Washington (Platts)--6Feb2008

Three government oversight groups on Wednesday asked a US House of
Representatives Appropriations panel to restore to 2000 levels the number of
oil and natural gas royalty auditors at the Minerals Management Service.

In a letter to the House Appropriations Subcommittee on Interior,
Environment and Related Agencies, the Project on Government Oversight,
Taxpayers for Common Sense and Friends of the Earth, criticized the Bush
administration's fiscal 2009 budget for seeking a "paltry increase of four
additional audit staff."

The request, the groups said, comes as "oil companies have demonstrated a
pattern of shortchanging the government on royalties," adding that "since
1998, the Department of Justice has collected almost $600 million in
settlements as a result of fraud lawsuits filed against the companies over
allegations that they shortchanged on oil and gas royalty payments."

The groups said MMS has since 2000 reduced the number of auditors in its
compliance and asset management program by 35 to 134, while at the same time
cutting the number of state and tribal auditors to 108 from 118.

The groups said a number of recent reports have pointed to the need for
more accountability in the royalty program, most recently a January report by
the Department of Energy Inspector General alleging that thousands of barrels
of oil "appear to have gone missing" from the Department of the Interior's
royalty-in-kind program, which is used to fill the Strategic Petroleum
Reserve.

"MMS auditors function in the same way that IRS employees do: they ensure
that oil companies pay what they owe," the organizations told the committee.
"With fewer watchdogs minding the store, oil and gas companies have fewer
incentives to pay up."

The groups said the administration's request to hire four new auditors
"demonstrates a continued pattern of doing the least amount possible to
address what are now widely confirmed shortcomings in the government's efforts
to hold oil companies accountable for royalty payments."

"With an ambitious plan to dramatically expand drilling in the coming
years, unless changes are made, the [Interior Department] will be even less
able to protect the taxpayer from hundreds of millions of dollars in potential
rip offs," they said.

The organizations urged the committee to at least restore the number of
auditors to 2000 levels and to "consider further increases commensurate with"
the agency's expanded leasing and drilling activities. Doing so, they added,
will "undoubtedly increase revenue recoveries by tens or even hundreds of
millions of dollars annually at a time of fiscal constraint."