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Testimony: 

Before the Committee on Natural Resources, U.S. House of 
Representatives: 

United States Government Accountability Office: 

GAO: 

For Release on Delivery Expected at 11:00 a.m. EDT: 

Wednesday, March 28, 2007: 

Royalties Collection: 

Ongoing Problems with Interior's Efforts to Ensure A Fair Return for 
Taxpayers Require Attention: 

Statement of Mark Gaffigan, Acting Director: 
Natural Resources and Environment: 

GAO-07-682T: 

GAO Highlights: 

Highlights of GAO-07-682T, a testimony before the Committee on Natural 
Resources, United States House of Representatives 

Why GAO Did This Study: 

The Department of the Interior’s 
Minerals Management Service (MMS) is charged with collecting and 
administering royalties paid by companies developing fossil and 
renewable energy resources on federal lands and within federal waters. 
To promote development of oil and natural gas, fossil resources vital 
to meeting the nation’s energy needs, the federal government at times 
has provided “royalty relief” waiving or reducing the royalties that 
companies must pay. In these cases, relief is typically applicable only 
if prices remain below certain threshold levels. Oil and gas royalties 
can be taken at MMS’s discretion either “in value” as cash or “in kind” 
as a share of the product itself. Additionally, MMS also collects 
royalties on the development of geothermal energy resources—a renewable 
source of heat and electricity—on federal lands. 

This statement provides (1) an update of our work regarding the fiscal 
impacts of royalty relief for leases issued under the Deep Water 
Royalty Relief Act of 1995; (2) a description of our recent work on the 
administration of the royalties in kind program, as well as ongoing 
work on related issues; and (3) information on the challenges to 
collecting geothermal royalties identified in our recent work. 

To address these issues we relied on recent GAO reports on oil, gas, 
and geothermal royalty collection systems. We are also reviewing key 
MMS estimates and data. 

What GAO Found: 

The absence of price thresholds in oil and gas leases issued by MMS in 
1998 and 1999 has already cost the government about $1 billion and the 
agency has recently estimated that future foregone royalties would be 
$6.4 billion to $9.8 billion over the lives of the leases. Precise 
estimates of the actual foregone royalties, however, are not possible 
at this time because future projections are sensitive to price and 
production levels, both of which are subject to change. MMS is 
currently negotiating with oil and gas companies to apply price 
thresholds to future production from these leases, with mixed 
results—only 6 of the 45 companies involved have agreed to terms. 
Moreover, a pending legal challenge to Interior’s authority to include 
price thresholds on any leases issued under the Deep Water Royalty 
Relief Act could, if successful, cost the government billions more in 
refunded and foregone revenue. 

In our most recent review of the royalty in kind (RIK) program, 
conducted in 2004, we found that MMS was unable to determine whether 
the revenues received from its sales of oil taken in kind were 
equivalent to receiving royalties in value, largely because it had not 
developed systems to rapidly and efficiently collect this information. 
We made recommendations that the agency has implemented that have 
improved the administration of the program as it existed at the time of 
our report. However, the continued expansion of the program raises a 
new question about the adequacy of the agency’s overall management 
practices and internal controls to meet the increasing demands placed 
on the RIK program. Accordingly, we are undertaking follow-on reviews 
assessing, among other things, the agency’s ability to quantify and 
compare administrative costs and revenues of the RIK and royalties in 
value programs and the extent to which the revenues collected under the 
RIK program are equal to or greater than what would have been received 
had they been taken in value. 

In a 2006 report on geothermal royalties, we found that missing and 
erroneous historical data, as well as insufficient data on electricity 
sales, meant that MMS is unable to accurately determine whether it was 
collecting royalties as directed by statute. The Energy Policy Act of 
2005 included provisions that significantly changed how geothermal 
royalties are calculated but also directed Interior to maintain the 
same level of royalties over the next ten years that would have been 
collected prior to the Act’s passage. We found that making this 
determination requires historical data on sales of electricity produced 
from geothermal resources as well as accurate royalty data. However, 
MMS did not have sufficient historical gross revenue data with which to 
establish a baseline for past royalties paid as a percentage of 
electricity revenues. Further, about 40 percent of MMS’s royalty data 
was either missing or erroneous for the projects we reviewed. We 
recommended that MMS correct these deficiencies and the agency agreed. 
We are continuing to monitor the agency’s efforts. 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-682T]. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Mark Gaffigan at 202-512-
3841 or gaffiganm@gao.gov. 

