The Interior Department has done a poor job tracking production of oil and gas from public lands and waters and has likely cost taxpayers billions in lost royalties, according to a panel of government oversight officials.

Outdated technologies, poor interagency communication and a 15-year-old royalty relief law have contributed to the loss of tens of billions of taxpayer dollars, the officials told the House Interior and Related Agencies Appropriations Subcommittee this morning.

Crucially, Interior's Bureau of Ocean Energy Management, Regulation and Enforcement does not have access to industry real-time data on production and well activity in the Gulf of Mexico, making it difficult to determine accurate revenue figures and efficiently allocate inspections resources.

"We don't know what we don't know," said Frank Rusco, director of the Government Accountability Office's natural resources and environment team.

"The reasonable assumption is that some of it is being underreported," Rusco said, adding that his agency has not verified any systemic violations.

Interior's revenue collections system also does not respond to industry conditions, Rusco said. For example, when the price of oil and industry profits go up, Interior could take a greater share of the revenue, he said. It's one issue Interior is exploring as part of a royalty review that should be completed by the end of 2011, Rusco added.

Rusco's testimony comes as GAO released a new report this morning highlighting several management challenges at Interior, including retaining employees in oil and gas oversight, developing a cohesive program to manage wildfires and addressing several billions of dollars in deferred maintenance needs, among other things.

Mary Kendall, Interior's acting inspector general, also raised similar concerns during the hearing.

Lawmakers from both parties generally agreed that Interior needs better data, updated software systems and improved communications between bureaus in order to ensure taxpayers receive their fair share from oil and gas production.

"We've got a lost resource here," said Rep. Jim Moran (D-Va.), the ranking member on the subcommittee.

Moran questioned why industry is not required to share real-time data with regulators given that the oil and gas it extracts is a publicly owned resource.

He also asked whether Interior's Bureau of Land Management has the authority to require equipment at onshore oil and gas wells to prevent the escape of natural gas into the atmosphere, which GAO estimates amounts to about 2 percent of total production.

"There is a lot of old equipment out there that can be replaced with low bleed valves," Rusco said, adding that GAO had recommended that BLM evaluate and identify cases where equipment could be economically exchanged.

A fall GAO report found that oil and gas operators could economically capture nearly half their flared or vented natural gas on federal land to boost royalties and reduce heat-trapping emissions (Greenwire, Dec. 1, 2010).

Off-the-shelf technologies would enable operators to save about 40 percent of gas vented or burned at federal onshore leases and add about $23 million to their annual federal royalty payments, the 57-page report found.