WASHINGTON, DC -- Senator Jack Reed (D-RI) today joined his colleagues in calling on the Government Accountability Office (GAO) to review and report on the adequacy of the royalty accounting and collection process for oil and natural gas produced from federal and Indian leases. The Minerals Management Service (MMS), an agency within the U.S. Department of Interior (DOI), is responsible for the management of the program. Recent press reports have alleged that the MMS has under-collected on these leases, costing American taxpayers $700 million. In a separate letter, Reed called on the U.S. Department of Interior (DOI) to take steps to correct any under-collection of royalties from oil and natural gas on federal and Indian lands.Reed stated, In light of skyrocketing energy prices this winter, in addition to a soaring budget deficit, it is irresponsible for the federal government to not fully collect royalties on federal and Indian oil and natural gas leases. While rising energy prices threaten to financially overwhelm low-income families and seniors this winter, forcing them to choose between heating their homes and eating, it seems likely that uncollected revenues were not passed on to consumers, and instead increased the profit margins of the oil and gas industry.Families and seniors are expected to spend 32 percent more for heating oil, 48 percent more for natural gas and 30 percent more for propane this year. Text of the letter to GAO follows:The Honorable David M. WalkerComptroller GeneralU.S. Government Accountability Office441 G Street, N.W.Washington, D.C. 20548Dear Mr. Walker:The purpose of this letter is to request that the GAO undertake a review and report on the adequacy of the royalty accounting and collection process for oil and natural gas produced from Federal and Indian leases. As you know, the Minerals Management Service (MMS), an agency within the Department of the Interior, is responsible for the administration of the royalty management program. In this time of rising oil and gas prices, the program has been the subject of criticism for alleged under-collections resulting in the public not receiving fair value for its mineral resources. It is essential that the U.S. Treasury, the States and the Tribes receive the amounts owed to them for production from Federal and Tribal leases.Specifically, we request that you respond to the following questions: 1.At a time when prices for natural gas are increasing, why are royalty collections on federally-owned natural gas not increasing at a commensurate rate?2.Has MMS reduced the number of auditor positions? If so, how many positions have been cut? Why?3.Has MMS reduced the number of audits that it undertakes? How many audits were initiated in 2005 as compared to each of the five preceding years?4.Does MMS have adequate resources to ensure that the royalties are properly collected on Federal and Indian leases?5.Have funding levels for State and Tribal cooperative agreements for auditing been reduced? If so, please provide information regarding the amount of the reductions. How has this affected the amount of production that can be audited by States and Tribes on an annual basis?6.Are the deepwater royalty relief provisions being implemented in accordance with law? Is MMS collecting royalties in deepwater when the price reaches the threshold requiring royalty payment? If not, why not?7.Has MMS implemented all recommendations in the Department of the Interior Inspector Generals March 2003 Report that concluded that MMS audit process was ineffective because it lacked accountability, did not cover all audit work, and was incomplete?8.What is the basis for withholding information about royalty payments by individual payors? What reported information is proprietary? 9.What specific changes in the royalty collection process should MMS make to ensure that the U.S. Treasury, the States, and the Tribes get fair value for oil and gas resources produced from Federal and Indian leases? We hope that you will give this request the highest priority and provide a response within thirty days. Thank you for your attention to this important matter.Sincerely,Text of letter to DOI follows:The Honorable Gale NortonSecretaryU.S. Department of the Interior1849 C Street, NWWashington, DC 20240Dear Secretary Norton:We write in response to allegations in yesterdays New York Times article, As Profits Soar, Companies Pay U.S. Less for Gas Rights, which implies the Department of Interior has been grossly negligent in its duty to ensure Americans receive fair compensation for the use of their public lands for natural gas development. Specifically, a three month New York Times investigation found that even though energy costs have skyrocketed under the Bush Administration, the Department of Interior collected about the same amount of royalty payments from profit-rich companies as they did five years ago. The Times estimates that just last year, the Administrations lax enforcement and loophole-laden regulations may have short-changed American taxpayers by more than $700 million dollars. With natural gas costs busting American family budgets and harming our economy, it seems likely that these forgone revenues were not passed on to consumers, but rather, padded the profit margins of the oil and gas industry. Particularly at a time of soaring budget deficits, this situation is unacceptable. Yesterdays report highlighted a series of steps the Interior Department can take to remedy this situation, such as reinstating the full audits that have been scaled back during the Bush Administrationa step that has been criticized by the Interior Department Inspector General. Another initiative would require enforcement of existing rules, such as those requiring companies to start paying royalties when market prices reach a threshold level. Given the billions of dollars of lost revenue at stake, we hope the Department will take immediate action to remedy this situation on behalf of the American taxpayer. We would be willing to work with the Department to enact supportive legislation such as requiring greater transparency of oil and gas industry revenues, or support funding for additional auditors.In addition, we are troubled by the suggestion that companies involved in the federal leasing program have made differing representations of average natural gas costs to the Securities Exchange Commission and Department of Interiorboth of which are federal agencies. In order for Congress to carry out its own oversight responsibilities and probe the magnitude of these discrepancies, we respectfully request that you provide us with the average sale price of natural gas reported to the Department of Interior over the past five years, by each individual firm participating in the leasing program with revenues of over $500 million.We look forward to working with you on this matter, which is so crucial in ensuring a fair and transparent result for American taxpayers. Sincerely,