That 1872 Mining Law

Earl Devaney, the no-nonsense Inspector General for the Interior Department, which has the responsibility for all things mining, including abandoned mine sites, has issued a report on the dangers those abandoned sites posed. Today's NY Times has an editorial on that report's findings.

After an extensive one-year investigation, Mr. Devaney concludes, in language that is always blunt and at times incendiary, that both the Bureau of Land Management and the National Park Service have “put the public’s health and safety at risk” by failing to clean up or seal off abandoned mine sites. Several deaths and injuries have already occurred — one mine swallowed an entire vehicle, the report says — and “the potential for more deaths and injuries is ominous.” ...

Among the many flaws of the 1872 mining law is that it has never forced mining companies to clean up their messes. Last fall, the House passed a reform bill that would strengthen environmental controls on new mines and raise money to clean up old mines by forcing companies that mine gold, silver, copper and other hard-rock minerals to pay royalties just like oil companies do.

The House Bill, while not perfect, does go a long way towards ameliorating the dangers these old mines pose. The Senate, however, has yet to make even the slightest move to consider the issue. Odd? No, not really.

The House bill has some support in the Senate, but it also has one powerful opponent: Harry Reid, the majority leader who is a miner’s son and whose home state of Nevada does a brisk business in mining.

Sen. Reid, a Democrat, has shown no interest in forcing the mining companies to clean up their messes and certainly is not interested in the royalty system the House has proposed, a system which oil and natural gas companies have been forced to comply with (well, sorta kinda these past seven years). Now, you'd think that Sen. Reid would be concerned enough about the people of his state and the people who visit his state to make certain of their safety. Apparently, however, you would be wrong.

I guess there are just more important considerations than public safety, namely the interests of campaign contributors.

Heckuva job, Harry.

Another Unsurprise

President George W. Bush has put fewer plants and animals on the Endangered List in seven years than his father did in one year. His Interior Department found all sorts of canny ways to manage this negative accomplishment according to this article in today's Washington Post.

Controversies have occasionally flared over Interior Department officials who regularly overruled rank-and-file agency scientists' recommendations to list new species, but internal documents also suggest that pervasive bureaucratic obstacles were erected to limit the number of species protected under one of the nation's best-known environmental laws.

The documents show that personnel were barred from using information in agency files that might support new listings, and that senior officials repeatedly dismissed the views of scientific advisers as President Bush's appointees either rejected putting imperiled plants and animals on the list or sought to remove this federal protection.

Officials also changed the way species are evaluated under the 35-year-old law -- by considering only where they live now, as opposed to where they used to exist -- and put decisions on other species in limbo by blocking citizen petitions that create legal deadlines.

The excuse offered by the Interior Department? They've been too busy defending lawsuits against the department for failing to list new species. How's that for an Alice In Wonderland explanation.

The result has been the loss of several species, and the article listed a couple of them. Of course, there's no way to get an accurate count, nor to determine what those losses will lead to as the ecology is altered by those losses. But the argricorps and land developers are happy: they haven't had to deal with those pesky environmental issues under Secretary Dirk Kempthorne.

The irony of one delisting will, of course, be lost on the administration which doesn't do nuance: that of the American Bald Eagle in Arizona's Sonoran Desert, even though there are only 50 breeding pairs instead of the desire goal of 500.

Heckuva job, Dirk.

303 days.

Arnold Hedges His Bets

Governor Arnold Schwartzenegger has turned out to be a quick study. He's discovered a way to get what he wants by pulling a few strings at the federal level. This time it has to do with Indian gaming in California. He negotiated new compacts with four of the wealthiest tribes, and got the state legislature to approve the compacts when he pointed out that the state (in the midst of some serious budget deficits) would get billions of dollars out of the deal. Now the compacts have to be approved by the voters in the February election, and there are four propositions dealing with the compacts.

This time around a lot of voters have indicated that they don't want more Indian gaming because they don't want the state to turn into another Nevada. It is conceivable that the propositions would be voted down. The governor knows this. What to do? Well, an editorial in Friday's Sacramento Bee explains what happened next.

