-Caveat Lector-
Begin forwarded message:
From: [EMAIL PROTECTED]
Date: January 22, 2007 8:29:29 PM PST
To: [EMAIL PROTECTED]
Cc: [EMAIL PROTECTED], [EMAIL PROTECTED], [EMAIL PROTECTED]
Subject: Duh! Bush Administration "Forgot" to Charge Big Oil $10
BILLION Required by Law
Inspector General: Dept of Interior’s
failure to act on royalty mistake
‘a jaw-dropping example of bureaucratic bungling’
By AIMEE CURL
January 18, 2007
http://federaltimes.com/index.php?S=2491924
While he’s found no smoking gun in the bureaucratic blunder that’s
allowed oil companies to drill on federal land royalty-free,
Interior Department Inspector General Earl Devaney told lawmakers
today that knowledge of the mistake stretches into the agency’s
current leadership.
More than 1,000 leases signed in 1998 and 1999 were inked without
the clause that requires companies to pay royalties for oil drilled
on federal land. The omission of this requirement, called a price
threshold, could cost the federal government as much as $10 billion
over 25 years, according to the Government Accountability Office.
Johnnie Burton, director of the Minerals Management Service, which
oversees the drilling leases, testified before Congress last fall
that she’d only recently found out the price thresholds were left
out. But the inspector general’s investigation concluded Burton
knew about the mistake as early as 2004.
Devaney told members of the Senate Energy and Natural Resources
Committee that after Burton was shown a series of e-mails
suggesting she’d been advised of the situation, the director
conceded she “probably had been told of the omission in 2004 ...
but speculated that she was probably told of the mistake in
conjunction with being informed that the solicitor’s office had
opined that nothing could legally be done to remedy the issue.”
Devaney called the fact that better attempts weren’t made to
correct the problem a “shocking, cavalier management approach to an
issue with such profound financial ramifications, a jaw-dropping
example of bureaucratic bungling.”
Sen. Ron Wyden, D-Ore., asked why Burton is not being held
accountable.
“Move Ms. Burton to another position,” Wyden said. “Something needs
to be done to show that people responsible for these mistakes face
some consequences.”
Stephen Allred, Interior’s assistant secretary for land and
minerals management, argued that the initial mistakes didn’t occur
under current management.
“My experience with Director Burton, is that I’ve found her to have
the highest integrity and be a competent person. I have not seen a
reason yet to make a change in her status,” he said.
“It’s obvious there’s a lot of blame to spread around on this
issue,” said Committee Chairman Jeff Bingaman, D-N.M. “The entire
matter raises questions about management and organization of the
department.”
Devaney said he found no evidence that the omission of the price
thresholds was deliberate. But he said this “costly bureaucratic
mistake” results from a process that has too many people involved,
but no one held responsible or accountable.
“People are getting these voluminous documents, putting their
initials on top, and passing it along to the next official. It’s a
process that can be fixed, but it’s broken right now,” he said.
Allred said they plan to fix it.
“The controversies we’re discussing today, whether in fact or in
perception is damaging to all of us,” he said, calling the
inspector general’s report “luminous.”
Allred said the department is forming a review panel to look at
Minerals Management Service’s processes and procedures and assured
lawmakers that the administration has seen to it that price
thresholds are in place for all leases after 1999.
Last month, five companies holding about one-fifth of the active
leases from 1998 and 1999 made a deal with Interior to begin paying
royalties as of Oct. 1, 2006. Department officials have indicated
they’re continuing to work with the remaining companies on reaching
similar agreements.
Sen. Larry Craig, R-Idaho, asked why these efforts have stalled.
Allred said the oil companies are waiting on lawmakers.
“We’re having continuing discussions with companies, but won’t make
further progress until Congress defines the role it wants to play
in this issue.”
Lawmakers in the House today began debating a bill that includes a
provision requiring oil companies to renegotiate the leases in
question or pay a “conservation” fee in order to enter into future
leases with the federal government.
“We’ve discussed the issue with companies holding these leases,”
Allred said. “Our goal is to focus on the greatest amount of
royalties available — those to be derived for future production —
and to try to minimize possibilities for legal action in future.”
Sen. Byron Dorgan, D-N.D., said the department and Congress should
take an aggressive approach.
“It’s our responsibility to decide to make this right on the behalf
of the American tax payers,” he said. “The companies that have
these contracts are benefiting from a mistake <sic> and laughing
all the way to the bank. We need to make it clear we’re open for
business only to the companies that will work with us in good faith
to make this right.”
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