Mr. DUNCAN. Maybe new legislation would have to be enacted for that.

Mr. BROOKS. Would you think such legislation would be desirable in encouraging the agreement on these disputes and getting them expedited?

Mr. DUNCAN. We must admit they are using our money but we have a lot of cases where they are paying the disputed amount, but we cannot pay them the 6-percent interest they are being charged. Mr. BROOKS. They do not have to pay that?

Mr. DUNCAN. Yes, sir.

Mr. BROOKS. They have to pay the disputed amount?

Mr. DUNCAN. Yes. They pay the disputed amount. A lot of the FPC orders have allowed them to take the money or the contract, like in Kansas, maybe from 7 to 11 cents. We charge on the 11 cents if they receive the money. If there are refunds between companies there is interest paid but we cannot pay our share of interest on that additional royalty money to be refunded.

Mr. BROOKS. If you would be so kind, if you would rough up a bill that might provide for interest payments on delinquencies to the Government, it would be helpful, since your staff is intimately familiar with it. I would appreciate taking a look at one. We all might get together such a draft. The legislative drafting service will not feel that you are violating their union if you do that. It will be all right. You go on and do it.

(Exhibit 20 follows:)

EXHIBIT 20-LETTER FROM D. OTIS BEASLEY, ASSISTANT SECRETARY, DEPARTMENT OF THE INTERIOR, TO HON. JACK BROOKS, SEPTEMBER 24, 1962, WITH A PROPOSED BILL TO REQUIRE THE PAYMENT OF INTEREST FOR DELINQUENT MINERAL LEASING OBLIGATIONS

U.S. DEPARTMENT OF THE INTERIOR,

Hon. JACK BRooks,

OFFICE OF THE SECRETARY, Washington, D.C., September 24, 1962.

Chairman, Government Activities Subcommittee,
Committee on Government Operations,

House of Representatives, Washington, D.C.

DEAR MR. BROOKS: Your letter of August 16, with enclosures, refers to your request, at the hearing on August 15 before the Government Activities Subcommittee concerning delinquencies in oil and gas royalty accounts, for proposed legislation under which the Interior Department could charge interest on delinquent payments.

In accordance with your request for this drafting service, we have prepared the enclosed draft of a bill to require the payment of interest for delinquent mineral leasing obligations. Inasmuch as the draft bill has not been cleared through the Bureau of the Budget, you will understand, of course, that we can make no commitment at this time concerning the position of this Department with regard to it. The draft proposes a distinction between money in an amount certain and money in an indeterminate amount owed to the United States because in many cases disagreements arise as to the amount due. For example, the 82 accounts listed in the General Accounting Office report as delinquent were not in balance for various reasons other than nonpayment as of the date of General Accounting Office completed its audit. The complexity of public-land accounting for oil and gas leases varies greatly because of the different terms and conditions.

An analysis of the tabulation submitted at the hearing, based on a General Accounting Office audit, shows $145,177.33 has been paid and $101,161.16 is or has been subject to appeal. In addition, $156,965.01, shown as misapplied to accounts within units, has been paid and considered earned. The unpaid accounts shown as "slow pay" is now $6,265.06. Only 17 accounts, out of the 82 involving $60,757.23, showed no action taken as of August 13, 1962, to adjust.

In many of these cases the lessee paid the amount he calculated as due in accordance with his interpretation of the terms of the lease and the regulations. Disputes arise over volume measurement and various types of allowances for operating, trucking, and manufacturing items. The applicable price paid may be questioned, especially in a new field without pipelines, established markets, or outlets.

Participating areas within unit agreements in a producing status present difficult accounting problems. The area and field prices for acceptable gas may be subject to approval of the Federal Power Commission. Certainly, in most of these cases, requiring administrative determinations, the accounts are not delinquent.

The determination of the amount and the exact time that an account becomes delinquent for assessing interest will require administrative review and probably lead to additional appeals.

Sincerely yours,

D. OTIS BEASLEY, Assistant Secretary of the Interior.

A BILL To require the payment of interest for delinquent mineral leasing obligations Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That where money in an amount certain is owed to the United States, arising from operations under the Mineral Leasing Act, as amended and supplemented (30 U.S.C. 181, et seq.), the Acquired Lands Leasing Act (30 U.S.C. 351-359, et seq.), section 402, Reorganization Plan Numbered 3 of 1940 (60 Stat. 1099), section 3 of the Act September 1, 1949 (63 Stat. 683), section 3 of the Act of June 28, 1952 (66 Stat. 285), and is not paid on or before the last date prescribed for payment, interest on such amount at the rate of 6 per centum per annum shall be paid to the United States for the period from such last date to the date paid.