...After the compacts were ratified by the Legislature, they were sent to Washington, where the U.S. secretary of the interior is supposed to review and either accept or reject them. But after they arrived at Interior, the compacts were lost for 80 days. Under federal law, the secretary has 45 days to take action or Indian state gambling compacts become law automatically. Because the California compacts were lost, no review took place. When they mysteriously reappeared after the 45-day deadline had passed they were deemed approved automatically.

Here's where the governor steps in. The compacts are not officially in effect until they are published in the Federal Register. Given the pending vote in California and the mysterious disappearance and reappearance of the California compacts, Interior Department officials initially said they would not publish them until after the California vote. But 16 days later Interior reversed course, and the compacts were published.

It turns out that Schwarzenegger had spoken with Interior Secretary Dirk Kempthorne and asked him to publish the compacts. At an editorial board meeting with The Bee on Wednesday, when he was asked directly if he had asked Kempthorne to publish them, the governor hedged, merely saying he asked Kempthorne to give "some attention" to the matter to make sure that "everything go through procedures." Later, a spokesman for the governor said that Schwarzenegger had asked the secretary to publish the compacts. The governor spoke with Kempthorne on Dec. 6. The compacts were published in the Federal Register on Dec. 19.

... If voters reject those four gambling deals on the ballot, Interior's decision to approve and publish them in the Federal Register creates a legal quandary. Does federal action supersede the California vote? [Emphasis added]

Because in some areas, among them these gambling compacts, Native American tribes are considered sovereign nations, it is entirely possible that the federal government's action will take precedence over the state vote. If voters disapprove the compacts, the courts will have to decide the issue, and they surely will be called upon to do so. That, however, is only part of the issue. How we got to this point is far more telling.

The first part of this little incident, the mysterious disappearance and equally as mysterious reappearance, may be nothing more than another example of this administration's incompetence, although I somehow doubt that. Even if mere negligence on the part of the Interior Department is established, it is the second part of the episode that deserves scrutiny. The department's Inspector General is already looking into the whole episode, and the Sacramento Bee's editorial board urges an investigation into Governor Schwartzenegger's actions.

I think that's a sterling idea.

Meanwhile, Back At The Interior Department

It's been several months since the Department of the Interior has been in the news. No, the silence is not reflective of the department's cleaning up its act, it's more a case of folks there waiting for another shoe to drop. According to an article in today's NY Times, that shoe came in the form of a report from the department's own Inspector General.

The Interior Department’s program to collect billions of dollars annually from oil and gas companies that drill on federal lands is troubled by mismanagement, ethical lapses and fears of retaliation against whistle-blowers, the department’s chief independent investigator has concluded.

The report, a result of a yearlong investigation, grew out of complaints by four auditors at the agency, who said that senior administration officials had blocked them from recovering money from oil companies that underpaid the government.

...it offered a sharp description of failures at the Minerals Management Service, the agency within the Interior Department responsible for collecting about $10 billion a year in royalties on oil and gas....

Prepared by the Interior Department’s inspector general, Earl E. Devaney, the report said that investigators found a “profound failure” in the agency’s technology for monitoring oil and gas payments.

It suggested that the agency was too cozy with oil companies and that internal critics had good reason to fear punishment.

“It demonstrates a Band-Aid approach to holding together one of the federal government’s largest revenue-producing operations,” Mr. Devaney concluded. [Emphasis added]

Interior is responsible for, among other things, managing the energy companies' drilling on public lands and for collecting royalties from the companies for the oil and gas they extract from that property. Several department employees have been complaining for several years that the energy companies were underpaying those royalties. Those same employees have been demoted or fired for their temerity, although this report falls short of accusing the Interior Department of retaliation.

And the excuse offered for not collecting the royalties and not collecting the interest due on the prior underpayments?

In one case, senior officials decided that it would impose a “hardship” on oil companies to demand that they calculate the back interest they owed after having been caught underpaying. The agency itself was years behind in billing the companies, because its computers could not perform the calculations.

That's it, that's the ticket. Blame the software, but don't hold the company that sold the package to the department accountable for the screw-up and demand that it be fixed. And above all, don't ask the poor power companies to figure out what they owe including interest.

I need a desk to pound my head on.

