Heath: Fix drilling royalty collection issues

George Heath

In July, Michigan’s auditor general released a report showing that the Michigan Department of Natural Resources has a problem collecting all of the revenue owed from oil and gas companies through exploration leases on state land, leading to a decrease in desperately needed revenue for our state. With a lease auction happening this month, we can and must do better and the auditor general points us in the right direction.

The auditor general found that the state lacks a process to ensure we receive proper royalties from oil companies for drilling. Sadly, this recommendation was also made in 1998 and we still haven’t made the right types of changes to capture all of our revenue that is owed by these corporations. The audit calls for more in-house reviews — exactly the type of work a dedicated state worker should be performing to ensure accountability and transparency.

However, the most recent audit found that this is not happening because of a push to outsource more public work. The report shows that the employee hired to conduct the reviews has been given the task of outsourcing the in-house reviews instead of actually performing them. According to the audit, this employee was hired to monitor the payments owed by big gas companies and to figure out how to apply the same process to smaller oil producers. Instead, the audit shows that the staff person had “dedicated time to other duties” — those duties include outsourcing the work to vendors instead of performing them in-house, as suggested.

This is a matter of priorities for the DNR. The hiring of more dedicated state employees to perform in-house audits will more than pay for itself by finally — after nearly two decades of suggestions from the auditor general — ensuring that the state is paid all of its oil and gas royalties owed by energy companies. This is something that can and should be done internally by state employees who are accountable to the public.

The DNR’s monitoring of oil and gas revenues is not the only issue of a state department failing to take action and fix problems exposed by audits. As reported last month, in general, numerous departments have failed to fix problems despite seeing the same issues raised for decades. This is a problem that correlates with the call for smaller and smaller government. When we continually shrink the size of our public works departments, we can’t as easily address reoccurring problems — even small ones.

We must reverse the trends of cutting vital tools that help us govern smartly and stop the outsourcing of essential services without proper oversight. We can’t afford to have more Aramark-style failures without clear accountability.

George Heath is president of SEIU Local 517M.