Waste of the Day: Oil and Gas Royalties Under Collected
Topline: The Department of the Interior does not have a data model that can ensure the government is accurately collecting royalty payments for oil and gas drilled on federal land, according to the Government Accountability Office.
Key facts: The Department of the Interior leases 23.7 million acres of federal land to drilling companies, who must pay royalties of 12.5% to 18.8% on all gas and oil they sell using the land. From 2012 to 2022, drilling companies on federal land sold $600 billion of gas and oil and paid $74 billion in royalties.
The department conducts audits and compliance reviews to make sure companies are paying their fair share, but not as often as it used to. There were 136 audits in 2012 that collected an extra $100 million of royalties, but just 51 audits in 2022 that collected only $24 million.
The department has no idea how many other companies are failing to pay their royalties.
The GAO wrote last August that the department has not used a data model to estimate missed royalty payments since 2011, and even that model had “design and data limitations.” The GAO tried to adapt an IRS data model to estimate missed royalty payments, but the Department of the Interior’s data records are not “sufficient” to use a more advanced model.
The department blamed its lack of oversight on staffing shortages. While it’s true that staff headcount has fallen — from 79,048 in 2010 to 62,890 — the agency’s spending has soared, OpenTheBooks found. The Department of the Interior spent $13.2 billion in 2010 and $23.1 billion in 2024.
The GAO also noted that the department is not “prioritizing hiring staff with data analysis skills.” Even with those vacancies, OpenTheBooks’ data shows an agency payroll of $5.9 billion in 2024. There were 258 employees making more than $200,000.
Search all federal, state and local government salaries and vendor spending with the AI search bot, Benjamin, at OpenTheBooks.com.
Summary: Oil and gas royalties are one of the government’s largest sources of non-tax revenue. Every dollar that is not collected makes it more difficult to reduce taxes for the general public.
The #WasteOfTheDay is brought to you by the forensic auditors at OpenTheBooks.com
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