Washington, DC  -- A group of House Democrats today called for immediate congressional hearings and investigations into reported efforts by senior Interior Department officials to allow oil and gas companies to cheat American taxpayers out of royalty payments.  Congressman Maurice Hinchey (D-NY), Congressman Ed Markey (D-MA), Congressman George Miller (D-CA), Congresswoman Carolyn Maloney (D-NY), Congresswoman Rosa DeLauro (D-CT), and other House Democrats sent letters today to House Resources Committee Chairman Richard Pombo (R-CA) and House Appropriations Subcommittee on Interior Chairman Charles Taylor (R-NC), asking that oversight hearings be held on the matter before Congress adjourns for October.

According to an article in today's New York Times, four Interior Department auditors have filed a lawsuit against the agency after senior agency officials suppressed their efforts to collect more than $30 million in fraudulent royalty underpayments by oil and gas companies that are operating on public property in the Gulf of Mexico.  

Markey said, "This revelation about senior management at the Interior Department suppressing requests by auditors for government action to prevent oil company rip-offs is just the latest example of the Bush Administration’s overly cozy relationship with the big oil companies.  This cozy relationship between the Administration and its oil company cronies apparently has resulted in the Interior Department allowing these companies to rip-off the American taxpayer by neglecting to pay a fair price to drill on the public’s land."

"It's bad enough that oil and gas companies are cheating the American people out of tens of millions of dollars in royalty payments, but for all of this to be happening with the blessing of senior Interior Department officials is outrageous," said Hinchey. "The Interior Department should be in the business of fighting for the best interests of the American people, not in the business of finding ways for oil and gas companies to cheat and lie in order to make even greater profits.  We need an investigation and hearings to determine who at the Interior Department prevented auditors from going after oil and gas companies that were cheating so that appropriate disciplinary and legal actions can be taken against those senior officials."

Miller, “This is one of the real costs of the culture of corruption at the Department of the Interior – the department where ‘anything goes,’ according to their own inspector general.  Every dollar the government fails to collect from what oil companies properly owe the taxpayers adds to the financial burden of average Americans. It's time for a new direction at Interior, for an end to royalty underpayments, and for the House Resources Committee to finally use its authority to investigate corruption at the Bush Interior Department.”

Maloney said, "We knew that the oil companies have the American taxpayer over a barrel, but the news that members of the administration are actually giving them a hand is outrageous. Is the Department of the Interior working for us or is it working for the oil companies? Congress needs to find out."

DeLauro said, "Politics constantly comes before sound policy in this Administration.  And when the federal government looks the other way while oil and gas companies rob hardworking American taxpayers of billions, it appears politics has won out again at the Interior Department.  Special interests have come ahead of the public interest and Congress has abdicated its oversight responsibilities.  With families facing everything from high gas prices to rising health care costs and stagnant wages, we have better things to do with $80 billion of the taxpayers' dollars than give it to oil companies for nothing in return."

This recent revelation of impropriety at the Interior Department comes one week after the agency's Inspector General, Earl Devaney, testified before Congress that, "Simply stated, short of a crime, anything goes at the highest levels of the Department of the Interior."   

To address the latest example of inappropriate and corrupt behavior at the Interior Department, the House Democrats want congressional investigations and hearings to examine: The New York Times' most recent revelation about senior Interior Department officials allowing oil and gas companies to cheat on more than $30 million in royalty payments; the effect that corruption at the Interior Department, as described by Devaney, has had on the royalty collection program; and the effect that budget cuts have had on the agency's ability to ensure that oil and gas companies are making correct payments to the federal government.

The Government Accountability Office (GAO) estimates that current royalty relief provided to oil and gas companies, as the result of an Interior Department clerical error, will end up costing the federal government as much as $10-$20 billion over 25 years in lost revenue.  A recently discovered oil field in the Gulf of Mexico, the Jack Field, is estimated to yield oil that would have provided the federal government with as much $1.5 billion in royalty payments had the clerical error not been made.  According to the GAO, that figure could grow to more than $80 billion if oil companies win a pending lawsuit that would expand the scope of royalty relief.

To help close the loophole, the House Democrats who sent the letters today calling for investigations and hearings, offered an amendment to the Interior Appropriations bill for Fiscal Year 2007 when that measure was debated in the House in May.  The amendment is aimed at getting energy companies with royalty-free contracts originating in 1998 and 1999 to rework their contracts so that they contain provisions for royalty payments to the federal government.  While the amendment doesn't require energy companies to rework their contracts,  it does bar them from receiving future contracts unless they work with the Interior Department to redo the existing contracts that contained the royalty-free clerical error, thus providing energy companies with a large incentive to rework the existing contracts.

Copies of the letters sent to Chairman Pombo and Chairman Taylor can be found here:

Letter To Pombo Re oversight.9.21.06.pdf 

Letter To Taylor Re oversight.9.21.06.pdf 

September 21, 2006

CONTACT: Israel Klein