Lawmakers take Interior Department to task on royalty position

Minerals Management Service official argues department lacks the clout to recoup omitted royalty payments worth billions.

House Government Reform Committee leaders Tuesday took issue with the Interior Department's recent assertion that the department lacks the "bargaining power" to retrieve billions of dollars lost due to an error in federal oil and gas development leases.

In a Tuesday letter to Interior Secretary Dirk Kempthorne, Government Reform Chairman Tom Davis, R-Va., and Energy Subcommittee Chairman Darrell Issa, R-Calif., said the department should issue a plan to recoup money lost when Clinton administration officials failed to include provisions that required royalty payments if the cost of oil or gas reached price thresholds in leases issued in 1998 and 1999.

The Government Accountability Office has estimated that the omission has cost the government nearly $2 billion and will cost an additional $8 billion over the life of the leases.

Johnnie Burton, director of the Minerals Management Service, recently said the department "does not have the bargaining power to recoup the back royalty payments."

"This is absurd," Davis and Issa wrote. "That money belongs to the federal government and must be collected just as any other benefit unduly conferred upon a private citizen."

They argue that oil companies bid on the leases as if price thresholds were included and knowing that the department had the authority to include and enforce them.

"We must honor the clear intent of the parties and collect what is due," the lawmakers wrote.

They are also asking departmental officials to provide a better list of companies that hold 1998 and 1999 leases, those companies which are either actively renegotiating those leases or have expressed an intent to renegotiate, as well as lease expiration dates.

Davis and Issa said Burton provided an incomplete list last week after lawmakers requested the information at a Sept. 14 hearing -- including only the names of companies that gave the department permission to identify them as having met with departmental officials.

Interior Department Inspector General Earl Devany told lawmakers this month that a "classic bureaucratic" blunder in 1998 and 1999 had led to the lapse in royalty payments and that the department had a long history of irresponsible and unaccountable management.

Interior Deputy Secretary Lynn Scarlett defended the department before the Government Reform Committee at a hearing this month and said Devany "makes broad and serious, yet vague, allegations."

She said the department "disagrees with the IG's broad-brush characterization."