|Secretary Kempthorne formed the panel last year, charging it to conduct a full and candid assessment of the Department's mineral revenue management system. The recommendations were developed by a bipartisan panel led by former U.S. Senators Bob Kerrey and Jake Garn.
WASHINGTON, D.C. – Secretary of the Interior Dirk Kempthorne today received the final report of an independent panel that recommended more than 100 actions to improve the Department’s minerals revenue management program, and he has ordered top officials to begin implementing recommendations that can be carried out administratively.
“I have directed that the Department take all necessary steps to implement those recommendations immediately,” Kempthorne said. “Where it is within our power to do so, the responsible officials will take administrative action to rectify identified problems. However, other recommendations may require further study or legislative action.”
The Secretary also noted that some of the recommendations will need to be explored further through consultations with state and American Indian officials, and in some cases, industry organizations, before they can be adequately implemented.
Kempthorne’s directive was sent through C. Stephen Allred, the Assistant Secretary for Land and Minerals Management, to Randall B. Luthi, Director of the Minerals Management Service (MMS), and James L. Caswell, Director, Bureau of Land Management (BLM). The agencies must also develop an action plan based on the report’s recommendations and submit a progress report to the Secretary within 30 days.
Among the recommendations that are now being implemented, MMS is providing additional ethics training for all employees, in addition to the standard training requirement, and specifically for those who deal with industry in a regulatory, collections or enforcement role. The agency also is upgrading its communication and coordination to ensure the accuracy of lease and royalties collection data. In addition, MMS recently issued an Indian Oil Valuation Rule to provide added certainty to the valuation of oil produced from American Indian lands, a key issue noted by the independent panel.
The recommendations were developed by a bipartisan panel led by former U.S. Senators Bob Kerrey and Jake Garn. Kempthorne formed the panel last year, charging it to conduct a full and candid assessment of the Department’s mineral revenue management system. He gave the panel a free hand to scrutinize all key processes, from production accountability and royalty collections to audits, compliance and enforcement.
While the seven–member panel found that MMS employees are genuinely concerned with fostering continued program improvements and that, overall, MMS is an effective steward of the Minerals Revenue Management Program, it concluded that the Department’s royalty management program could be improved in several key areas.
The panel forwarded the report on its findings and recommendations to the Department’s Royalty Policy Committee on December 18, 2007. The Committee reviewed and accepted the report at its Jan.17, 2008 meeting and sent it to the Secretary for action.
The report noted that there has been considerable controversy surrounding the program; that Congress has raised concerns about inadequacies in the mineral leasing and revenue collection processes; and that Interior’s Inspector General has investigated allegations of ethical lapses of personnel in the royalty in kind (RIK) program.
The report identifies, however, a number of advantages for the Federal Government by receiving royalties in kind and suggests ways to strengthen that process, while recognizing that MMS has effectively taken a small, pilot program and turned it into what is a now a major component of the royalty management program.
“We believe that implementing the recommendations in this report will greatly strengthen the management of the program, will restore public confidence, and will ensure maximum value for the U.S. taxpayer,” Sens. Kerrey and Garn said in a joint statement announcing the independent panel’s conclusions.
MMS collected more than $11.4 billion in royalties in 2007, disbursing the revenue to states, American Indians, and the U.S. Treasury. Since it was established in 1982, MMS has collected and disbursed more than $176 billion in oil, natural gas and other mineral royalties. Multiple audits conducted by KPMG for the Department’s Office of the Inspector General over the past six years have found that MMS is accurately accounting for and collecting royalties due to the American people for energy development on Federal lands. Additionally, the agency recently eliminated a backlog of interest payments and revised its audits and compliance manuals to bring them up to date with current procedures, both items recommended by the Inspector General.
For additional information on the report, contact Larry Finfer at 202-208-5978 or via email at Larry_Finfer@ios.doi.gov. The report is online at the following site: http://www.mrm.mms.gov/Laws_R_D/RoyPC/PdFDocs/RPCRMS1207.pdf