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The Linowes Commission - Where Are We 25 Years Later?

James D. Harris, Federal and Indian Oil & Gas Royalty Valuation and Management

Twenty-five years ago, the Commission on Fiscal Accountability of the Nation's Energy Resources (Commission) chaired by David F. Linowes issued its report. Today we consider lessons learned about royalty policy and management.

In 1982, the Commission identified five major shortcomings with the federal royalty program. It noted that the United States Geological Survey's Conservation Division (Conservation Division) did not verify data reported by industry, lease account records were unreliable, late payments were common, the lessees' records were rarely audited, and civil penalties for breach of contract did not exist. In short, the Commission found, “the industry is essentially on the honor system.”

Much has changed since then. The Department of the Interior (DOI) has employed professional managers with financial accounting and auditing expertise to address 54 of the 60 recommendations made by the Commission. The other six were determined to be impractical or not applicable in light of new legislation. Generally speaking, the recommendations focused on auditing and financial management practices that would provide greater public assurances that federal lessees were fulfilling their promises. The audit and penalty authority given to DOI pursuant to the Federal Oil and Gas Royalty Management Act of 19821 (FOGRMA) in response to Commission recommendations, goe