[Survey Report on Administration of Revenues Due From Helium Produced on Federal Leases, Bureau of Land Management]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. 99-i-395

Title: Survey Report on Administration of Revenues Due From Helium
       Produced on Federal Leases, Bureau of Land Management

Date:  March 31, 1999



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U.S. Department of the Interior
Office of Inspector General





SURVEY REPORT


ADMINISTRATION OF REVENUES
DUE FROM HELIUM PRODUCED
ON FEDERAL LEASES,
BUREAU OF LAND MANAGEMENT


REPORT NO. 99-I-395

MARCH 1999






MEMORANDUM


             TO:  The Secretary

           FROM:  Robert J. Williams
                  Acting Inspector General

SUBJECT SUMMARY:  Final Survey Report - "Administration of
                Revenues Due From Helium Produced on Federal
                Leases, Bureau of Land Management" (No. 99-i-395)

Attached for your information is a copy of the subject final
survey report.  The objective of the survey was to determine
whether the Bureau of Land Management effectively identified,
collected, and accounted for helium fee sales revenues due from
Federal leases.

We found that the Bureau effectively accounted for and processed
the helium payments it received.  However, it did not effectively
identify all of the helium producers and require them to submit
production information to compute fees from helium sales or to
determine the payments due.  The Mineral Lands Leasing Act
reserves all helium rights to the Federal Government when a
mineral lease is issued.   The Federal Oil and Gas Royalty
Management Act of 1982 requires gas producers and sellers to
maintain and provide records of helium production and sales to
the Bureau for payment verification and audit.  However, the
Bureau did not effectively identify helium payments due because
it did not take actions to ensure that information requests for
production and sales records were provided by gas producers.  In
addition, the Bureau did not establish adequate reporting
mechanisms to ensure that payors were identified when leases or
contracts were issued, and it assigned a low priority to
identifying wells producing helium on Federal lands.  As a
result, the Bureau had little assurance that fees from the
production and sales of helium were paid on Federally leased
lands.  We further determined that the Minerals Management
Service may be able to perform the Bureau's helium revenue
collection function more effectively than the Bureau.

In its response, the Bureau agreed with two of the report's three
recommendations and did not agree with one recommendation.  Based
on the response, we considered two recommendations resolved but
not implemented and requested the Bureau to reconsider its
response to the remaining recommendation, which is unresolved.

If you have any questions concerning this matter, please contact
me at (202) 208-4252.


Attachment





March, 1999                                       C-IN-BLM-002-97



SURVEY REPORT

Memorandum

     To:  Director, Bureau of Land Management

   From:  Robert J. Williams
          Acting Inspector General

Subject:  Survey Report on  Administration of Revenues Due From
          Helium Produced on Federal Leases, Bureau of Land
          Management (No. 99-i-395)
INTRODUCTION

This report presents the results of our survey of the Bureau of
Land Management's administration of revenues due from helium
produced on Federal leases.  The objective of the survey was to
determine whether the Bureau effectively identified, collected,
and accounted for helium fee sales revenues due from Federal
leases.

BACKGROUND

Helium produced on federally leased lands and revenues collected
by the Federal Government from helium production are subject to
the requirements of the Mineral Lands Leasing Act of 1920 (30
U.S.C. 181), the Helium Act as amended by the Helium
Privatization Act of 1996 (50 U.S.C. 167), and the Federal Oil
and Gas Royalty Management Act of 1982 (30 U.S.C 1701).  The
Mineral Lands Leasing Act excludes helium from Federal mineral
leases and reserves helium exclusively to the Federal Government.
The Helium Act reserved to the Secretary of the Interior all
helium on public domain lands and provided the Secretary with
complete rights of access to helium extraction plants, data, and
accounts.  The Helium Privatization Act continued the Secretary's
authority provided in the Helium Act to  enter into agreements
with private parties for the recovery and disposal of helium on
Federal lands and to deposit helium revenues into the Treasury.
The Federal Oil and Gas Royalty Management Act requires that all
activities/individuals "directly involved in developing,
producing, transporting, purchasing, or selling oil or gas" from
Federal leases establish and maintain  records for 6 years and
that they make reports and provide information that the
"Secretary may . . . reasonably require."

