No one can blame the U.S. Department of Interior for wanting to shed some of its responsibilities for managing oil and gas activities on federal land. It's an annoying business. The department must fulfill a congressional mandate to lease the federal oil and gas resource, plan sales for which lawmakers withhold funds, comply with incomprehensible and sometimes conflicting environmental laws and regulations, and try not to spend all its time in court despite environmentalist groups that sue at the first hint that something might happen for economic reasons on the people's real estate.
Alas, Interior cannot shed those responsibilities. It is the federal government's land manager, and the government owns a lot of land.
WHAT'S PROPOSED
In the interest of reinventing government, the department proposes to abolish the 15 year old Minerals Management Service, delegate royalty collection and management to state governments and willing Indian tribes, and apportion remaining functions, such as leasing, to other departments. It's all supposed to save money.
Interior deserves cheers for its sense of innovation but hoots for trying to dump royalty collection onto states. Its undeveloped proposal for selling future royalties is especially intriguing, however difficult it would be to put into practice. But the idea isn't enough to rescue the rest of the plan.
At the issue's most basic level, states and Indian tribes should not collect royalties from land they don't own. Interior suggests they would do the job more efficiently than it can. Yet there's no reason, other than underperformance by Interior, that this should be so. A tenet of modern management is that no one handles an asset more carefully and profitably than does its owner.
Indeed, ownership is the central question. A farmer in Neosho, Mo., has no less claim to the royalty on oil and gas produced from federal land in Wyoming than does a banker in Casper. Yet to whom does the farmer turn if he suspects Wyoming's royalty collectors are shirking their duties?
Of course, not many Missouri residents think much about their interests in federal revenues from oil and gas activities. This is why oil and gas leasing opponents so easily win support for their positions in interior states with little or no federally owned land. Those states tend to treat federal resources outside their borders as belonging to someone else and their management as a parochial issue. Interior's devolution proposal would perpetuate this dangerous view.
Management of federal land should be a nationwide concern. It is one of the few activities from which the government makes money. Interior says MMS in fiscal 1994 collected royalties totaling $3.1 billion from offshore leases, $1.1 billion from onshore leases, $145 million from Indian tribal leases, and $20 million from Indian allotted leases.
At a time of budgetary distress, the country should be looking for ways to raise those numbers. It should be offering as much federal land as possible for lease. Instead, leasing is all but confined to areas already on production.
OBSCURING POTENTIAL
Priority aims of federal land management should be to assess and develop the hydrocarbon resource and to make money. Yet the practice of federal land management, contrary to statutory mandates, has been to prevent economic activity in the name of environmental protection. By treating MMS as a redundant cost center, Interior obscures the economic potential of federally owned resources and helps to ensure that the U.S. never fully benefits from them.
Copyright 1995 Oil & Gas Journal. All Rights Reserved.