Officially Sponsored Endangerment

Last week, the bald eagle was removed from the endangered list because by most accounts the species had made a comeback. That's good news. The bad news, however, is that many more species may expire due to deliberate lack of government intervention by this administration. From today's Los Angeles Times:

The bald eagle may be soaring back from near-extinction, but hundreds of other imperiled species are foundering, as the federal agency charged with protecting them has sunk into legal, bureaucratic and political turmoil.

In the last six years, the Bush administration has added fewer species to the endangered list than any other since the law was enacted in 1973.

The slowdown has resulted in a waiting list of 279 candidates that are near extinction, according to government scientists, from California's Yosemite toad to Puerto Rico's elfin-woods warbler.

Beyond the reluctance to list new species, a bottleneck is weakening efforts to save those already listed. Some 200 of the 1,326 officially endangered species are close to expiring, according to environmental groups, in part because funds have been cut for their recovery.

"It's wonderful the bald eagle is recovering — one of the most charismatic and best funded species ever," said Jamie Rappaport Clark, a former director of the U.S. Fish and Wildlife Service who now works for Defenders of Wildlife, an advocacy group. "But what's happening with the other species? This administration has starved the endangered species' budget. It has dismantled and demoralized its staff." [Emphasis added]

One way to choke off a federal agency is to cut its budget. The Fish and Wildlife Service is facing a 28% cut in the president's proposed budget, and previous years' cuts have left the agency with 30% fewer employees on board.

Those who remain are being led by political appointees who have closer ties to the interests opposed to the agency's mandate than to the nation as a whole. One of those appointees, Julie McDonald was recently forced to retire when an Interior Department Inspector General's report busted her for leaking sensitive agency memos to business interests battling against further regulation (more about Ms. McDonald here).

The Democrats of the 110th Congress have decided to hold hearings on this agencies problems and the appointees responsible for them. Hopefully, those same Democrats will also see that money is put back into the budget for this agency so that it can do the job it was created to do. We need more good news stories like the bald eagle.

Just In Time

On March 30, 2007, I put up a post on Julie MacDonald, the head of the Fish and Wildlife Service who liked leaking Interior Department info to industries affected by new regulations. Interior's Inspector General issued a report that detailed her questionable behavior.

Well, Ms. MacDonald is back in the news. From today's NY Times we learn that Ms. MacDonald has resigned her position, and the timing is, shall we say, interesting.

The resignation came about a week before a House committee was set to hold hearings on political interference with biologists, and the same day that Senator Ron Wyden, Democrat of Oregon, wrote Interior Secretary Dirk Kempthorne demanding that he take action to address the concerns about the official, Julie A. MacDonald, who was overseeing the Fish and Wildlife Service.

The only surprising part is that it took the White House about five weeks to determine that this was a case the Democrats in Congress weren't going to take a pass on. Given the nature of the findings of the Inspector General's report, the White House should have been paying more attention. Here are just a few of the findings:

Among other actions that drew the ire of wildlife biologists and lawyers, Ms. MacDonald had heavily edited biologists’ reports on sage grouse, a species that in the end was not placed on the threatened or endangered lists. Their habitat overlaps with vast parts of the Rocky Mountain West, where oil and gas drilling and cattle ranching are prevalent; listing the grouse as endangered or threatened could have curbed those industries’ access to federal lands.

In another case in the inspector general’s report, Ms. MacDonald demanded that scientists reduce the nesting range for the Southwest willow flycatcher to a radius of 1.8 miles, from a 2.1-miles, so it would not cross into California, where her husband has a ranch.

She also gave internal agency documents to industry lawyers and a lawyer from the Pacific Legal Foundation, all of whom frequently filed suit against the Interior Department over endangered species decisions.

It is the last finding that may very well be the most damaging and the most interesting for Congressional hearings to pursue. It is unlikely that Ms. MacDonald was acting on her own initiative, or that she was acting in a solo capacity. Apparently at least one committee chair has figured that out:

Representative Nick J. Rahall II, Democrat of West Virginia and chairman of the House Natural Resources Committee, said Tuesday in a statement, “The problems at the Fish and Wildlife Service are not merely a matter of people and personalities; the faults run much deeper than Julie MacDonald.”

Rep. Rahall is right, but his assessment shouldn't be limited to just the Fish and Wildlife Service. The entire federal government appears to have been affected by the disease.