[End of section] 

Mr. Chairman and Members of the Committee: 

We are pleased to be here today to discuss our recent work on the 
administration of revenues collected from the production of fossil and 
renewable energy resources on federal lands and within federal waters. 
Companies that develop these resources do so under leases which 
generally require the payment of royalties on the resources extracted 
and produced. These leases are administered by the Minerals Management 
Service (MMS), an agency within the Department of the Interior 
(Interior). These resources include geothermal, coal, and, most 
notably, oil and natural gas (hereafter oil and gas). 

In particular, fossil energy resources from federal lands and waters 
are a critical component of the nation's energy portfolio, supplying 
more than a third of all the oil and nearly a quarter of all the 
natural gas produced in the United States in fiscal year 2005. Oil and 
gas companies received over $77 billion from the sale of oil and gas 
produced from federal lands and waters in fiscal year 2006, and these 
companies paid the federal government about $10 billion in royalties. 

In order to promote oil and gas production, the federal government has 
at times and in specific cases provided "royalty relief"--the waiver or 
reduction of royalties that companies would otherwise be obligated to 
pay. When the government grants royalty relief, it typically specifies 
the amounts of oil and gas production that will be exempt from 
royalties and may also specify that royalty relief is applicable only 
if oil and gas prices remain below certain levels, known as "price 
thresholds." For example, the Outer Continental Shelf Deep Water 
Royalty Relief Act of 1995, also known as the Deep Water Royalty Relief 
Act (DWRRA), mandated royalty relief for oil and gas leases issued in 
the deep waters of the Gulf of Mexico from 1996 to 2000. These deep 
water regions are particularly costly to explore and develop. However, 
as production from these leases has grown, and as oil and gas prices 
have risen dramatically in recent years, serious questions have been 
raised about the extent to which royalty relief has been in the 
interest of taxpayers. These concerns were brought into stark relief 
when it was learned that MMS issued leases in 1998 and 1999 that failed 
to include the price thresholds above which royalty relief would no 
longer be applicable, making large volumes of oil and natural gas 
exempt from royalties and significantly affecting the amount of royalty 
revenues collected by the federal government. Further royalty relief is 
currently available under other legislation and programs, raising the 
prospect that the federal government may be forgoing additional royalty 
revenues. Recently, congressional committees, Interior's Inspector 
General,[Footnote 1] public interest groups, and the press have 
questioned whether our nation's oil and gas royalties are being 
properly managed and whether the oil and gas industry is paying a fair 
share of revenue to the public resource owners, especially in light of 
high oil and gas prices, record industry profits, and the daunting 
current and long-range fiscal challenges facing our nation. GAO has 
expressed similar concerns, and the U.S. Comptroller General has 
highlighted royalty relief as an area needing additional oversight by 
the 110th Congress.[Footnote 2] 

The MMS is authorized by Congress to collect royalties "in value," as a 
fraction of the revenues companies receive from sale of oil and gas 
produced on federal leases, or "in kind," as a fraction of the oil and 
gas that the MMS then sells to recover the government's share of oil 
and gas revenue. With regard to oil, while MMS has long received 
relatively small amounts of oil in kind for specific purposes, such as 
in a past program that provided royalty oil to small refiners at 
subsidized prices, the bulk of royalties have historically been 
collected in value. In recent years, however, MMS has taken a growing 
proportion of oil royalties in kind. Much of this oil was then 
exchanged for other oil that was put into the nation's Strategic 
Petroleum Reserve, over 700 million barrels of publicly held crude oil 
that is stored to ensure emergency supplies in the event of a 
significant disruption in the normal oil supply. Under the Energy 
Policy Act of 2005, MMS is charged with ensuring that the revenues it 
receives when it sells oil taken in kind are at least as great as the 
revenues it would have received had it taken the royalties in value. 
The recent expansion of the royalties in kind (RIK) program has raised 
the obvious question of whether or not this condition is being met. 

While fossil energy resources are significant, the federal government 
also manages royalties from renewable sources such as geothermal 
energy. Geothermal energy is a unique renewable energy resource in that 
it can provide a consistent and uninterrupted supply of heat and 
electricity. Companies drill wells to bring the geothermal fluids and 
steam to the surface, separate the steam from the fluids as their 
pressure drops, and use the steam to spin the blades of a turbine that 
generates electricity. The electricity is then sold to utilities in a 
manner similar to sales of electricity generated by hydroelectric, coal-
fired, and gas-fired power plants, and the companies pay royalties 
based on the electricity sold. 

