Royalty-in-kind is not-so-fine, says report

The federal government risks losing millions of dollars in royalties from natural gas production because it does not promptly determine and collect when it gets shortchanged, according to a report by congressional auditors.

“The Government Accountability Office said today that the Minerals Management Service, which manages oil and gas production on public lands, does not have the tools or staff necessary to check that companies are paying the government what it is owed in royalties.
The report specifically looks at royalty-in-kind. Under this program, companies producing gas on federal lands and offshore pay the government with gas rather than cash. The government then sells the gas.

Here’s Bloomberg’s version of the story and AP’s.
The MMS used to just get paid in cash but earlier this decade moved to royalty-in-kind in an effort to deal with the complications of the accounting. It hasn’t exactly been a pretty picture, however, as described in a two-part series on how the Wyoming office of the MMS went a bit overboard.
Here’s the full GAO report.
Royalty-in-kind if one of the items the Obama administration said it would like to get rid of as part of its overhaul of oil and gas taxes.

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