Helium produced on Federal lands is part of the "residual gas"
resulting from natural gas production on leases issued by the
Bureau.  When production is begun, the lessees make payments to
the Minerals Management Service for their production of the
natural gas.  Helium is contained in the residual gas of this
production process.  When the quantity of helium is economically
recoverable, producers of the natural gas may extract the helium
from the residual gas.  According to Bureau officials, helium is
considered to be economically recoverable when the helium content
of the gas stream is .03 percent or greater.  Bureau officials
also stated that producers of the natural gas stream which have
plants capable of extracting helium extract the gas as a result
of entering into gas gathering agreements,  contracts for sale of
gas, or transport agreements with lessees.  The majority of the
helium produced in the United States was processed by 11
extraction plants, which received production from wells located
in Texas, Oklahoma, Kansas, and Wyoming (the process for helium
production is detailed in Appendix 1).

The Bureau collected helium revenues of about $3.9 million during
fiscal year 1996 for production from approximately 1,200 wells.
The Bureau receives helium revenues through "fee sales," which
result from helium extracted from federally leased oil and gas
wells authorized by the Mineral Land Leasing Act.  Contracts for
the sale of extracted Federal helium that results in fee sales
revenues to the Bureau are issued by the Bureau to producers
which extract the helium and  have obtained the rights to the
natural gas processed or which have signed agreements to purchase
the gas stream processed from oil and gas lessees.  The Bureau
also collects royalties for helium produced under Federal
leaseholds authorized by the Federal Farm Mortgage Corporation.
During fiscal year 1996, about $3.7 million of the $3.9 million
collected by the Bureau for helium was received from fee sales
from contracts with two major producers.  The remaining revenues
were collected from 54 companies that extracted helium from
Federal leaseholds.

In fiscal year 1996, helium operations of the former U.S. Bureau
of Mines were transferred to the Bureau of Land Management.  In
addition, the Helium Privatization Act of 1996 (50 U.S.C. 167b)
required that the Bureau of Land Management end its activities to
produce, refine, and market helium by April 9, 1998.  However,
under the Act, the Bureau remained responsible for identifying,
collecting, processing, and auditing revenues due the Government
for helium produced by private entities on Federal lands.

The Bureau's Helium Field Operations Office in Amarillo, Texas,
is responsible for identifying, collecting, and accounting for
helium fee sales and royalties collected from helium producers.
The Unit of Federal Leased Lands, Helium Resources Evaluation
Section, Branch of Helium Resources, of the Helium Field
Operations Office had three full-time employees who were
responsible for identifying Federal helium-producing wells and
accounting for the payments received.  Helium revenues  are
collected monthly and deposited into the Helium Fund, which is a
revolving fund intended to fund all operating expenses of the
Federal helium program.

SCOPE OF SURVEY

Our survey was conducted in accordance with the "Government
Auditing Standards," issued by the Comptroller General of the
United States.  Accordingly, we included such tests of records
and other auditing procedures that were considered necessary
under the circumstances.  Our survey included reviewing the
Bureau's procedures for fiscal years 1996 and 1997 for
identifying, collecting, processing, and auditing helium revenue
payments that resulted from fee sales and oil and gas leases
authorized by the Federal Farm Mortgage Corporation.   We also
discussed these procedures with Bureau officials and performed
detailed analyses of payor lists, obtained records relating to
the 11 active helium production plants in the United States, and
evaluated the Bureau's resources for identifying payors.  In
addition, we contacted officials in the Minerals Management
Service to determine whether the Service had an interest in
assuming the Bureau's duties for administering helium revenue
collections because of the similarities in functions performed by
the Service.

As part of our survey, we evaluated the system of internal
controls to the extent that we considered necessary to accomplish
the survey objective.  The internal control weaknesses we
identified are discussed in the Results of Survey section of this
report.  The recommendations, if implemented, should improve
internal controls in these areas.  We also reviewed the
Departmental Report on Accountability for fiscal year 1997, which
includes information required by the Federal Managers' Financial
Integrity Act, and the Bureau's annual assurance statement for
management controls for fiscal year 1997 and determined that no
material weaknesses were reported which directly related to the
objective and scope of our survey.

PRIOR AUDIT COVERAGE

Neither the Office of Inspector General nor the General
Accounting Office has audited the administration of helium
revenues during the past 5 years.

