Overview of Department of the Interior's and Selected States' Royalty Accounting Systems

Pursuant to a congressional request, GAO assessed the feasibility of the new royalty accounting system being developed by the Department of the Interior and determined the types of accounting systems used by the States of California, Colorado, New Mexico, and Wyoming for their State-owned oil and gas leases.

Interior's new royalty accounting system is being developed for implementation in two primary phases over several years. The two phases are: (1) the accounting phase, which is scheduled to be operational in January 1983; and (2) the production phase, which is to be implemented in fiscal year 1984. GAO stated that, until the accounting phase is operational, it will not know if the effort is fully successful. If the detailed design is carried through successfully, the system should vastly improve Interior's ability to account for and control royalties received from Federal lands. GAO found that the sophistication of the States' royalty accounting systems varied greatly. Their means of verifying royalty payments and their review and analysis of data reported by gas and oil companies also varied. California, Colorado, and Wyoming officials would like to perform the royalty accounting and collecting functions for Federal leases within their boundaries; however, of these three, only California now has a system that may be capable of doing so. Colorado and Wyoming are presently developing automated royalty accounting systems and may be able to assume Federal royalty functions at a later date. New Mexico also appears to have a good system. However, State officials do not believe that the system could be readily adapted to Federal leases and the State does not want to assume the royalty accounting and collection function for Federal leases.