Bingaman, Rahall on IG Royalties Report

September 25, 2007
06:28 PM
Last year, in response to news stories about alleged misconduct in the management of the oil and gas royalty program at the Department of the Interior, Sen. Bingaman and Congressman Nick Rahall (now both committee chairmen) asked DoI Inspector General Earl Devaney to investigate the accusations.
Yesterday, Devaney delivered to Bingaman and Rahall a massive document detailing the results of a year-long examination into the claims.
Today, Chairman Bingaman and Chairman Rahall responded with this follow-up letter to Interior Secretary Dirk Kempthorne:
September 25, 2007
The Honorable Dirk Kempthorne
U.S. Department of the Interior
1849 C St. NW
Washington, DC 20240
Dear Secretary Kempthorne,
We are writing in regards to the Department of the Interior (DOI) Office of Inspector General’s (OIG) recent Report of Investigation, Minerals Management Service: False Claims Allegations.  The issues leading to this investigation were initially brought to our attention a year ago, when four Minerals Management Service (MMS) auditors brought suit under the Federal Civil False Claims Act, alleging the Interior Department had suppressed their efforts to recover millions of dollars from oil and gas companies. Like you, we asked the Inspector General to look into this matter given the importance of ensuring that the American people receive a fair return for oil and gas produced from federal lands. 
Unfortunately, the OIG report raises a number of troubling questions beyond the initial scope of the investigation, exposing matters that heighten our concerns about the agency’s administration of its royalty management program. 
The report points to MMS’ “conflicting roles and relationships with the energy industry,” “systemic communication failures” that hinder federal auditors’ efforts to collect royalties owed by oil and gas companies, and a “profound failure” to develop computer systems critical to the efficient collection of these revenues—a computer system for which the public has paid nearly $150 million.
While we understand that a number of these matters remain the topic of ongoing investigation, the Inspector General has nevertheless made several recommendations for improving the agency’s management of its royalties collection programs. These range from clarifying the guidance provided to auditors, to the possible rescission of an agency policy based on the premise that calculating interest on royalties owed poses a “hardship” for oil companies. We respectfully request that you provide for us as soon as possible a detailed account of the agency’s plan for responding to the Inspector General’s findings, as well as any plans the Assistant Secretary for Lands and Minerals Management has for follow-up on the investigation. 
Jeff Bingaman                                                                          Nick J. Rahall, II
Chairman                                                                                  Chairman
Committee on Energy and Natural Resources                 Committee on Natural Resources
cc:  The Honorable C. Stephen Allred, Assistant Secretary – Land and Minerals Management
#   #   #