New York Times: Keeping Up With Nigeria

January 23, 2007
Op-Ed Contributor
By KARIN LISSAKERS

IN the last six months, media coverage, Congressional hearings, lawsuits by private citizens and a scathing report by the Interior Department’s inspector general have exposed a litany of failures in the department’s management of oil and gas leases on public lands and waters.

These failures have lost the government billions of dollars in royalties. They have become so glaring, in fact, that there is even speculation that the president, a good friend to the energy industry, might speak about them in his State of the Union address tonight.

If he does, he would only be about a term-and-a-half too late. Our government’s record on resource revenue management — a bipartisan record, one should add — looks more like that of a corruption-ridden failing state than that of an advanced industrial country. Many of the same failures we criticize elsewhere — for example, the mismanagement of the Iraqi oil industry — are rampant here.

Like the Iraqi government, the United States government lacks the systems to determine exactly how much oil and gas is being produced on federal properties. Private lawsuits and state investigations have exposed systematic underpayment by companies on gas leases, yet the Interior Department relies on these companies to tell the government how much they owe, with no independent verification.

The department’s inspector general, Earl E. Devaney, found that the government’s bookkeeping is so poor that it does not actually know how much money it recovered, nor how many audits it conducted. The inspector general also found the department unable to verify quantities and prices for payments-in-kind (when the government takes a share of the oil and gas instead of cash), which are a growing portion of the royalties the government collects.

Interior’s mismanagement is compounded by the secrecy that surrounds the entire enterprise. Though these are payments to the government for oil and gas extracted from public lands, companies are not required to disclose either payments or production levels to the public. The department says such data must be protected, because it could reveal pricing strategies and cost structures.

Such secrecy is contrary to the public’s right to know what is being done on public lands. It is also contrary to an emerging international standard of transparency and accountability regarding oil, gas and mining revenues — standards that the United States is pressing developing countries to adopt.

What’s more, energy companies have shown a willingness to comply with these standards. BP almost got kicked out of Angola for trying to disclose its payments there without Angola’s permission. Newmont and other mining companies have started posting on their Web sites information about taxes and fees they pay to individual governments. Statoil, a large international operator, is required by Norwegian law to report, country by country, all taxes paid at home and to foreign governments.

ExxonMobil, ChevronTexaco, Shell, Total, Anglo American and many other international oil and mining companies are part of the international Extractive Industries Transparency Initiative — under which they report all royalties, taxes, fees, bonuses and payments-in-kind.

In some countries that take part in the initiative, company payments are lumped together before publication. Nigeria, however, requires individual disclosure. Surely the United States should not have a lower standard of disclosure than Nigeria.

Congress, with the president’s encouragement, should insist that the United States practice at home the transparency it preaches abroad. It should enact a requirement that all companies extracting oil, gas and other minerals from federal lands publicly report all of their production on those lands and all royalties and other payments made to the federal government from that production.

Only then can the American public have confidence that the taxes owed by those who have benefited from the use of our public lands are being properly accounted for and fully collected.

Karin Lissakers is the director of the Revenue Watch Institute.

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