POGO Royalties-In-Kind Report: Drilling The Taxpayer

The Department of the Interior's Minerals
Management Service (MMS) continues their fatal attraction to the oil
and gas industry, with no signs of the cozy relationship cooling. Last
week's salacious findings in the Department's Inspector General report
cited specific instances of corruption, inappropriate relationships,
and conflicts of interest. A report, Drilling the Taxpayer: Department of Interior's Royalty-In-Kind Program is
being released today by the Project On Government Oversight illustrates
that those scandals are only symptoms of a much larger problem in the
royalty collection program.

For years,

POGO

has questioned the MMS royalties-in-kind (RIK) program. Royalties are
the second largest source of federal revenue outside of Internal
Revenue Service collections. Nearly half of those royalties are
collected in kind-in the form of crude oil or natural gas-rather than
in cash. The product is then sold in the marketplace, returning the
proceeds to the Treasury.
POGO

's report, the fifth in a series about royalties, tracks how industry's
influence on the RIK program has been pervasive, and can be traced from
the program's inception through its expansion into the full-blown
program that exists today.
POGO

now demands the program be abolished.

"The
IG tried to find evidence of a quid pro quo for the presents and trips
given to government employees. Perhaps, the evidence was so big the IG
missed it. The program itself is the gift industry wanted in return. It
is clear from the facts that the gas and oil industry's pals in MMS
implemented a program tailored to the industry's benefit, defended its
unverifiable book-keeping, and expanded the program without any regard
for good governance or accountability," said
Danielle Brian

,

POGO

Executive Director.

POGO

's report found that the program lacks standard taxpayer protections,
avenues for public participation, regulations to explain the program,
and professional audits, and is surrounded by secrecy.

Essentially,
the RIK program asks taxpayers to trust that industry delivers the
correct amount of oil or gas to the government in lieu of cash, but has
reduced oversight to such a degree that the GAO labeled RIK's
management "an honor system." "That honor system has failed, and it's
time to shut the program down," stated Brian.