US Legislation: The "Practice What You Preach" Bill

Though most of Revenue Watch's work focuses on extractive industry revenue management in developing countries, developed countries are by no means immune from revenue mismanagement. The US system for managing royalties from oil and gas produced on federal lands has been the subject of criticism from several oversight groups, and could be greatly improved. Better revenue management will not only insure that US citizens receive their due from the country's substantial (though diminishing) petroleum reserves, it will also make it easier for the US and US-based organizations like RWI to make a compelling case for improved revenue management worldwide.

RWI is supporting research into how the United States can best improve its management of oil and gas revenues, with the goal of developing recommendations for legislative improvements to the system. At a minimum, Congress should adopt a short amendment directing the Department of the Interior (DOI) to:

  • Make public all contracts and annual production and price statistics, in a clear and easily accessible manner on the DOI website.
  • Conduct regular audits of leases that generate a threshold amount of revenues.
  • Submit to Congress an annual public report on all enforcement actions undertaken, on a case-by-case basis.

Because of the size and strategic importance of US oil and gas royalties, the Interior Department's management of these public resources has come under appropriate scrutiny from a variety of sources, from Congress and the press, to private citizens (including former Department officials) bringing lawsuits, to a report by the Department's own inspector general. These inquiries have exposed serious weaknesses in resource management by the Department of the Interior and its Minerals Management Service (MMS)/Minerals Revenue Management program (MRM):

  • DOI cannot verify how much oil and gas is actually being produced on public properties.
  • It does not verify the validity of the costs that companies deduct before royalties are applied (and lawsuits and other actions have exposed large-scale exaggerations and consequent underpayment to the government by companies).
  • DOI's accounting does not accurately reflect all audits and penalties recovered.
  • Department auditors have quit in protest and testified that their superiors discouraged aggressive investigations and pursuit of recoveries.
  • Investigations are underway of favoritism in the government's assignment of mineral leases.

Moreover, secrecy within the royalty management system hampers proper public and congressional oversight, and compounds the weaknesses of DOI's internal oversight and management systems. This anti-transparency climate is also inconsistent with US support for EITI internationally. A fundamentally different approach to domestic reform is needed, one that relies on public disclosure and transparency as the primary means of protecting the public interest.