OTHER REVIEW

In September 1993, the  U.S. Bureau of Mines issued an internal
report performed by  Bureau of Mines officials titled "Unit of
Federal Leased Lands: Background, Development, Obstacles,
Progress, and Status, 1991-1993."  The report described the
methods and steps taken to organize the Unit of Federal Leased
Lands and its workplan, an overview of the processes and
procedures for administering helium royalty payments, a
discussion of the obstacles encountered by the Unit, and payment
statistics and information relating to helium fee sales (the Unit
now operates as part of the Bureau of Land Management).  The
obstacles discussed in the report included the following:

- The extensive amount of time required to research, assemble,
and coordinate the information required to accurately determine
revenues due the Government.

- Incomplete, inconsistent, and nonexistent information
resources.  Comprehensive information, such as data on Federal
acreages, exact spot locations of wells, Federal wells feeding
extraction plants, and lessees/operators, did not exist.

- Lack of reliable maps to identify whether wells were located on
Federal acreage.

- The inability of Helium Field Operations staff to obtain access
(primarily from extraction plants) to data listings of all wells
feeding extraction plants because extraction plant operators said
that this information was proprietary.

- The inability of Helium Field Operations staff to obtain access
to Bureau of Land Management state office databases containing
critical case recordation information (for example, maps, first
production reports, lease copies, agreement copies, and quit
claim copies) concerning Federal leaseholds.

- The amount of time and the difficulty in locating proper payors
because the Bureau did not officially document the Designation of
Operators, which indicated what producers were operating wells
that may produce helium.

- Complex and time-consuming leasehold research; the lack of
specific directives and instructions or procedures; the process
of informing producers, operators, and extractors and other
Governmental agencies about helium payments; and  payment details
that are required to be included in the accounting records.

However, the report did not contain any recommendations to
address these obstacles.

RESULTS OF SURVEY

We found that the Bureau of Land Management effectively accounted
for and processed the helium payments it received.  However, the
Bureau did not effectively identify all of the helium producers
and require them to submit production information to compute fees
from helium sales or to determine the payments due.  The Mineral
Lands Leasing Act reserves all helium rights to the Federal
Government when a mineral lease is issued.   The Federal Oil and
Gas Royalty Management Act of 1982 requires gas producers and
sellers to maintain and provide records of helium production and
sales to the Bureau for payment verification and audit.  However,
the Bureau did not effectively identify helium payments due
because it did not take actions to ensure that information
requests for production and sales records were provided by gas
producers.  In addition, the Bureau did not establish adequate
reporting mechanisms to ensure that payors were identified when
leases or contracts were issued, and it assigned a low priority
to identifying wells producing helium on Federal lands.  As a
result, the Bureau had little assurance that fees from the
production and sales of helium were paid on Federally leased
lands.  We further determined that the Minerals Management
Service may be able to perform the Bureau's helium revenue
collection function more effectively than the Bureau.

Bureau Procedures for Identifying and Verifying Revenues

The Bureau did not effectively identify all the helium producers
and require them to submit production information to compute fees
from helium sales or to determine the amount of payments due.
Bureau procedures require that companies submit lists of wells
that may produce helium to the Bureau after they obtain a Federal
lease.  The companies are then to make payments to the Bureau if
helium is produced.  However, all companies producing helium had
not submitted lists or payments to the Bureau.  Consequently, the
Bureau had to develop internal lists of wells capable of
producing helium through the "time consuming" process of
researching natural gas production and land ownership databases
and through the examination and comparison of maps, lease data,
and listings of wells feeding helium extraction plants.   While
the Bureau's Helium Resources Evaluation Section had made
progress in establishing useful information sources for
identifying potential payors, such as researching Bureau and
industry databases, it did not (1) enforce information requests
to identify helium production on Federal lands from producers and
helium extraction plants and (2) establish a reporting mechanism
which ensured that potential payors were notified of their
responsibilities to pay helium royalties when producing helium
from leases on Federal lands.

Enforcement of Information Requests.  The Bureau had not
effectively enforced the requirements of the Federal Oil and Gas
Royalty Management Act (30 U.S.C. 1713)  that required gas
producers and sellers to maintain and provide records of helium
production and sales records from leases on Federal land.  At the
time of our review, the Bureau had not initiated research on 75
companies that had been identified as potential helium extractors
from Federal lands.  The companies were identified because they
were producing natural gas on Federal leases in areas such as
Texas, Oklahoma, Kansas, and Wyoming, where helium production was
common.  For example:

- In August 1993 and again in April 1994, the Bureau sent letters
to 11 helium extraction plants requesting information to assist
in identifying Federal wells that were feeding the plants.
However, only 2 of the 11 plants provided the requested
information, and Bureau officials had not followed up with the
unresponsive plants or initiated legal action, such as issuing
subpoenas,  to ensure the plants' compliance with the requests.

