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Published December 01, 2010, 07:54 AM

GAO: Lost natural gas costs gov't $23M per year

BILLINGS, Mont. (AP) — The government is losing tens of millions of dollars in potential royalties from energy companies that let immense volumes of natural gas escape into the atmosphere, congressional investigators said in a new report.

By: MATTHEW BROWN, Associated Press

BILLINGS, Mont. (AP) — The government is losing tens of millions of dollars in potential royalties from energy companies that let immense volumes of natural gas escape into the atmosphere, congressional investigators said in a new report.

The Government Accountability Office report says about 50 billion cubic feet of natural gas has been needlessly lost every year during production on federal lands. That translates into $23 million annually in lost revenues.

But more than just royalties are at stake: The lost gas could fuel roughly 700,000 homes and is equivalent to the greenhouse gas emissions of more than 3 million cars.

"You'd much rather capture gas and use it for productive purposes rather than releasing it into the atmosphere," the GAO's Frank Rusco said Tuesday.

He added that the government could curb the practice through stricter regulations — "either for environmental reasons or because they should be getting (royalties) from this gas."

Rusco said technology to capture the escaping gas is available and economical, and that the Interior Department had greatly underestimated how much gas escapes from storage tanks and leaking equipment.

Most of that lost gas is vented — meaning released directly into the air — or burned off through flaring.

Interior spokeswoman Kendra Barkoff said the agency had no immediate comment and was reviewing the GAO report, which was released Monday. But in a letter to the GAO, Interior Department Assistant Secretary William Lewis wrote that he generally agreed with the report's findings.

Lewis said Interior was tracking Environmental Protection Agency rulemaking for greenhouse gases, and would "use venting and flaring reduction technology where it is economic."

Most natural gas produced in the U.S. comes from five states — Louisiana, Texas, Oklahoma, New Mexico and Wyoming. But demand for the fuel is booming, in part because it offers an alternative to more polluting coal. Drilling has been expanding in Colorado, Montana, Utah and other Western states in recent years.

Kathleen Sgamma, government affairs director for the Western Energy Alliance, said the industry is moving forward on its own to install equipment that captures escaping natural gas.

"Interior could much better spend its time pursuing actual job creation and significant economic development if it removes some of its barriers to onshore oil and gas development," she said.

Sgamma added that GAO's estimate of $23 million in lost royalties was "pretty minuscule" compared with $2.7 billion in onshore federal oil and gas revenues in fiscal year 2010. Also, because the GAO report was based in part on 2006 data, Sgamma said it failed to reflect the industry's recent progress to curb emissions.

But environmentalists who want strict limits on greenhouse gas emissions seized on the GAO report as validating their position.

"It's confirmation of the work we've been doing," said Erik Schlenker-Goodrich, an attorney with the Western Environmental Law Center. "We've known all along there are significant opportunities here to safeguard the climate, produce more royalties for government and produce more gas for consumers."

In Montana, North Dakota, South Dakota and New Mexico, groups including WildEarth Guardians and Earthworks have pushed the Interior Department to consider greenhouse gas emissions whenever public lands are leased for energy development.

The department's Bureau of Land Management has resisted calls for change, saying the emissions from gas produced on leased federal lands are impossible to link directly to climate change.

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