United States | Transparency Snapshot

The United States is one of the world's top producers of oil. It is also one of the few countries where sub-soil mineral resources are not considered public property unless they are situated on public lands.1 As a result, in recent years an average of only one-third of total U.S. oil production has come from on- and offshore lands owned by the federal government. Nonetheless, natural resource revenues from development activities on these lands account for one of the U.S. government’s largest sources of nontax income.

While the U.S. is a long-standing supporter of the Extractive Industries Transparency Initiative (EITI), it took a milestone step in 2011 by announcing it would seek to become an EITI implementing country. The U.S. government collects roughly $10 billion annually in revenues from oil, gas and minerals on federal lands. The management and use of these revenues will involve a more transparent, inclusive process as the U.S. pursues EITI candidacy and compliance.

This EITI declaration was made as one of many U.S. commitments to the Open Government Partnership, alongside commitments to improve citizen engagement methods and tools, and overhaul certain records management and regulatory transparency practices.

Revenue Transparency

In the U.S. the collection of natural resource revenues and management of these assets are handled by the Department of the Interior (DOI), for all leases held by the federal government.2 DOI also manages revenues in trust on behalf of U.S. states, American Indian tribes and individual Indians. While reform efforts underway at DOI under Secretary of the Interior Ken Salazar may result in improvements, the U.S. government has an indisputably troubled history with the management of public natural resource assets, marked by a lack of oversight, low revenue capture, insufficient regulation and a cozy relationship with industry.

The Government Accountability Office (GAO) has detailed these problems for decades. In specific reference to revenue collection, GAO has found within the last five years that:

  • The U.S. government cannot “provide reasonable assurance that the public is collecting its share of revenue from oil and gas development on federal lands and waters” without drastically improving its production verification and inspection capacities.3
  • In general, it is unclear whether the appropriate amount of royalties is applied to production on U.S. public lands, as a result of poor data quality and management.4
  • Because of insufficient audit and compliance activities, U.S. royalty collections overall are “at risk,” potentially costing the federal government billions in lost revenue over time.5

These findings led GAO to designate DOI’s management of federal oil and gas resources “as a government-wide high risk issue” in February 2011.6 At a time when U.S. federal government debt is at an historic high, this is an especially damning assessment. Revenues accruing from extractive activities on U.S. public lands are a huge source of income for the U.S. government – and yet, as the GAO has found, they are not maximized. This is in part due to problems at the DOI outlined above, but the U.S. fiscal regime governing revenue collection also plays a role. No royalties are assessed for hard rock mining on public lands, and the revenues collected for oil and gas production in the Gulf of Mexico region are lower than for most other national fiscal systems, and for many U.S. states.7

While many of these gaps in revenue collection have been entrenched, the Cardin-Lugar provision passed in the 2010 Dodd-Frank Act will soon provide more information to U.S. citizens on the value of their natural resource assets, and could bolster DOI reform efforts. Under current disclosure practices, some revenue information on public resources is made available to citizens, but information is limited to aggregate national totals which are broken out by payment type and commodity, but not by company. Under Dodd-Frank, however, all domestic and foreign companies registered with the U.S. Securities and Exchange Commission are required to report how much they pay the U.S. federal government and foreign governments for access to oil, gas and mineral resources. The law requires reporting on a country-by-country and project-by-project basis, and will yield detailed public information on company payments related to development activities occurring on U.S. public lands. 

The new requirement will take effect once the U.S. Securities and Exchange Commission has issued final rules implementing the Cardin-Lugar provision, anticipated by the end of 2011. Meanwhile, other key markets for extractive industries have taken notice; the European Commission is expected to issue a legislative proposal for country-by-country reporting in the fall of 2011, while several European governments have already announced their intention to address mandatory reporting standards at the national level.

Revenue Watch has created an online calculator showing the value of oil and mining companies on more than 35 of the largest global stock exchanges, and the share of the market that would be covered under new and proposed regulations. View the tool at: data.revenuewatch.org/listings.

