The feasibility assessment of a U.S. natural gas production reporting system uniform production reporting model. Final report, July 1993--June 1994 Page: 35 of 563

                                
data to project impacts or to monitor the actual effect of any policy initiative. For
example, incentives programs for marginally-producing gas and oil wells are the
subject of numerous initiatives at both the state and federal level. Analyses of both
the expected and the actual impacts of these various proposals requires the kind of
data that will be available through a UPRM implementation.
Other Federal Agencies. Given the data collection responsibilities for federal
lands, the Minerals Management Service and the Bureau of Land Management stand
to directly gain from a move toward uniform production reporting. In addition,
uniform state production information would be beneficial to other agencies that have
special needs for particular data. The Federal Energy Management Agency
(FEMA), the Department of Defense (DOD), the Environmental Protection Agency
(EPA), and other federal agencies could benefit from access to such data.
Increased Federal Royalty Income
Public and Indian lands are the largest sources of natural gas supply in the U.S.
market. The federal government has the management responsibility to receive
proper value for minerals produced from public and Indian lands with a special
fiduciary responsibility for Indian lands. Historically, the Minerals Management
Service obtained data from pipelines to determine values for royalty purposes, and
to provide an external data source for audits and data verification. With the issuance
of FERC Order 636, the only source of comprehensive information will be the
producing states. To insure that minerals produced from public and Indian lands are
valued properly, accurate and timely information in a standard format will be needed
by the federal government from each of the producing states.
Royalty income to the federal government from federal onshore and Indian leases in
1992 was nearly $280 million, with an additional $1.3 billion in federal offshore
royalties. A one percent reduction in royalty evaluation would cost the federal
government and Indian tribes $2.8 million per year for onshore properties alone.
Prior to the issuance of FERC Order 636, estimates from some states indicated that
as much as 3 to 5 percent of natural gas was unreported and/or improperly valued.
Under FERC Order 636, without state upgrades of production reporting and
accounting systems, the percentages of unreported and improperly valued gas are
increasing; some estimate this under reporting is reaching 10 percent. Therefore, in
the absence of accurate and timely state data, the federal government and Indian
tribes are potentially losing as much as $28 million per year in natural gas royalty
income from onshore leases; if the same rate of unreported production applies,
losses from federal offshore leases would be an additional $130 million. Most of
the potential onshore loss is distributed in the six states with the greatest gas
volumes produced from federal onshore and Indian lands, as shown in the table
below. Significant ongoing federal benefits would accrue through uniform
production reporting upgrades in these states.
Background                         Page 27                     Uniform Production
Reporting Model