- As of May 1997, the Bureau had unsuccessfully attempted to
obtain information from two producers to determine the amount of
Federal helium revenues due.  In each case, the Bureau had not
obtained legal assistance to ensure that the producers complied
with the request.

As part of our survey, we judgmentally selected, based on
suggestions from Bureau officials, a list of 29 Federal wells
operated by three companies.  The companies had not submitted
payments for these wells.  Bureau officials said that they
believed the wells were producing helium because the wells in the
same geographic areas were submitting payments for production of
helium.  From production  information received from helium
extraction plants, we determined  that 9 (31 percent) of the 29
wells  were producing helium.  Based on that information, we
estimated that the Bureau had not received payments totaling as
much as $4,900 for the companies' production from October 1993
through February 1997.

Because we found that 31 percent of the wells reviewed were
producing helium, we believe that there may be significant
amounts of unreported helium production and related revenue
payments because the Bureau had not, at the time of our review,
initiated research on potential production from 75 companies that
had Federal leases.  The Bureau attributed the lack of potential
payor identification to insufficient staffing.  An April 25,
1996, memorandum from a Bureau helium payment analyst to the
General Manager of the Helium Field Operations Office provided
justification for a request to add two positions to the Helium
Resources Evaluation Section.  The memorandum stated:

Research of wells producing extracted helium from Federal
leaseholds and  receipt and verification of monies due from 1991
to current are ever-increasing and time consuming tasks . . . .
We have identified in excess of 2,500 wells to date from which we
are receiving monies from helium extraction for approximately
1200 wells.  This initial research has been completed for
approximately 18 of 35 companies who are consistently paying.
This well and company research is in various stages of completion
for the remaining 17 companies.  Also, approximately 75
additional companies have been identified to date as possible
helium extractors requiring research yet to be initiated.

At present two Helium Payment Analysts are responsible for the
research, Government ownership decimal percentage determinations,
and verification and audit of payments received.  Total annual
revenues approximate $4.5 million [estimate based on fiscal year
1994 collections].

This request for additional staff was not approved by Bureau
management.  Bureau officials also told us that the Section was
supervised by an engineer  who spent only about 25 percent of his
time performing work related to helium royalties.

Reporting Mechanisms.   The Bureau did not have an effective
reporting mechanism to ensure  that it was notified when helium
production started on new or existing leases.  As a result,
payments received from helium producers were not accompanied with
standardized forms itemizing production volumes, mole
percentages,[1] and sales prices.  Consequently, according to the
Bureau, its staff had to use the expensive and time-consuming
payor identification steps described  previously (see
"Enforcement of Information Requests" in this report).  The
Bureau also did not have formal approved procedures and policies
in its Manual for identifying, collecting, and accounting for
helium revenues.  We believe that the inclusion of these
procedures in the Bureau Manual, together with enforcement of
information requests, would improve the Bureau's ability to
ensure that helium production was correctly and consistently
reported by producers, documentation would be submitted to
support production amounts, and proper revenue payments would
subsequently be submitted.

For example, in 1996, one major extraction plant was reporting
production information  that was incorrect.  According to Bureau
officials, production data were received in a different format
each month, and the payment received was incorrect because the
producer was measuring the mole percentage of the helium it
produced during the incorrect stages of production.  In some
cases,  royalty computations  could not be verified by Section
personnel because the data needed to compute the royalties were
not provided with the payments.

Transfer of Function

During our review, we noted that the Bureau's helium revenue
collection functions were similar to those performed by the
Minerals Management Service's Royalty Management Program.  The
Service's Royalty Management Program identifies, collects,
accounts for, audits, and disburses mineral revenues from the
exploration and development of mineral resources, primarily oil
and natural gas production, on Federal lands and the Outer
Continental Shelf.  The Program, which operated on a budget of
about $69 million, collected about $6.4 billion in fiscal year
1997 for offshore lease sales, rents, and royalties and from
other collections.

