Lax oversight of oil and gas royalties

Published: Sunday, January 18, 2026 at 7:36 pm

Federal Oversight of Oil and Gas Royalties Under Scrutiny

A recent report from the Government Accountability Office (GAO) reveals significant challenges in the federal government's oversight of oil and gas royalties. The Department of the Interior, responsible for managing royalties from drilling on federal lands, is struggling to ensure accurate reporting and collection.

As of 2023, the Department of the Interior had leased 23.7 million acres of federal land to drilling companies. These companies are obligated to pay royalties ranging from 12.5% to 18.8% on the oil and gas they extract. From 2014 to 2024, companies initially promised to pay approximately $96 billion in royalties. However, they later adjusted their estimates, claiming miscalculations and reducing the total owed by $2.7 billion to $93 billion.

The GAO's report highlights that the Department of the Interior faces difficulties verifying the accuracy of these adjustments. A 1996 law allows companies up to six years to revise their royalty estimates, while the government has seven years to audit them. This creates a time crunch, particularly when companies wait until the deadline, leaving the government with limited time to conduct thorough audits, which often take longer than the available timeframe.

The Department of the Interior sought to amend the law in 2011, requesting a reduction in the revision period for companies to three years. However, this change was never enacted, with some critics citing potential burdens on energy companies. Industry representatives have offered mixed opinions on the matter, with some expressing support for a shorter deadline due to advancements in technology, while others cite the need for more time due to record-keeping challenges.

The GAO's findings also point to a decline in the number of royalty audits conducted by the Department of the Interior. In 2012, 136 audits yielded an additional $100 million in royalties, whereas in 2022, only 51 audits collected $24 million. The GAO estimates that even a 1% improvement in royalty collections could generate tens of millions of dollars annually.

BNN's Perspective:

The situation underscores the need for a balanced approach. While it's crucial to ensure fair practices for energy companies, the government must also have the resources and time to effectively oversee royalty payments. Streamlining the audit process and potentially revisiting the revision deadlines could help ensure that taxpayers receive the revenue they are due.

Keywords: oil and gas royalties, federal land, Department of the Interior, GAO, royalty audits, energy companies, royalty payments, government oversight, revenue collection, audit deadlines

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