gregory j. gould director office of natural resources revenue

Office of Natural Resources RevenueU.S. Department of the Interior

Industry Compliance Accurate Revenues & Data Professionalism & Integrity

Office of Natural Resources Revenue (ONRR) Introductory Presentation for DOI’s OCL and Intergovernmental staff

Gregory J. GouldDirector

Office of Natural Resources Revenue

Presented By:

April 22, 2014


ONRR: Who We Are

♦ Office under the Assistant Secretary for Policy, Management and Budget within the Department of the Interior

♦ Responsible for the management of revenues associated with federal offshore and federal and American Indian onshore mineral leases, as well as revenues received as a result of offshore renewable energy efforts

Dallas

Denver

Farmington

Ft. Berthold

Houston

Oklahoma City

Tulsa

Washington D.C.

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Cumulative Revenue Disbursement of $257.4 Billion

• Since 1982, over $257 billion in revenues was distributed from onshore and offshore lands to the Nation, states, and American Indians

• The distribution to the U.S. Treasury is one of the Federal government’s greatest sources of non-tax income

Historic Preservation Fund$4.4 billion Land & Water Conservation

Fund$27.9 billion

Reclamation Fund$24.2 billion

American Indian Tribes & Allottees

$9.2 billion

State Share (Offshore)$3.8 billion

State Share (Onshore)$31.2 billion

U.S. Treasury$156.7 billion

Cumulative Mineral Lease RevenueDisbursement (1982 - 2013)

Note: rounding may affect totalsNote: rounding may affect totals


Revenue Distribution

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• FY 2013 Disbursements -- $14.2 Billion

– $ 8.6 Billion to the U.S. Treasury

– $ 895.6 Million to the Land & Water Conservation Fund

– $ 150 Million to the Historic Preservation Fund

– $ 1.59 Billion to the Reclamation Fund

– $ 2 Billion to 35 States

– $ 932.9 Million to 34 Indian tribes and approximately

30,000 individual Indians


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Statutory Authority

• ONRR’s authority to collect royalties comes from the following statutes:– Leasing of Allotted Lands for Mining Purposes, Act of March 3, 1909– Indian Mineral Leasing Act of 1938– Indian Mineral Development Act of 1982– Mineral Leasing Act of 1920– Geothermal Steam Act of 1979 – Federal Oil and Gas Royalty Management Act of 1982 (FOGRMA)– Federal Oil and Gas Royalty Simplification and Fairness Act of 1996 (RSFA)

• Other statutes relevant to offshore leases:– Outer Continental Shelf Lands Act of 1953 (OCSLA)– Deepwater Royalty Relief Act of 1995 (DWRRA)– Energy Policy Act of 2005 (EPAct)– Gulf of Mexico Energy Security Act of 2006 (GOMESA)


Mineral Leases as of 6/24/20131

61,533 Total LeasesOffshore: 6,538*Onshore: 48,650**Indian: 6,345***

32,433 Producing LeasesOffshore: 1,432*Onshore: 25,049**Indian: 5,952***

*Administered by BOEM**Administered by BLM***Administered by BIA

1ONRR lease data is maintained for the sole purpose of collecting, verifying and disbursing mineral revenues. For official lease data, please refer to the leasing agencies.

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Oil Natural Gas

Coal

Carbon DioxideCopperGeothermalHot WaterLeadLimestone PhosphatePotashRenewablesSand & GravelSodiumSulfurOther

Products & % of Collections

90%

8%

2%

Royalty paymentsRentalsBonusesPenalties

Other revenues

Collect

Disburse Funds

Audit & Ensure Compliance

from over 2,000 payors

Federal OnshoreFederal OffshoreAmerican Indian

Land Categories


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Federal Oil and Gas Lease Payments• Bonus:

– Cash consideration paid to government by the successful bidder – Paid prior to obtaining a lease

• Rent (Non-producing leases): – Annual rental payment due at beginning of each year until lease becomes

producible– Annual rental rates -- $1.50 to $44.00 per acre for Federal onshore and

Federal OCS lands

• Royalty (Producing leases):– Royalty payment due monthly.– Calculated as a percentage of the amount or value of production saved,

removed or sold from the lease.– Onshore Federal lands – standard royalty rate of 12.5%– OCS Federal lands

• Standard rate – 18.75% (all new leases in the GOM beginning in 2008)• Frontier areas – 12.5% (e.g. Alaska)


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How Are Royalties Calculated?

Example:

Sales Volume = 100 bbls Price = $70 Transportation = $1.00 Royalty Rate = .125*

Royalty due the Federal Government = 100 x ($70 - $1.00) x .125 = $862.50

*The most common royalty rate is 12.5 %

Royalty ($$) = Sales Volume X Price X Royalty Rate(Price = Gross Sales Value – Transportation – Processing Costs)


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Federal Leasing Information Flow

ONSHORE(BLM)

ONSHORE(BLM)

INDIAN(BIA)

INDIAN(BIA)

ONRRONRR

Non-Producing Lease

Non-Producing Lease

Rent Duefrom Lessee

Rent Duefrom Lessee

Lessee submits payment and

Form 2014

Lessee submits payment and

Form 2014

Lease Issued to Lessee

Lease Issued to Lessee

Is lease producing?

Is lease producing?