According to the Service's report "Minerals Management Service,
1982-1997: 15 Years of Excellence," the Service's Royalty
Management Program uses computerized accounting systems to
process more than 200,000 transactions each month from almost
100,000 Federal and Indian leases.  The Program also conducts an
extensive audit program of mineral leases; develops regulations
to implement royalty management legislation; coordinates its
mineral revenue collection activities with those of agencies
responsible for oversight and regulation of mineral development
and production; establishes standards and procedures for
determining the fair market value for minerals; conducts payor
training; processes financial and production data submitted by
companies; and performs monthly disbursements of monies collected
to the U.S. Treasury, state and county governments, and Indian
tribes and allottees.  Thus, the Service receives production
information and the related royalty payments on the natural gas
produced and sold from Federal leases, which also may produce
helium.

In September 1998, Service officials told us that they were
negotiating a memorandum of understanding with the Bureau for the
Service to utilize its audit resources to conduct an audit of the
payments received by the Bureau from the largest producer of
helium on Federal lands.  We support this arrangement and believe
that the Bureau should evaluate the feasibility of transferring
helium responsibilities to the Service.  If this occurs,  we
believe that  cost savings could be realized and payor compliance
could be improved.  Further, the Service's Royalty Management
Program has a significantly larger number of resources and
capabilities available to use in effectively identifying and
collecting helium revenues than the Bureau has in this area.

Recommendations

We recommend that the Director, Bureau of Land Management:

1.  Evaluate the feasibility of transferring responsibilities for
administering helium revenues to the Minerals Management Service.

2.  Establish written procedures to provide regulatory guidance
for initiating necessary actions, including legal proceedings, to
ensure the compliance of operators and extractors with the
information requests concerning helium production.

3.  Establish written procedures in the Bureau Manual which
ensure that the Bureau is notified when production is initiated
on new or existing wells that may produce helium.  These
procedures should also include standardized remittance forms,
including specific production data to be required from each
producer.

Minerals Management Service Response and Office of Inspector
General Reply

In the March 18, 1999, response (Appendix 2) to the draft report
from the Acting Director, Minerals Management Service, the
Service stated that it will "work together with the Bureau" in
any evaluation of the feasibility of transferring helium revenue
collection responsibilities to the Service.  Although the Service
was not requested to respond, we believe that its stated
willingness to work with the Bureau in improving the program will
have a beneficial impact on the program.

Bureau of Land Management Response and Office of Inspector
General Reply

In the March 22, 1999, response (Appendix 3) to the draft report
from the Acting Director, Bureau of Land Management, the Bureau
concurred with Recommendations 1 and 2 but indicated
nonconcurrence with Recommendation 3.  Based on the response, we
consider Recommendations 1 and 2 resolved but not implemented and
Recommendation 3 unresolved.  Accordingly, the unimplemented
recommendations will be referred to the Assistant Secretary for
Policy, Management and Budget for tracking of implementation, and
the Bureau is requested to reconsider its response to
Recommendation 3 (see Appendix 4).

Regarding Recommendation 3, the Bureau stated that it does "not
believe internal guidance to be the proper vehicle" for  ensuring
that operators notify the Bureau of Land Management of new
production and requiring operators to submit standardized
remittance forms.   The Bureau further stated that it "did not
agree that placing this additional burden on operators is
necessarily the appropriate process" to  increase helium
extraction and revenue collection on Federal lands.

However, as noted in our report (page 6), payments received from
helium producers were not accompanied with standardized forms
that indicated production volumes, mole percentage measurements,
and sales prices.  We believe that this requirement is critical
to ensure that the Federal Government receives its fair share of
helium revenues and that operators are treated equitably by
adhering to the same requirements.  We do not believe that such a
requirement would place an undue burden on operators. We
therefore request that the Bureau reconsider its response to the
recommendation.

Additional Comments on Audit Report

In its response, the Bureau provided additional comments on the
report.  The Bureau's comments and our replies are presented in
the paragraphs that follow.

The Bureau stated that the draft report "incorrectly cites the
Helium Privatization Act as authorizing the `Secretary to enter
into agreements with private parties for the recovery and
disposal of helium on Federal lands and to deposit helium
revenues into the Treasury.'"  The Bureau cited the Helium Act as
the "legal basis" for this authority and said that the Helium
Privatization Act "authorizes continuance of the administration
of extracted FLHP [Federal Lands Helium Program] by the Secretary
of the Interior."  To clarify the relationship between the two
Acts, we have revised the Background section of our report.

