U.S. Interior Still Isn't Able to Assure on Federal Oil Income

WASHINGTON (Dow Jones), Apr. 15, 2010

The Interior Department still isn't able to assure that oil and natural gas production on federal leases are measured accurately, a key metric determining federal revenues from the industry, a government auditor's report said Wednesday.

The Government Accountability Office report follows several years of scandal at Interior over revenue collection from petroleum leases and comes after the Obama Administration promised to reform the program.

Frank Rusco, head of GAO's Natural Resources and Environment division, said Interior's policies for measuring and auditing production volumes resulted in increased risk of inaccurate oil and gas evaluations. Adding to the problems, the department hadn't clarified its oversight authorities and was facing future hurdles from an under-trained and under-staffed agency.

The Bureau of Land Management was particularly targeted by the GAO report, failing to meet its annual goals for inspecting oil and gas leases under a revised strategy and falling behind industry standards for data review and software.

Responding to the report, the Interior Department agreed with most of the GAO recommendations to reform the system. The Department rejected a recommendation, however, for Congressional oversight of part of its program, instead wanting only the Secretary to review the results of a recommended study.

"We believe that Interior could provide the results of a study to the Secretary as an interim measure, but given this technology's potential to significantly improve Interior's production verification efforts, Congress should have clear and thorough information available to it when determining how federal funds are spent," Rusco said.

Darrell Issa, ranking member of the House Oversight and Government Reform Committee, said the GAO report shows that despite Secretary Ken Salazar's efforts to restructure the oil revenue program, "The Interior Department is still guilty of a breach of fiduciary duty to the American people."

"This report confirms that the bureaucracy at the Interior Department continues to defeat efforts by both Democratic and Republican Administrations to hold it accountable and institute needed reforms."

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