Audit: 308,000 barrels missing from Petroleum Reserve

12.jpg How do you not notice when 308,000 barrels of oil go missing?

That’s the question government auditors were asking after they looked into the Department of Energy’s management of oil received for the Strategic Petroleum Reserve, a critical program to assure energy stability in the U.S. in case of an oil crisis.

To help add to the reserve, DOE receives a portion of the royalty oil that the Department of the Interior gets in return for allowing petroleum companies to drill on government lands and waters.

The department’s Inspector General Gregory H. Friedman and his auditors found that in 28 percent of the oil transfers they examined, the amount received did not match the estimated amount to be shipped by the Interior Department’s Minerals Management Service.

“To illustrate our findings regarding discrepancies, during a four-month period in Fiscal Year 2005, two Department contractors reported receiving 308,000 barrels of royalty oil less than the amount that MMS had scheduled for delivery to the market center. Yet, despite this significant shortfall, the Department took no action to resolve the discrepancy and to ensure that it had received all of the oil shipped by MMS,” according to the audit.

Eventually, the auditors received documentation from MMS to explain reasons for the discrepancy, including “a decision by MMS to sell royalty oil rather than ship it to the Department,” although 32,000 barrels could still not be accounted for in the above example.

Reached for comment, a spokeswoman for the department issued a statement. “We are confident that all royalty oil transferred to DOE was properly delivered to the SPR. However we recognize the need for enhanced controls and as such, we have followed the recommendations of the report and taken steps to strengthen the RIK program by collecting additional supporting documentation for oil receipts and increasing coordination with MMS to facilitate monthly confirmation of the quantity of oil transferred.”

Last year, the Interior Department’s MMS was investigated by the Government Accountability Office for losing track of billions of dollars in royalties. A GAO report in May 2007 determined that an increase in the royalty rates, which were among “the lowest government takes in the world,” could potentially increase revenue by $4.5 billion over 20 years and help ensure “a fair rate of return for the American people from oil production on federally leased lands and waters.”

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