Pass the popcorn; it's going to be a long session.

Back to Interior

It looks like the Democrats in the 110th Congress are going to need plenty of klieg lights the next two years. Yet another Bush appointee has been caught using her government position to push the administration agenda rather than perform her job. From an AP report in yesterday's Sacramento Bee:

A government official broke federal rules and should face punishment for leaking information about endangered species to private groups, the Interior Department's watchdog said.

The department's deputy assistant secretary for fish, wildlife and parks acknowledged releasing information that was not supposed to be made public to organizations such as the California Farm Bureau Federation and Pacific Legal Foundation, according to the agency's inspector general.

Environmentalists and other critics contend Julie MacDonald undermined federal endangered species protections. In the report by Earl Devaney, Interior Department officials describe MacDonald as a political appointee bent on manipulating science to fit her policy goals, which they said favor developers and industry.

The report said MacDonald:

-Removed more than 80 percent of almost 300 miles of streams that were to be protected to help bull trout recover in the Northwest's Klamath River basin.

-Tried to remove protections for a rare jumping mouse in the Rocky Mountains based on a questionable study.

-Pressured the Fish and Wildlife Service to alter findings on the Kootenai River sturgeon in Idaho and Montana so dam operations would not be harmed. [Emphasis added]

Ms. MacDonald's qualification for her job?

MacDonald is a hydraulic engineer with a master's degree in management but no background in natural sciences. She joined the Bush administration in July 2002 as a senior adviser for fish, wildlife and parks. She was promoted to deputy assistant secretary in 2004.

Well educated, yes. A degree suited to this position, such as in one of the biological sciences, not so much. Obviously her qualifications lay elsewhere. She clearly is quite adept at bullying the scientists at the department and at feeding sensitive information via email to friends at Chevron. Those two attributes make her ideal for this administration.

Sometimes Appearances Matter

The Interior Department is back in the news, although this time it's a couple of alums that are involved, one of whom had transferred to the Justice Department and the other of whom had left government service to become a lobbyist. The AP story appeared in yesterday's Sacramento Bee

Nine months before agreeing to let ConocoPhillips delay a half-billion-dollar pollution cleanup, the government's top environmental prosecutor bought a $1 million vacation home with the company's top lobbyist.

Also in on the Kiawah Island, S.C., house deal was former Deputy Interior Secretary J. Steven Griles, the highest-ranking Bush administration official targeted for criminal prosecution in the Jack Abramoff corruption probe.

Just before resigning last month, Assistant Attorney General Sue Ellen Wooldridge signed two proposed consent decrees with ConocoPhillips: one giving the company as much as two to three more years to install $525 million in pollution controls at nine refineries and the other dealing with a Superfund toxic waste cleanup.

It wasn't just Mr. Griles and Ms. Wooldridge (who are romantically involved) in on the house deal, and this is where the issue gets hot:

Last April, Wooldridge, ConocoPhillips Vice President Donald R. Duncan and Griles had gone together on a $980,000 home in a gated community at Kiawah Island. Records from the Charleston County Auditor's office obtained by The Associated Press list Duncan as a 50 percent owner of the home and Wooldridge and Griles as 25 percent owners. [Emphasis added]

The Justice Department's top environmental lawyer continued to handle a case involving her two investment partners, and that case is about to end with a sweet deal for the company employing one of those partners. Somebody finally noticed.

The House Oversight and Government Reform Committee said Wednesday night it will open an inquiry and request documents into the real estate transaction and consent agreements.

"There appears to be a breakdown of ethics at the Justice Department, said the committee's chairman, Rep. Henry Waxman, D-Calif. "Senior Justice Department officials should not be handling cases that affect their close friends and investment partners." [Emphasis added]

One would certainly think so, but the parties involved claim there was no problem, no problem at all:

"We object to the suggestion that the real estate transaction involving Don Duncan, which was cleared in advance by the ethics office of the Department of Justice, had any impact whatsoever on the consent decrees entered into by ConocoPhillips or the recent SEC filing amending ConocoPhillips code of ethics," company officials said. ...

As for the vacation home, Stephen W. Grafman, Wooldridge's attorney, said she paid for her share and was told by the Justice Department's ethics office a month before the sale went through "that the purchase was not a problem."