SEC. 2. Where money in an indeterminate amount is owed to the United States, arising from operations under the Mineral Leasing Act, as amended (30 U.S.C. 181, et seq.), the Acquired Lands Leasing Act (30 U.S.C. 351-359, et seq.), interest on the amount subsequently determined to be due to the United States at the rate of 6 per centum per annum shall be paid to the United States for the period following thirty days after notification of the obligor of the fixed amount administratively determined to be due to the United States and until payment is

made.

SEC. 3. The Secretary of the Interior is authorized to issue such regulations as he deems appropriate to carry out the purposes of this Act.

DELAYS IN HANDLING ROYALTY ACCOUNTS

Mr. BROOKS. Did you have a question, Mr. Schweiker? Mr. SCHWEIKER. Yes. What do we mean when we say, "improper identification of remittances?"

Mr. DUNCAN. The only answer I can give to you for that would be that the company sent in one check for a lot of payments, which they had been billed for or had not been billed for and gave the wrong identification numbers and the money has been received but has not been credited to the right participating area or the right lease.

Mr. SCHWEIKER. On this list we talk about misapplication of payment within unit. Is that the same thing? Is that what we are talking about here?

Mr. DUNCAN. That would follow in general, but we have the information as to the amount of money that would be applicable to a participating area for a unit but the area out of the participating acreage had not been settled or they gave it as credit to another lease which was later thrown out of the participating area. We have the question of crediting the proper amount to the right lease.

Mr. SCHWEIKER. Some of these misapplications-here is one that goes back to 1957. Why does it take 5 years to find out we have the wrong lease number? Some of these have pretty old dates with misapplications on them.

Mr. DUNCAN. I cannot answer that one.

Mr. SCHWEIKER. Here is another dated 1959, misapplication of payment. That has been 3 years that we have not caught up with the right account. I cannot comprehend how we can have lease numbers and misapply the payment for so long a period. I can understand an initial mistake, but I cannot understand why we are carrying things 3, 4, 5 years because they have been misapplied to the wrong account.

Mr. DUNCAN. It is a matter of personnel and getting to it, I can assure you that. It is like the Outer Continental Shelf. We took in over a $10,000 royalty in 1954 and we are now up to 226,000 barrels a day.

Mr. SCHWEIKER. From Mr. Wallhauser's question, do I understand you do not have any people full time, or have only a few people full time, following these things up?

Mr. DUNCAN. We have not had anyone up until lately in this particular area of accounting that has been assigned to straighten out these delinquent accounts. We feel that we have the money, we will get the money, and we must apply ourselves to the current business.

Mr. SCHWEIKER. I can understand giving priority to current business, but if you are doing $40 million worth of revenue I cannot quite comprehend that it would not save money to have one man assigned to this in some way, to find out why we misapplied a fund for 5 or 7 years. Granted we may not lose the money. I see your point there, but it is awful sloppy bookkeeping to say we misapplied a fund for 5 or 7 years.

Mr. DUNCAN. Unfortunately, we do not have too many wellinformed accountants that do this type of adjusting. It is a matter that there is no personnel available.

Mr. BROOKS. I understand

Mr. SCHWEIKER. I take issue with that. I have a little background in this business. If you do not have them, go out and get them. You can train them. With $40 million worth of business we should be able to find somebody who knows something.

Mr. BROOKS. If you had a $40 million business, could you find an accountant to keep up with it?

Mr. SCHWEIKER. We sure could in private enterprise. I know that. Mr. BROOKS. I understand also, Mr. Duncan, that they are making some studies in

Mr. SCHWEIKER. I just want to say, have we made a formal request for a man to supervise this in any way? Have you asked for a person or formally requested from the Department a person to fill this job? Do you have this pending anywhere?

Mr. DUNCAN. We have applications in for increasing grades of personnel and we have not been able to fill them.

Mr. SCHWEIKER. Another question: What provisions do we have in our royalty contracts and agreements about delinquencies? What authority does the Government have to stop a lease, to terminate it or to do something from an enforcement standpoint to get the money?

Mr. DUNCAN. We can always shut down a lease. We can tell the pipeline company, if they are taking the oil or gas, not to pay. We have a claim on the equipment. We have the bonds. We have the bonds. suspension of operation.

We can order

Mr. SCHWEIKER. Have we ever exercised this?

Mr. DUNCAN. We have many times. In the old days when the bonds were $5,000 and royalties due began to approach that amount, purchasers have been ordered to stop payment until payments were made or another bond was filed.

Mr. SCHWEIKER. In other words, when the liability goes over the bonded part, then you act in cases like that? Mr. DUNCAN. Yes.