Expenditure Transparency

The DOI deposits roughly half the oil, gas and mineral funds it receives into the U.S. Treasury, while the remainder is disbursed to federal, state and tribal accounts. Total disbursements by fund and commodity are published by the DOI’s Office of Natural Resources Revenue (ONRR), and are made available online for each fiscal year.8  Transparency in how these funds are used varies by recipient. The federal government is the sole owner of revenues from U.S. public lands, and has progressive budget transparency policies that result in regular, annual and detailed disclosures. Individual states may choose to highlight the contribution resource revenues make to their budgets or not. Meanwhile, revenues disbursed to American Indian Tribes and individual Indians are considered proprietary information by default under the 1982 Indian Mineral Development Act.

Contract Transparency

The terms the U.S. government agrees to when approving leases for the extraction of natural resources on U.S. public lands are made available to citizens as standard practice. Royalty rates and license fees are fixed and published publicly, while bonus data for winning and losing lease bids is published by relevant agencies almost immediately after sale. Copies of U.S. lease documents and related forms and environmental reviews are made available by on- and offshore authorities, though these are not housed in a central database and can be difficult to find. Additionally, some lease information may be redacted for a discrete time period at the discretion of the DOI, for reasons of commercial sensitivity.

Freedom of Information

The U.S. Freedom of Information Act, FOIA, allows individual citizens to request myriad information about public assets, documents and processes, from government agencies and officials.9 Under FOIA, disclosure is mandated unless the information sought is an exception protected under law, such as information related to national security or trade secrets.

ONRR policies state that information released under FOIA related to oil and gas production routinely omits “sales/royalty value data as commercial or financial information (confidential business information),” since “combined with widely available production information,” this value data “can disclose a payor’s pricing strategy and cause competitive harm.” Similarly, ONRR notes that “solid mineral and geothermal lease-level production data are considered confidential” because of the importance of this data to cost structure information and pricing strategies.10 While some FOIA requests and responses are made available online by DOI, these resources are also decentralized, scattered among the many oversight agencies responsible for natural resource assets and revenues. Citizens or advocacy groups making relevant FOIA requests may therefore need to file separate requests with various agencies in order to get a full picture of company activities and payments related to development on U.S. public lands.

1. In other words, the U.S. national government receives no fiscal benefit (apart from revenues generated by corporate income taxes) from extractive activities taking place on property owned by private landowners, state and local governments, and U.S. Indian tribes.

2. Specifically, resources and revenues are the domain of the DOI’s Bureau of Land Management (BLM), Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE), and Office of Natural Resources Revenue (ONRR). BLM manages onshore federal oil and gas leases, BOEMRE prepares and administers offshore leases and handles reclamation and enforcement activities, and ONRR is in charge of revenue collection.

3. GAO, Oil and Gas Management: Interior’s Oil and Gas Production Verification Efforts Do Not Provide Reasonable Assurance of Accurate Measurement of Production Volumes, GAO-10-313 (Washington, D.C.: Mar. 15, 2010).

4. GAO, Mineral Revenues: MMS Could Do More to Improve the Accuracy of Key Data Used to Collect and Verify Oil and Gas Royalties, GAO-09-549 (Washington, D.C.: July 15, 2009).

5. GAO, Mineral Revenues: Data Management Problems and Reliance on Self-Reported Data for Compliance Efforts Put MMS Royalty Collections at Risk, GAO-08-560T (Washington, D.C.: March 11, 2008).

6. GAO, High Risk Series: an Update, GAO-11-278 (Washington, D.C.: Feb. 16, 2011).

7. GAO, Oil and Gas Royalties: The Federal System for Collecting Oil and Gas Revenues Needs Comprehensive Reassessment, GAO-08-691 (Washington, D.C.: Sept. 3, 2008).

8. See statistics at ONRR’s website

9. See full FOIA texthttp://www.justice.gov/oip/amended-foia-redlined-2010.pdf

10. ONRR Guide to Royalty Information (pdf)