Oh, please! First year law students know better. When it comes to conflicts of interest, not only should impropriety be avoided, so should even the appearance of impropriety.

Paul Light, a professor at New York University's Wagner School of Public Service and an expert on presidential appointees, said Wooldridge's participation in the Kiawah Island partnership and the ConocoPhillips settlement "creates the impression of favoritism, or favors due."

"From an appearance standpoint it's awful, and from a legal standpoint it's questionable," Light said Wednesday. "Political appointees have been indicted for less."

The fact that ConocoPhillips got a break on a slam-dunk case certainly doesn't help Ms. Wooldridge's case, even with the green light from Justice.

Heckuva job, George!

Keeping Promises

Last month, I posted on some Justice Department investigations into the way the Department of the Interior was doing its business. I concluded with the following:

Still, it's nice to see that at least some in the Justice Department haven't gotten the message to lay off big oil. Now, with a new Congress, perhaps the Justice Department will get the support it needs to clean up the mess in Interior.

It appears that the new Democratic led Congress intends to do just that. From today's NY Times.

As director of the Minerals Management Service, Ms. Burton has faced widespread complaints from Congress for months that her agency is mismanaged, unaccountable and on the verge of losing billions of dollars owed by oil and gas companies that drill in the Gulf of Mexico.

On Thursday, the Interior Department’s inspector general is expected to tell the Senate Energy Committee that Ms. Burton either ignored or remained unacceptably blind to a leasing blunder that will, if left unchanged, let oil companies escape as much as $10 billion in royalties over the next five years.

The Senate hearing comes amid rising bipartisan anger about potentially huge losses to taxpayers that have prompted an investigation by the Justice Department into the agency’s multibillion dollar “royalty in kind” program.

...In July, Republicans the House Government Reform Committee accused her agency of stonewalling their investigation. In September, they accused Ms. Burton of going too far in making concessions to oil companies. That same month, the Interior Department’s chief independent investigator declared that “short of crime, anything goes at the highest levels of the Department of the Interior.” [Emphasis added]

The leasing blunder in question is in fact the fault of a contract which issued under the Clinton administration and involves the failure to include an "escape clause." However, the mistake was noticed shortly after the Bush administration began and nothing has been done about it since then. It's the kind of mistake that Ms Burton should have noticed and rectified because her prior job with the state of Wyoming involved the collection of such royalties for her state. She claims that the problem wasn't brought to her attention until just recently. Either she is lying or she is a lousy manager: her staff was well aware of the issue years ago at a time when oil prices were much lower and the government would have been in a better bargaining position to renegotiate the leases in question.

The 110th Congress isn't letting either possibility slide, and there is actually some Republican support for this investigation.

It's about time.

The Department of the Interior: One More Time

Today is Christmas, but it's beginning to look like the Department of the Interior has been busy dispensing gifts all year long. Most of the time the presents went to the big oil companies, but now we learn that the gift list includes all sorts of contractors as well. From today's Washington Post:

The Defense Department paid two procurement operations at the Department of the Interior to arrange for Pentagon purchases totaling $1.7 billion that resulted in excessive fees and tens of millions of dollars in waste, documents show.

Defense turned to Interior, which manages federal lands and resources, in an effort to speed up its contracting. Interior is one of several government agencies allowed to manage contracts for other agencies in exchange for a fee.

But the arrangement between Interior and Defense "routinely violated rules designed to protect U.S. Government interests," according to draft audit documents obtained by The Washington Post.

...The findings prompted the inspector general's office to demand that the Pentagon stop using Interior's contracting shops.

More than half of the contracts examined were awarded without competition or without checks to determine that the prices were reasonable, according to the audits by the inspectors general for Defense (DOD) and Interior (DOI). Ninety-two percent of the work reviewed was awarded without verifying that the contractors' cost estimates were accurate; 96 percent was inadequately monitored. [Emphasis added]

And just what kind of contracts were awarded and to whom? This will curl your hair:

In one instance, Interior officials bought armor to reinforce Army vehicles from a software maker. In another, Interior bought furniture for Defense from a company that apparently had not previously been in the furniture business. One contract worth $100 million, to lease office space for a top-secret intelligence unit in Northern Virginia, was awarded without competition. Defense auditors said that deal cost taxpayers millions more than necessary, and they have referred the matter for possible criminal investigation.