Mr. SCHWEIKER. That is all, Mr. Chairman.

AUTOMATIC DATA PROCESSING EQUIPMENT FOR HANDLING OIL AND GAS ACCOUNTS

Mr. BROOKS. Thank you, Mr. Schweiker. Mr. Duncan, I wanted to ask one question before I yield to Mr. Nedzi. I understand there is a survey or some study being made of using automatic data processing equipment to handle this problem so you could more effectively keep your royalty accounts up to date and at least assign to the proper account. I am wondering what is the progress that has been made in this adaptation of ADP equipment to this problem, if any?

Mr. DUNCAN. We started out, I think 3 years ago, with the eastern region, where we have a few mineral leases of different types and oil and gas leases-not many-and we started to work up how we could use the automatic data equipment and take care of all of the different terms and obligations provided in the leases and the units. We have extended automatic data use to California. There are some difficulties being worked out as to the computations. It will move on to other regions but again it takes money to operate that and we are progressing. We think such use may free personnel that can do other work. Mr. BROOKS. Would it get the job done any better?

Mr. DUNCAN. I would hope so.

It looks like it will.

Mr. BROOKS. Have you placed a request through channels for participation in programing on such an ADP equipment?

Mr. DUNCAN. We work closely in cooperation with the Survey Computation Branch. There is a computer in the Geological Survey. They have their own programing group. They go out to our field offices and work. We have over 8,000 accounts.

Mr. Books. 8,000 accounts for a computer?

Mr. DUNCAN. They are all different. We have to work up the basic data and find enough memory places in the drums for these different items.

Mr. Books. I understand. You are now working on that?

Mr. DUNCAN. We are.

ADDITIONAL ACCOUNTING PERSONNEL

Mr. BROOKS. In the meantime, you said you had considered requesting some increases in grades and personnel for this staff of experts that do this accounting, in your reply to a question by Mr. Schweiker. Did I understand you have requested some new people to assist those you have in bringing this up to date, and that request has been denied?

Mr. DUNCAN. It has not been denied.

Mr. BROOKS. Has it been granted?

Mr. DUNCAN. We are always trying to get more accountants.

Mr. BROOKS. I understand that problem. You are always trying to get more.

Mr. DUNCAN. We have authority to get more for this year.

Mr. BROOKS. You have authority to get some more?

Mr. DUNCAN. Yes.

Mr. BROOKS. You have not been able to locate the people?

Mr. DUNCAN. We have not found them.

Mr. BROOKS. What kind of accountants are you looking for? What kind of grades exist? I would think certainly you could probably get some.

Mr. DUNCAN. Our chief accountants are grade 11.

Mr. BROOKS. Is that the kind of opening you have now?

Mr. DUNCAN. That is all we have.

Mr. BROOKS. Grade 11?

Mr. DUNCAN. We have no grade 11's available.

Mr. BROOKS. What kind do you have?

Mr. DUNCAN. Probably 7's and 5's.

Mr. BROOKS. It will be hard to get a CPA at a grade 5. I would offhand say you probably won't.

Mr. DUNCAN. We will not get any CPA's in Casper, Wyo., at even a 9. Our chief accountant in Washington is only a grade 12.

Mr. BROOKS. You are worrying about getting him moved to a grade 13 or 14?

Mr. DUNCAN. Yes.

Mr. BROOKS. This may be admirable but until you get the whole job done, I do not know whether that would be the most helpful thing.

Mr. DUNCAN. A chief accountant-the one you are dealing with there handled $41 million worth of royalty last year or a gross income of $295 million. It does seem to me that is a pretty

Mr. BROOKS. Have you put that recommendation in through channels and has it been to the Appropriations Committee and has it gone through Mr. Beasley and Secretary Udall and have they agreed on it? Did they recommend it to the Appropriations Committee? Mr. DUNCAN. Not yet. It is not yet Mr. Beasley's function. The responsibility rests in the Geological Survey.

Mr. BEASLEY. He is discussing the grade level which is within the administrative discretion of the agency.

Mr. BROOKS. Have they even agreed with you?

Mr. BEASLEY. It has not gotten out of his Bureau yet.

Mr. BROOKS. Have they agreed in the Geological Survey in the Bureau?

Mr. BEASLEY. I would say they have not, or Mr. Duncan would not be here raising some question regarding it.

Mr. BROOKS. That is what occurs to me. I am not going to try to make a justification of an increase or decrease when the Bureau itself has not even made a determination and when the Department has not. They have not even made a recommendation to Congress on it yet.

Mr. BEASLEY. So if this is one of the problems that is making difficult his accountability for his program, you can rest assured that the Department will take notice of it and see what solutions may be made.