The Bureau stated that it did not agree that the Federal Oil and
Gas Royalty Management Act applied to helium but that "for ease
of administration, wherever the Helium Act and FOGRMA [Federal
Oil and Gas Royalty Management Act] allow," it has "designed
similar administrative procedures" for the Federal Lands Helium
Program  and the oil and gas program.

The Federal Oil and Gas Royalty Management Act (30 U.S.C.
1702(9)) defines oil and gas as "any oil or gas originating from
or allocated to the Outer Continental Shelf, Federal or Indian
Lands."  Therefore, helium is not excluded from this definition.
Furthermore, the Code of Federal Regulations (30 CFR  202.152)
states that producers of oil and gas from Federal leases should
report "helium . . . and any other gas marketed as a separate
product" in accordance with the standards cited in this section
of the Code.  The Act also provides the Bureau with the critical
record retention and access requirements needed to identify
production and verify payments.

The Bureau stated that it "believe[s] it is inappropriate to rely
on an outdated report for any of the findings identified in" our
draft survey report from its September 1993 internal report "Unit
of Federal Leased Lands: Background, Development, Obstacles,
Progress, and Status, 1991-1993."  The Bureau also stated, "Since
1993, the unit has undergone significant changes, including
transfer of jurisdiction from the Bureau of Mines to the BLM
[Bureau of Land Management] and significant change in legislative
authority through the Helium Privatization Act of 1996."

The conclusions in the survey report are based on our review of
controls, policies, and procedures in effect at the time of our
review and not on the findings in the cited report.  However, we
found that the deficiencies noted in the Bureau's 1993 internal
report still existed and continued to impede the Bureau from
effectively administering helium revenue collection.
Specifically, the Bureau's  report noted the extensive amount of
time needed to determine revenues due the Government; the lack of
information resources needed to identify production; the
inability of staff to obtain access to extraction plant data; the
inability of staff to obtain access to Bureau state office
databases; and the lack of specific directives, instructions, and
procedures for program operations.  As stated in our report
(pages 5 and 6), we determined that the Bureau was not
effectively identifying and verifying revenues by enforcing
information requests and utilizing reporting mechanisms that were
noted in its 1993 report.

The Bureau said that our report "indicates that we [the Bureau]
had not established a reporting mechanism for potential payors.
Since August 1991, we have routinely sent notices to operators of
Federal wells.  The notice outlines their responsibility to pay
helium royalties or fees and provides an appropriate contact.
These notices are also periodically updated and reissued."
However, the Bureau did not state, in its response, how effective
these mechanisms were and how the Bureau was following up on
these initial contacts.  As noted in our report (pages 5 and 6),
we found that the Bureau had been unsuccessful in enforcing
information requests.  We have revised the report to note that
the Bureau did not have an effective reporting mechanism.

The Bureau stated that our report "implies that recoverable
helium is widespread" and that this conclusion was based on our
review of "29 wells from a helium-rich area."  The Background of
the report (page 2) stated that most of the  helium production in
the United States was processed by 11 plants and that this
production was received from four states.  Our selection of the
29 wells was based on a judgmental sample chosen with the
assistance of Bureau helium program personnel.  As stated in the
report (page 5), we believe that there may be significant amounts
of unreported helium production, since we found that 31 percent
of the 29 wells were producing helium and that the Bureau had not
initiated research on potential production from 75 companies.

The Bureau stated that our report "correctly identified the need
for additional staffing, but failed to note that an additional
analyst position was added to the Unit of Federally Leased Lands
group in June, 1998."  The Bureau's additional staff position was
created after our audit fieldwork was completed, but we recognize
this as a positive effort to improve the program's operations.

The Bureau stated, "Regardless of the size of the agency or
program handling of these responsibilities, the Helium
Privatization Act requires helium program management to be funded
from collection receipts."  The Bureau also stated that although
"this small part" of the Bureau's helium program "does exhibit
similarity" to the functions of the Minerals Management Service,
"these functions do not encompass the full spectrum of helium
management functions" performed by the Bureau's Amarillo Field
Office.  We agree that the Act requires helium production
management to be funded from collection receipts but believe that
this requirement can be met more economically if the Minerals
Management Service assumes some or all of the Bureau's helium
revenue functions because of the Service's expertise in this
area.  Our report and Recommendation 1 indicate that only
functions related to identifying and collecting helium revenues
from helium produced on Federal lands should be considered for
transfer to the Service.

