The Minerals Management Service received criticism of its royalty collection practices today in a report released by the Department of the Interior's Inspector General.
The report analyzes Minerals Management Service systems for gauging whether companies are fully paying royalties they owe for oil-and-gas production on federal lands and waters and finds the agency does not adequately evaluate company-reported production data.
"This increases the risk that MMS may not detect underpaid royalties," the report says. It also cites a host of data-management problems.
The inspector general examined MMS "compliance reviews," which require fewer resources and allow "broader coverage" than a full-scale audit, the report says. While the reviews are a "legitimate tool," reliance on company reported data is dangerous when MMS does not adequately verify the information, it says.
Citing "insufficient volume analysis," the report says, "Without additional analytical steps, MMS has no assurance that the reported production amounts are reasonable."