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Lost oil and gas royalties blamed on computer
Other problems, including mismanagement, have also contributed to millions in losses, according to an investigation.
Associated Press
Published September 27, 2007

WASHINGTON - A $150-million computer system that is supposed to help the government keep track of oil and gas royalties has been a "profound failure," contributing to possibly millions of dollars in lost revenue, according to Interior Department investigators.

The department's inspector general cited the computer system's shortcomings in a scathing report released Wednesday that said the royalty collection process is riddled with mismanagement, ethical lapses and conflicting relationships with the energy industry.

The yearlong investigation found "a Band-Aid approach to holding together one of the federal government's largest revenue producing operations," Inspector General Earl E. Devaney wrote Interior Secretary Dirk Kempthorne.

The government collects about $10-billion in royalties a year from oil and natural gas taken under federal leases covering federal coastal waters.

Copies of the IG report were sent to the oversight committees in both the House and Senate, which had asked for an investigation into the Minerals Management Service's royalty collection system and complaints by four whistle-blowers that millions of dollars were not being collected from energy companies.

Many of the findings and management shortfalls cited in the IG report have been previously raised in reports, court papers and at congressional hearings.

But the report for the first time delved into allegations that the agency was losing perhaps millions of dollars in uncollected interest on overdue royalty payments in part because of computer problems.

It was not certain how much interest was lost. But the agency told investigators that from 2002 through 2006 energy companies were billed for $21.4-million in interest because of overdue royalty payments. It said $13.6-million was collected.

The government in 1999 contracted for the computer system, which is supposed to track and dispense royalties paid by the oil and gas companies and also bill and collect interest, the report said. The IG report said nearly $150-million has been spent on the program and supposed improvements.

Devaney said the inspector general's office has begun a separate investigation into the procurement of the system and its development.

[Last modified September 27, 2007, 00:37:40]
http://www.sptimes.com/2007/09/27/Worldandnation/Lost_oil_and_gas_roya.shtml