Due, in part, to increasing demand for electricity, interest is 
increasing in developing geothermal energy resources as an alternative 
form of generation. Because many areas that have the potential to 
produce additional geothermal energy are located on federal lands, the 
federal government will continue to be a major participant in the 
future development of geothermal energy. MMS collects the federal 
geothermal royalties and disburses to the state and local governments 
its share of these royalties. In 2005, the most recent year for which 
data are available, MMS collected $12.3 million in geothermal 
royalties, almost all of which was derived from the production of 
electricity. 

You asked us to provide information from our recent work on the 
administration of federal royalty revenues at MMS. My testimony today 
(1) updates our work regarding the fiscal impacts of royalty relief for 
leases issued under the Deep Water Royalty Relief Act of 1995; (2) 
describes our recent work regarding the administration of the royalties 
in kind program, as well as ongoing work on this and related issues we 
have undertaken for congressional requesters; and (3) provides 
information on the challenges to collecting and managing geothermal 
royalties that we identified in recent work. 

To address these issues, we relied on recent GAO reports related to 
MMS's royalty collection systems for oil, gas, and geothermal 
resources. As part of our ongoing work, we also reviewed the 
methodology and assumptions used by MMS to produce their February 2007 
estimate of foregone oil and gas royalties. Our work follows the 
issuance of our report last year explaining why oil and gas royalties 
have not risen at the same pace as rising oil and gas prices.[Footnote 
3] Our work was conducted in accordance with generally accepted 
government auditing standards. 

In summary we found: 

* The absence of price thresholds in leases issued in 1998 and 1999 has 
already cost the government about $1 billion and MMS's most recent 
estimate indicates a range of future foregone royalties of between $6.4 
billion and $9.8 billion over the lifetime of the leases. However, 
because there is considerable uncertainty about future oil and natural 
gas prices and production levels, actual foregone royalties could end 
up being higher or lower than MMS's estimates. MMS is currently 
negotiating with oil and gas companies to apply price thresholds to 
future production from the 1998 and 1999 leases. To date, the results 
of these negotiations have been mixed--only 6 of the 45 companies 
involved have agreed to terms. Moreover, a pending legal challenge to 
Interior's authority to include price thresholds on any leases issued 
under the DWRRA could, if successful, cost the government billions more 
in refunded and foregone revenue. 

* In our most recent audit of the RIK program, conducted in 2004, we 
found that MMS had not collected the necessary information to determine 
whether or not the revenues received from its sales of royalty oil were 
equivalent to receiving royalties in value, largely because it had not 
developed information systems to rapidly and efficiently collect this 
information. We made recommendations to the Secretary of the Interior 
that the agency has implemented and that have improved the 
administration of the program as it existed at the time. However, the 
continued expansion of the program raises additional questions about 
the adequacy of the agency's overall management practices and internal 
controls to meet the increasing demands of the program. Accordingly, at 
the request of Congress, we are undertaking a follow-on review 
assessing, among other things, the agency's ability to quantify and 
compare administrative costs and revenues of the RIK and royalties in 
value programs and the extent to which the revenues collected under the 
RIK program are equal to or greater than what would have been received 
had they been taken in value. 

* In a 2006 report on geothermal royalties, we found that MMS had 
erroneous and missing historical geothermal royalty data and did not 
collect sufficient data from royalty payors to accurately asses whether 
MMS was collecting the amount of royalties required by statute. The 
Energy Policy Act of 2005 included provisions that significantly 
changed how geothermal royalties are calculated but also instructed the 
Secretary of the Interior to seek to maintain the same aggregate level 
of royalties over the next ten years that would have been collected 
prior to the Act's passage. We found that in order to compare royalties 
collected under the provisions of the Act with what would have been 
collected under the old system would require historical data on gross 
revenues from geothermal electricity sales as well as accurate royalty 
data. However, we found that MMS did not have sufficient historical 
gross revenue data with which to establish a baseline for past 
royalties paid as a percentage of electricity revenues. Further, about 
40 percent of MMS's royalty data was either missing or erroneous for 
the projects we reviewed. In our report we recommended that the 
Secretary of the Interior direct MMS to correct these deficiencies and 
the agency agreed with our findings and recommendations. We are 
continuing to monitor the agency's efforts to address these 
shortcomings. 

