Feds not getting fair share of oil and gas dollars, report finds

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The federal government isn't getting its fair share of oil and gas revenues from drilling on federal land, according a report released Tuesday by government auditors.

The Government Accountability Office found that while oil and gas companies generated $66 billion from sales of hydrocarbons produced on federal offshore and interior lands in fiscal 2012, the Interior Department took in only about $10 billion from such activity.

That's a fairly low figure compared with other nations, the report said. It concluded that the agency lacks the internal mechanisms to constantly revise its procedures in the face of a changing U.S. energy landscape.

"[W]ithout periodically conducting such assessments, Interior cannot know whether there is a proper balance between the attractiveness of federal leases for investment and appropriate returns for federal oil and gas resources, limiting Interior's ability to ensure a fair return," the report said.

Still, Interior has made some improvements, according to the report. It bumped up royalty rates for offshore energy to the current 18.75 percent, and it is looking at ways to simplify the royalty process.

That has helped increase the revenues the Treasury collects from federal oil and gas development compared with a 2007 report that said the return for the federal government ranked among the lowest in the world.

Onshore royalty rates, however, remain at 12.5 percent. And auditors underscored the department's previous attempts at revising oil and gas revenue collection, noting that Interior cannot provide "reasonable assurance" that it will "consistently" revisit the issue.

Sen. Ron Wyden, D-Ore., chairman of the Senate Energy and Natural Resources Committee, said the report indicated that it's not clear Interior "has always kept up with the times."

Wyden, among others, has argued that state and local governments are getting short shrift when it comes to energy production on federal lands, as a sizable portion of the royalties petroleum companies pay for onshore production flows back to state and Indian tribal governments. States currently don't receive revenues for offshore energy development, though a handful of Gulf Coast states will begin to in 2017.

“There remains an obligation to the American taxpayers to make sure they are getting a fair return for commercial use of their public lands. Since a major share of onshore royalties also go to states and Indian tribes, shortcomings in royalty collections also short those states and tribes,” Wyden said.

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