Keep in mind that the Defense Department has its own procurement section and should have been doing this work itself. The excuse given was that this particular section is underfunded, and the Department figured it could save time and money by going to the Department of the Interior, which is an interesting wrinkle in the outsourcing game. I suppose an argument can be made that awarding contracts without a bidding process and without checking the numbers does in fact speed up the process, but in that process, money is lost, not saved.

While it's nice to see the Inspectors General and the Department of Justice get involved, all of this is after the fact. The money has already been paid out, and the system in place pretty much assures us that the scam will continue. It's time for Congress to get involved. Hearings which include a complete top-to-bottom review of the Department of the Interior should be on the agenda for 2007. It's time to root out the crooks, many of them appointees of the current administration.

That would be a nice Christmas present to the American public for 2007.

From Incompetent to Criminal

Once again the Interior Department is under investigation, this time by the Justice Department. It's been a bad year for the department, especially the last several months. From today's NY Times:

The Justice Department has begun two criminal investigations into the Interior Department’s Minerals Management Service, which is already the focus of several inquiries into its collection of royalties for oil and gas produced on federal property.

...The investigations are an unexpected development in what has already become a broad examination of the Interior Department’s oversight of companies that pump more than $60 billion worth of oil and gas each year from publicly owned land and coastal waters.

...Mr. Devaney, the department’s inspector general, is already conducting two other investigations into suspected mismanagement of the minerals agency. And just last week, he issued a scathing criticism of the agency’s system for auditing oil and gas royalty payments. [Emphasis added]

While the article did not provide much detail, probably because the investigations are not complete, the subject matter appears to be the "royalities in kind" system that the oil companies pushed for and received. Under this program, instead of paying the royalties charged for extracting the oil and natural gas in dollars, the oil companies pay in oil and natural gas. The oil is usually placed in the US strategic oil reserve, but the natural gas is sold on the open market. The oil companies claimed that this system would simplify accounting. Apparently is also would make it easier for the oil companies to cheat.

To be fair, part of the Interior Department's problems were caused by sloppy contract drafting during the Clinton administration, but the Bush admistration was aware of the problem and cheerfully did nothing about it. Why should it? After all, the oil companies are like family to both Bush and Cheney.

Still, it's nice to see that at least some in the Justice Department haven't gotten the message to lay off big oil. Now, with a new Congress, perhaps the Justice Department will get the support it needs to clean up the mess in Interior.

A Pleasant Surprise

The past two years or so, the major oil companies have posted record-setting profits. We've tended to view those obscene figures as having come on the back of those of us who have to drive gas-powered autos, but it appears that the oil companies have also been ripping off the federal government (that is to say, all of the American public) by just not paying the royalties they owed. The U.S. Supreme Court recently disabused the oil companies of the notion that they didn't have to pay. From an AP report in the Sacramento Bee:

The Supreme Court ruled against the oil and gas industry Monday in a dispute over how many years into the past the government can reach to collect money for leases on federal land.
In a 7-0 decision, the court refused to limit the number of years the government can reach back to collect unpaid royalties. The ruling applies to administrative proceedings the Interior Department brought against two companies.

At issue is whether a federal law imposing a six-year time limit for the government to file lawsuits based on federal contracts also applies to administrative orders.
Ten years ago, the Interior Department's Minerals Management Service ordered BP America Production Co. and ARCO to pay $4.1 million and $780,000 respectively to cover royalty deficiencies on coalbed methane. The companies pumped the natural gas from wells in the San Juan Basin, which is in northwest New Mexico and southwest Colorado.

The government's administrative claim was based on royalties allegedly owed going back more than eight years from the time the Interior Department demanded the money. BP and ARCO say the limit should be six years, which would reduce the amount of royalties the Interior Department is able to claim.

Now clearly the Interior Department was lax in waiting so long to proceed with the hearings, but the point is that the money was owed, and not paid, and Interior did proceed within a time frame acceptable within the regulations in effect. One of the arguments made by the oil companies that was rejected by the justices is a classic:

BP and ARCO say unfavorable rulings in lower courts on the issue would add hundreds of millions of dollars to the royalty obligations of the oil and gas industry over the life of existing leases.