Operator submits Production

Data on OGOR

Operator submits Production

Data on OGOR

Producing LeaseProducing Lease

Distribution toStates, Indian Tribes,

Treasury, OST etc.

Distribution toStates, Indian Tribes,

Treasury, OST etc.

Lessee Subleases Operating Rights to

Operator

Lessee Subleases Operating Rights to

Operator

Yes No

non-producing Indian rentals

OFFSHORE(BOEM/BSEE)

OFFSHORE(BOEM/BSEE)

Production Data


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PrecisionP

reci

sion

Data Accuracy Efforts

Up-Front System Edits

Data MiningMissing Reports, Volume Comparisons,

LVS/GVS, High Level Analyses of Sales Values, Royalty Values, Adjustments, etc.

1 Month

6-9 Months

2-3 Years

7 Years (Fed. oil & gas)

Compliance Reviews

Audits

Timeline

Risk-based A

pproach Ris

k-ba

sed

Appr

oach Enf

orce

men

t Act

ions

Enforcement Actions

Enforcement Actions

Enfo

rcem

ent A

ctio

ns


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Financial & Production Management

Production Reporting & Verification

Receive, process and verify industry-submitted production reports

Error correction for all Federal and Indian production

Oversee meter inspections for production verification

Financial Management

Collect, verify, distribute all rent, royalties and bonuses

Receive, process and verify industry-submitted royalty reports

Perform Data Mining functions


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Audit and Compliance Program

All audits performed according to Generally Accepted Government

Auditing Standards

Compliance reviews are an analysis that determines the

reasonableness of reported revenues

Properties and companies are selected for review or

audit using a risk assessment across the

entire universe of properties and companies

Audit and Compliance ensures that Federal and Indian mineral revenues are accurately reported

and paid

A 3-year cycle to review and/or

audit revenues was established


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Audit and Compliance Standards

• Audits conducted are governed by standards developed and published by the Government Accountability Office (GAO) referred to as Generally Accepted Government Auditing Standards (GAGAS)

• GAGAS aligns with both the International Auditing Standards (IAS) for financial audits and the International Organization of Supreme Audit Institutions’ (INTOSAI) standards for performance audits

• The ONRR Audit Manual sets the minimum standards that ONRR, state, and tribal auditors must follow in completing audits

• The ONRR Compliance Review Manual establishes standards for completing both full and limited-scope compliance reviews.


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Coordination, Enforcement, Valuation, and Appeals:

Asset Valuation:

Issue valuation guidance and determinations

Review and respond to transportation and processing allowance requests

Draft and publish valuation rulemakings

State and Indian Coordination:

Advocate for the fulfillment of ONRR trust responsibility Focal point for Indian mineral issues and contact with the Indian

community, Indian mineral owners, and involved state and federal agencies

Office of Enforcement & Appeals:

Alternative Dispute Resolution Litigation Enforcement Operations

Industry Compliance Accurate Revenues & Data Professionalism & Integrity15

The Extractive Industries Transparency Initiative, or EITI, is a global standard that promotes revenue transparency and accountability in the extractive sector.


IncreaseTransparency &Dissemination

Enhance Understanding

by all Stakeholders

AchieveBetter Governance &

Accountability

Highlight resource revenue to

government

Ensure fair return on behalf of citizens for the use of public resources

Inform public policy

dialogue

Strengthen investment climate

Enhance public financial management

Foster participatory governance through

collaborative decision-making

Benefits of Implementing EITI in the U.S.

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Provide accessible and useful information about

public resources

Maintain or increase social license to

operate

Maintain or increase trust & public confidence

across sectors


Challenges of U.S. Implementation

– Defining and ensuring adequate civil society representation – Defining scope in light of complex governance and size/scale of U.S.

industry, including diversity in land/resource ownership and leasing– Alignment of U.S. policies and regulations– Potential duplication of reporting requirements– Cost of new or revised reporting systems and of the USEITI process

itself– Information published might not be value added– Legality of convening an independent MSG – Providing sufficient education/outreach– Sectors may have trouble self-organizing

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USEITI MSG Representation

Civil Society• Project on Government Oversight, Revenue Watch, Transparency International• Earthworks, First Peoples Worldwide, North Star Group, Oceana• Calvert Investments, Energy Policy Forum, Goldwyn Global Strategies, Research

Associates• United Mineworkers, United Steelworkers• University of California Los Angeles, Virginia Polytechnic Institute

Government• Departments of Energy, the Interior, Treasury• State Compact Commissions for Mining, Oil and Gas• State Government Representatives from California and New Mexico

Industry• British Petroleum, Chevron, Conoco-Phillips, Exxon-Mobil, Noble Energy, Shell Oil, Ultra

Petroleum, Walter Energy• Freeport McMoRan Copper & Gold, Newmont Mining, Peabody, Rio Tinto• American Petroleum Institute, Council of Petroleum Accountants Societies, Independent

Petroleum Association of America, National Mining Association

The USEITI Multi-Stakeholder Group has 21 Members and 20 Alternates, representing a wide range of organizations and stakeholder interests:

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Looking Ahead: Timeframe

February 2014: Achieve EITI Candidacy

2014: Implement USEITI Workplan

2015: Produce first USEITI Report

2016: Complete validation and achieve compliance

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Questions & Follow Up

Gregory J. GouldDirector

Office of Natural Resources [email protected]

mailto:[email protected]

gregory j. gould director office of natural resources revenue

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