In accordance with the Departmental Manual (360 DM 5.3), we are
requesting a written response to this report by May 10, 1999.
The response should provide the information requested in Appendix
4.

The legislation, as amended, creating the Office of Inspector
General requires semiannual reporting to the Congress on all
audit reports issued, the monetary impact of audit findings,
actions taken to implement audit recommendations, and
identification of each significant recommendation on which
corrective action has not been taken.

We appreciate the assistance of Bureau personnel in the conduct
of our audit.


cc:  Director, Minerals Management Service


**FOOTNOTES**

[1]:According to Bureau officials, the helium content of a
natural gas stream is measured as a percentage, known as the mole
percentage, which is used to determine the portion of helium in
the gas stream attributable to each particular well.  (The helium
extraction process is described further in Appendix 1.)  The mole
percentage should be measured at the inlet gauge of the gas
processing plant, which is before any processing occurs on the
gas.
                                                       APPENDIX 1

HELIUM  EXTRACTION  PROCESS[1]

Natural gas produced from wells consists of a mixture of methane
and other gases such as nitrogen, hydrogen, butane, ethane,
propane, and helium.  From the well, the natural gas may be piped
to a processing plant.  Although all natural gas contains at
least trace quantities of helium, helium production in the United
States is concentrated in the States of Texas, Oklahoma, Kansas,
and Wyoming because the natural gas mixture in these areas is
richer in helium than in other parts of the country. The helium
content of a natural gas mixture is measured as a percentage,
known as the mole percentage, which is used to determine the
portion of helium in the gas stream attributable to each
particular well.  If the processing plant is not connected to a
helium purification plant, the helium is vented into the
atmosphere.  If the processing plant is connected to a helium
purification plant, the processing plant will extract a crude
helium mixture averaging about 70 percent helium and 30 percent
nitrogen.  The helium production volumes are measured for revenue
purposes at the inlet valves at the gas processing plants that
receive the gas from the wells.  The crude helium mixture is sent
by way of a pipeline to a helium purification plant.  The helium
purification plant then processes the helium into a marketable
grade of helium  (which is approximately 99 percent pure).

A producer incurs a liability to the Bureau of Land Management
for helium produced that  is allocated at the metered wellheads.
Helium is used for space shuttle propellents; nuclear,
biological, and superconductor research; magnetic resonance
imaging equipment; and various lighter-than-air activities.


**FOOTNOTES**

[1]:The description of the helium extraction process is based on
information obtained from Bureau of Land Management documents and
discussions with Bureau officials.


                                                      APPENDIX 2


                                                      APPENDIX 3


                                                      APPENDIX 4



STATUS OF SURVEY REPORT RECOMMENDATIONS

Finding/Recommendation

Reference            Status              Action Required

1 and 2           Resolved; not       No further response to the
                  implemented.        Office of Inspector General
                                      is required.  The
                                      recommendations will be
                                      referred to the Assistant
                                      Secretary for Policy,
                                      Management and Budget for
                                      tracking of implementation.

3  Unresolved.
Reconsider the recommendation, and provide an action plan that
includes a target date and title of the official responsible for
implementation.



ILLEGAL OR WASTEFUL ACTIVITIES SHOULD BE REPORTED

TO THE OFFICE OF INSPECTOR GENERAL BY:

Sending written documents to:



Within the Continental United States

U.S. Department of the Interior
Office of Inspector General
1849 C Street,N.W.
Mail Stop 5341
Washington, D.C. 20240

Calling:

Our 24 hour
Telephone HOTLINE
1-800-424-5081 or
(202) 208-5300

TDD for hearing impaired
(202) 208-2420 or
1-800-354-0996



Outside the Continental United States


Caribbean Region

U.S. Department of the Interior
Office of Inspector General
Eastern Division- Investigations
1550 Wilson Boulevard
Suite 410
Arlington, Virginia 22209

Calling:
(703) 235-9221


North Pacific Region

U.S. Department of the Interior
Office of Inspector General
North Pacific Region
238 Archbishop F.C. F'lores Street
Suite 807, PDN Building
Agana, Guam 96910


Calling:
(700) 550-7428 or
COMM 9-011-671-472-7279