Drilling down at MMS, and the numbers aren't pretty

We’ve written before, on this blog and in the newspaper, about the problems at Interior’s Minerals Management Service, which collects royalties from oil and gas exploration projects on federal lands.

The most recent problems affect the “royalty-in-kind” program, which collects royalties in the form of oil and gas instead of cash; MMS sells the products for a profit. MMS says it’s more lucrative than a cash royalty program; good-government groups and many experts disagree.

Apparently, so does the Government Accountability Office (pdf):

MMS’s annual reports to the Congress do not fully describe the performance of the royalty-in-kind program and, in some instances, may overstate the benefits of the program.

The report (released today) cites some striking statistics: In 2006, for example, 64 percent of the oil collected through a royalty-in-kind program was sold essentially at a loss — below the royalties MMS would have received from a cash royalty program.

Not particularly encouraging, particularly as MMS plans to expand the royalty-in-kind program in the next few years.