOEM and BSEE failed to meet their agency goals for verification inspections of oil and gas production, meaning that DOI could not provide reasonable assurance that the public’s legal share of oil and gas development revenue was being collected. BLM has overseen onshore oil and gas activities, while MMS managed offshore oil and gas activities.
In 2009, GAO reported that it found numerous problems with DOI’s efforts to collect data on oil and gas production on federal lands, including missing data, errors on company-reported data on oil and gas production, sales data that failed to reflect prevailing oil and gas market prices and a lack of controls over changes to data reported by companies.
While DOI generally agreed with recommendations made by GAO to improve controls over the accuracy and reliability of royalty data, DOI’s efforts are incomplete, and it remains uncertain at this time whether these efforts will be fully successful, according to the GAO report. GAO noted that DOI contracted for a study as part of its comprehensive reassessment of DOI’s revenue collection policies and processes. That study has been completed, But DOI is still trying to determine if and how to use the results of the study to alter its lease terms.
BLM, BOEM and BSEE have all encountered persistent problems in hiring, training and retaining staff. In 2010, BLM and MMS experienced high turnover rates in key oil and gas inspection and engineering positions. This turnover makes it challenging for DOI to oversee oil and gas development on federal lands, placing the environment and royalties at risk, GAO noted.
The agencies facing ongoing human capital challenges for both offshore and onshore resources, GAO noted. U.S. Congress provided funds for fiscal years 2012 and 2013 to provide funds to BOEM and BSEE in the Gulf of Mexico to establish higher minimum rates of pay for key positions, primarily geophysicists, geologist and petroleum engineers, for up to 25 percent of the usual minimum pay rate. However, DOI has not received congressional approval or funds to establish higher minimum rates of pay for key positions as BOEM and BSEE did.
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