Background: 

Interior oversees and manages the nation's publicly owned natural 
resources, including parks, wildlife habitat, and crude oil and natural 
gas resources on over 500 million acres onshore and in the waters of 
the Outer Continental Shelf (OCS). In this capacity, Interior is 
authorized to lease federal fossil and renewable energy resources and 
to collect the royalties associated with their production. These 
substantial revenues are disbursed to 38 States, 41 Indian Tribes, 
Interior's Office of Trust Funds Management on behalf of some 30,000 
individual Indian royalty owners, and to U.S. Treasury accounts. 

Royalties paid for fossil and renewable resources extracted from leased 
lands represent the principal source of the $12.6 billion in revenues 
managed by MMS--$10.7 billion, more than 85 percent of revenues 
received in fiscal year 2006.[Footnote 4] Of these, oil and natural gas 
leases are the most significant component of royalties, composing on 
average nearly 90 percent of the royalties received over the past five 
years. For oil and gas, production royalties are paid either in value 
or in kind. The OCS Lands Act of 1953, as amended, and the Mineral 
Leasing Act of 1920, as amended, authorize the collection of production 
royalties either in value or in kind for federal lands leased for 
development onshore and on the OCS. Furthermore, according to MMS, the 
terms of virtually all federal oil and gas leases provide for royalties 
to be paid in value or in kind at the discretion of the lessor. The 
Energy Policy Act of 2005 provides additional statutory requirements to 
support the operation and funding of a program for managing federal oil 
and gas royalties in kind. 

Additionally, MMS also collects revenue generated by exploration and 
development of geothermal energy resources commonly used to generate 
electricity.[Footnote 5] Until recently, the Geothermal Steam Act of 
1970, as amended, directed MMS to disburse royalties collected from 
geothermal energy development such that 50 percent of geothermal 
royalties be retained by the federal government and the other 50 
percent be disbursed to the states in which the federal leases are 
located.[Footnote 6] A provision of the Energy Policy Act of 2005 
changed the distribution of the royalties collected from geothermal 
resources. While 50 percent of federal geothermal royalties must still 
be disbursed to the states in which the federal leases are located, an 
additional 25 percent must be disbursed to the counties in which the 
leases are located, leaving only 25 percent to the federal government. 

Billions of Dollars of Royalty Revenue Will be Foregone Because of 
Problems Associated with Royalty Relief: 

As Assistant Secretary Allred of Interior recently testified before the 
Congress, the absence of price thresholds in leases issued in 1998 and 
1999 has already cost the government almost $1 billion and MMS has 
estimated a range of potential future foregone revenue for these leases 
of between $6.4 billion and $9.8 billion. MMS calculated these 
estimates under a range of assumptions about oil and natural gas prices 
and future production levels. We reviewed MMS's assumptions and 
methodology for estimating the potential foregone revenue from 1998 and 
1999 leases and found them to be reasonable. However, because there is 
considerable uncertainty about future oil and natural gas prices and 
production levels, actual foregone royalties could end up being higher 
or lower than MMS's estimates. 

MMS is currently negotiating with oil and gas companies to apply price 
thresholds to future production from the 1998 and 1999 leases. If 
successful, this approach would partially undo the omission of price 
thresholds for future production, thereby implementing the royalty 
relief as though price thresholds had been included in the leases. 
However, the results of the negotiation have been mixed so far--as of 
late February 2007, only 6 of 45 companies have agreed to terms, and a 
current legal challenge to Interior's authority to set price thresholds 
on any DWRRA leases may further deter or complicate a negotiated 
settlement. 

In addition to forgone royalty revenues from leases issued in 1998 and 
1999, royalty revenues on leases issued under DWRRA in 1996, 1997, and 
2000 are also threatened pending the outcome of a legal challenge 
regarding price thresholds. Specifically, Kerr-McGee filed suit against 
the Department of the Interior in early 2006, challenging its authority 
to place price thresholds on any of the leases issued under the DWRRA. 
In effect, this suit seeks to remove price thresholds from the leases 
in question. In June 2006, Kerr-McGee agreed to enter into mediation 
with Interior in an attempt to resolve the issue; however, the 
mediation was unsuccessful and litigation has resumed. As of March 
2007, the leases in question have generated approximately $1 billion in 
royalties. If the government loses this legal challenge, it may be 
required to refund these royalties--perhaps with interest penalties-- 
and to forego any future royalties on these leases, and perhaps any 
lease issued during 1996, 1997, and 2000. As a result, the government 
could stand to lose billions of additional dollars. 