I beg your pardon? Those hundreds of millions of dollars weren't added to the royalty obligations, they are the royalty obligations, part of the contracts entered into to pump the oil and gas out of the ground.

Greedy bastards.

Interior Design

On Tuesday, I posted on the latest mission failure of the Interior Department. Apparently Congress decided it was time to look into these failures because they are costing the federal government billions of dollars. From today's NY Times:

The Government Accountability Office, the watchdog agency for Congress, is beginning a broad investigation into potential deficiencies in how the government collects billions of dollars in royalties from companies that produce oil and gas on federal territory. The inquiry is being done at the request of the Republican-led House Government Reform Committee.

The investigation reflects a growing anger in Congress about the Interior Department’s vast oil and gas leasing program, under which the government collects as much as $10 billion a year on oil and gas produced on federal land and in federal waters.

The agency has been under fire since February for errors on offshore leases that could cost the government more than $7 billion over the next five years, as well as for its sluggish response.

Four auditors responsible for scrutinizing royalties recently contended that their superiors blocked them from challenging millions of dollars in deliberate underpayments.

In September, the inspector general of the Interior Department, Earl C. Devaney, told lawmakers that top Interior officials had encouraged a culture of cronyism, ethical lapses and poor management. “Short of crime, anything goes,” he testified.

Democratic lawmakers have argued for months that the Interior Department under President Bush has been devoted almost entirely to serving the oil and gas industry, at the expense of American taxpayers. [Emphasis added]

A couple of things about this article nagged at me. First of all, the primary emphasis in the whole article is that it is Republicans who are calling for the investigation. The throw-away paragraph about the Democrats (the emphasized portion above)was obviously tacked on for "balance". I suppose that's justified in the sense that given the current make-up of Congress, it really isn't news until the Republicans address a problem.

The other point is that the list of problems with the Interior Department have all been documented by the press, including the NY Times, over the past year. Some solid investigative journalism finally got a rise out of Congress, which is charged with oversight of such agencies. While the timing of the call for such an investigation is suspicious (less than a week before the elections), it is welcome.

What would also be welcome is the press doing its job on other issues as well, and not just before an election.

Heckuva Job

Once again the Department of the Interior is in the news, and, once again, it's not the good news kind. From today's NY Times:

The Interior Department has dropped claims that the Chevron Corporation systematically underpaid the government for natural gas produced in the Gulf of Mexico, a decision that could allow energy companies to avoid paying hundreds of millions of dollars in royalties.

The agency had ordered Chevron to pay $6 million in additional royalties but could have sought tens of millions more had it prevailed. The decision also sets a precedent that could make it easier for oil and gas companies to lower the value of what they pump each year from federal property and thus their payments to the government.

Interior officials said on Friday that they had no choice but to drop their order to Chevron because a department appeals board had ruled against auditors in a separate case.

...the Bush administration has come under fire on Capitol Hill for its record on collecting payments. While the Interior Department has sweetened incentives for exploration and pushed to open wilderness areas for drilling, it has also cut back on full-scale audits of companies intended to make sure they are paying their full share.

Administration officials knew that dozens of companies had incorrectly claimed exemptions from royalties since 2003, but they waited until December 2005 to send letters demanding about $500 million in repayments. [Emphasis added]

The case itself is as complicated and convoluted as most government issues are these days, although the article lays out the facts and clarifies the convolutions nicely, but it boils down to this. To avoid paying the the full amount of royalties, the oil and gas companies buy or create a third company. The original company 'sells' the product to the new company, charging for the costs of drilling. The higher cost for the product lowers the royalty charge. It's a fiction-ridden set-up, a scam, if you will, and because of the way the system is set up, this government allows the oil and gas companies to get away with it.

What makes the situation even worse is that this particular case will set a precedent for not only future federal dealings with the oil companies on the collections of royalties, it also serves as a de facto precedent for states in their attempt to collect royalties. The oil and gas companies make out all the way around. And the American people lose out on billions of dollars in royalties for publically held resources.

Like Ruth said earlier, we've been getting more trickery than treat these days.