The RIK Program Has Been Unable to Demonstrate Its Effectiveness Due to 
Data Limitations: 

We reviewed the RIK pilot program for this committee in two separate 
reports in 2003 and 2004 and found that MMS did not collect the 
necessary information to effectively monitor and evaluate the 
program.[Footnote 7] This information includes the administrative costs 
of the RIK program and the revenue impacts of all sales. We found that 
MMS lacked this information largely because it had not developed 
information systems to rapidly and efficiently collect this 
information. 

We made several recommendations in our 2003 and 2004 reports to address 
the shortcomings we identified. Specifically, to further the 
development of management controls for MMS's RIK program, we 
recommended that the Secretary of the Interior instruct the appropriate 
managers within MMS to identify and acquire key information needed to 
monitor and evaluate performance prior to expanding the RIK program. We 
specified that such information should include the revenue impacts of 
all RIK sales, administrative costs of the RIK program, and expected 
savings in auditing revenues. We also recommended that MMS clarify the 
RIK program's strategic objectives to explicitly state that the goals 
of RIK include obtaining fair market value and collecting at least as 
much revenue as MMS would have collected in cash royalty payments. MMS 
agreed with both recommendations and has taken several steps to address 
these shortcomings. 

We acknowledge the agency's efforts and, within the context of the 
program's scope at the time of our report, consider our recommendations 
implemented by the agency. However, the expansion of use of RIK since 
our last review raises an additional concern. The RIK program has 
actively expanded the scope of its operations as MMS has increasingly 
opted to take royalties in kind rather than in cash. As MMS reported in 
its September 2006 Report to Congress, today's RIK operation manages a 
significant portfolio of the nation's oil and gas royalty assets 
collected primarily from federal leases in the Gulf of Mexico. This 
portfolio has expanded more than three-fold from 1999 to present--some 
82 million barrels of oil equivalent were exchanged in kind in fiscal 
year 2005--and is expected to continue to grow for the foreseeable 
future. The Energy Policy Act of 2005 permanently established an RIK 
operation with administrative and business costs to be paid from 
royalty revenues generated by RIK sales, effectively transitioning the 
program from pilot status to a steady-state business operation and 
potentially enabling a further expansion of the RIK program. The Act 
restricts the use of RIK to those situations where the benefit is 
determined to equal or exceed the benefit from royalties in value prior 
to the sale. However, the larger scale of the RIK program at present 
makes it unclear that MMS can effectively and accurately make this 
determination going forward. 

Noting this issue, we are undertaking work for the Congress. 
Specifically, we have several ongoing reviews assessing, among other 
things, MMS's ability to quantify and compare administrative costs and 
revenues of the RIK and royalties in value programs; the effectiveness 
of the systems used to collect, account for, and disburse royalties; 
and the accuracy of royalty revenue collection, including evaluating 
whether the value of RIK payments equal or exceed the value of 
royalties that would have been received in value for oil and gas as 
required by statute. 

MMS Does Not Collect the Data Necessary to Assess Whether Geothermal 
Royalties Remain Constant as Required by Law: 

In a 2006 report on geothermal royalties, we found that MMS had 
erroneous and missing historical geothermal electricity revenue data 
and did not collect sufficient data from royalty payors to accurately 
asses whether MMS was collecting the amount of royalties required by 
statute.[Footnote 8] Specifically, about 40 percent of the royalty 
revenue data for royalty payors was either missing or erroneous in the 
projects we reviewed. In addition, MMS did not have sufficient 
historical gross revenue data for geothermal electricity sales. 

MMS is charged with collecting and distributing royalties collected 
from the development of geothermal resources used to generate 
electricity. The Energy Policy Act of 2005 included provisions that 
significantly changed how geothermal royalties are calculated but also 
instructed the Secretary of the Interior to seek to maintain the same 
level of royalties over the next ten years that would have been 
collected prior to the Act's passage. We found that to meet the 
statutory requirements, MMS will need to calculate the percentage of 
gross sales revenues that lessees will pay in future royalties from 
electricity sales and compare this to what lessees would have paid 
prior to the Act. In order to compare royalties collected under the 
provisions of the Act with what would have been collected under the old 
system would require historical data on gross revenues from geothermal 
electricity sales as well as accurate royalty data on those sales. 

As a result of the insufficient gross revenue data and missing or 
erroneous royalty revenue data, MMS is unable to determine if it is 
collecting the amount of royalties on geothermal electricity production 
as required in statute. In our report we recommended that the Secretary 
of the Interior direct MMS to correct these deficiencies and the agency 
agreed with our findings and recommendations. We will continue to 
monitor the agency's efforts to address these shortcomings. 

Conclusions: 

As seen by all the attention royalties management has received in the 
Congress and the media, Interior's performance in managing this effort 
is a cause for concern. Billions of dollars have been lost already and 
potentially billions more are at risk. In a time of dire long-term 
national fiscal challenges it is urgent that this problem be fixed and 
the confidence of the American public that the sale of its national 
resources is generating a fair return be restored. Our work on this 
issue is continuing on multiple levels, including comparing the value 
of royalties taken in kind to the value of royalties taken as cash, 
reviewing the diligence of resource development, and evaluating the 
accuracy of the agency's cost, revenue, and production data. 

We look forward to this continued work, and to helping this committee 
and the Congress as a whole exercise oversight of this important issue. 
Mr. Chairman, this concludes my prepared statement. I would be pleased 
to respond to any questions that you or other members of the Committee 
may have at this time. 

GAO Contact and Staff Acknowledgments: 

For further information about this testimony, please contact me, Mark 
Gaffigan, at 202-512-3841 or gaffiganm@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this statement. Contributors to this testimony include 
Frank Rusco, Assistant Director; Robert Baney; Ron Belak; Philip Farah; 
Doreen Feldman; Glenn Fischer; Dan Haas; Chase Huntley; Dawn Shorey; 
Barbara Timmerman; Maria Vargas; and Jacqueline Wade. 

[End of section] 

Related GAO Products: 

Oil and Gas Royalties: Royalty Relief Will Likely Cost the Government 
Billions, but the Final Costs Have Yet to Be Determined, GAO-07-369T 
(Washington, D.C.: Jan. 18, 2007). 

Suggested Areas for Oversight for the 110th Congress, GAO-07-235R 
(Washington, D.C.: Nov. 17, 2006). 

Department of Interior: Royalty-in-Kind Oil and Gas Preferences, B- 
307767 (Washington, D.C.: Nov. 13, 2006). 

Royalty Revenues: Total Revenues Have Not Increased at the Same Pace as 
Rising Natural Gas Prices due to Decreasing Production Sold, GAO-06- 
786BR (Washington, D.C.: June 21, 2006). 

Renewable Energy: Increased Geothermal Development Will Depend on 
Overcoming Many Challenges, GAO-06-629 (Washington, D.C.: May 24, 
2006). 

Mineral Revenues: Cost and Revenue Information Needed to Compare 
Different Approaches for Collecting Federal Oil and Gas Royalties, GAO- 
04-448 (Washington, D.C.: Apr. 16, 2004). 

Mineral Revenues: A More Systematic Evaluation of the Royalty-in-Kind 
Pilots is Needed, GAO-03-296 (Washington, D.C.: Jan. 9, 2003). 

FOOTNOTES 

[1] Minerals Management Service's Compliance Review Process, Department 
of the Interior Office of the Inspector General, Report No. C-IN-MMS- 
0006-2006 (Washington, D.C.: Dec. 2006). 

[2] GAO, Suggested Areas for Oversight for the 110th Congress, GAO-07-
235R (Washington, D.C.: Nov. 17, 2006). 

[3] GAO, Royalty Revenues: Total Revenues Have Not Increased at the 
Same Pace as Rising Natural Gas Prices due to Decreasing Production 
Sold, GAO-06-786R (Washington, D.C.: June 21, 2006). 

[4] The remaining $1.9 billion consist of other revenues received from 
rent payments and bonuses paid by companies for successful bids on 
leases. 

[5] Geothermal energy is literally the heat of the earth. This heat is 
abnormally high where hot and molten rocks exist at shallow depths 
below the earth's surface. Water, brines, and steam circulating within 
these hot rocks are collectively referred to as geothermal resources. 

[6] 30 U.S.C. § 191(a). The State of Alaska is an exception to this 
provision, receiving 90 percent. 

[7] GAO, Mineral Revenues: A More Systematic Evaluation of the Royalty- 
in-Kind Pilots is Needed, GAO-03-296 (Washington, D.C.: Jan. 9, 2003) 
and GAO, Mineral Revenues: Cost and Revenue Information Needed to 
Compare Different Approaches for Collecting Federal Oil and Gas 
Royalties, GAO-04-448 (Washington, D.C.: Apr. 16, 2004). 

[8] GAO, Renewable Energy: Increased Geothermal Development Will Depend 
on Overcoming Many Challenges, GAO-06-629 (Washington, D.C.: May 24, 
2006), 34-38. 

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U.S. Government Accountability Office, 441 G Street NW, Room 7149 
Washington, D.C. 20548: