Washington, DC -- Reps. Ed Markey (D-MA), Rahm Emanuel (D-IL), Carolyn Maloney (D-NY), and Maurice Hinchey (D-NY) urged the Republican Congress to fix the loophole that allows oil and gas companies to skirt payment of royalties for drilling on federal lands before Congress adjourns tomorrow.  Rep. Markey, a senior member of the House Energy and Commerce and Resources Committees, will offer a motion to recommit if a bill to open drilling on the Outer Continental Shelf (OCS) is debated on the House floor today or tomorrow.  Markey’s motion would likely force oil companies holding leases without royalty thresholds to renegotiate before they are granted new drilling leases in the Gulf of Mexico.  On the eve of the House vote, the Department of Interior Inspector General released a report revealing serious shortcomings at the Mineral Management Service (MMS), which is charged with collecting royalties and auditing oil and gas companies.

Rep. Markey said, “Today or tomorrow the House Republican Leadership will schedule a vote on a bill to expand oil and gas drilling in the waters off of Florida’s Coast. Rather than spending their final hours in the Majority looking into the massive lack of oversight of the oil and gas industry, the Republican Party is giving one final gift to big oil.  When potentially billions of taxpayer dollars are at stake, the American people need a watchdog not a lapdog.” 

"This land is owned by American taxpayers, and these oil companies are getting away with not paying for using it.  Unfortunately this is just more of the same from the Bush Administration -- under this administration and their special interests, oil companies don't have to play by the same rules everyone else does," said Rep. Emanuel. "But this isn't just about breaking the rules, this is also about lost opportunities.  The $10 billion lost by the lack of oversight by the Interior Department could pay for other things Americans desperately need - making college more affordable, helping seniors afford prescription drugs, shoring up Social Security, etc."

“This report makes it pretty clear that the Bush administration is leaking a steady stream of money that is owed to the taxpayers. Instead of doing real audits, the government basically moves paper around in these ‘compliance reviews.’ They don’t even bother doing the necessary work to make sure adequate royalties are being paid, but I know there will be greater oversight in the new Congress,” Rep. Maloney said.

In May of this year, the House voted on an overwhelming bipartisan basis to adopt the Hinchey-Markey amendment to provide strong incentive for these oil companies holding leases offered in 1998 and 1999 that do not suspend royalty relief when oil prices are high, the Bush Administration has consistently opposed that amendment and says it doesn’t want the additional leverage it would provide the Department of Interior in bringing these oil companies back to the negotiating table. 

Some Highlights from the Dept. of Interior I.G. Report on MMS:
-      MMS did not audit 80% of the oil and gas companies who are on an honor system for royalty payments.
-      Interior Dept. officials can't track the agencies own audits because records are so poor.
-      Officials never collected UNDERPAID royalties.
-      Records say audits were done that were not completed.
-      The number of auditors decreased by 16% since 2000.
-      Audits declined by 22% although oil profits hit records.
-      "To a large extent, compliance reviews rely on company reported information instead of source documentation." (page 3)
-      “MMS could not accurately count the number of audits and compliance reviews that were completed each fiscal year." (page         4)
-      An MMS database "contained 12,800 lines of unmatched findings and collections that have not been reconciled to a specific         audit or compliance review." (page 5)
-      "For example, in the past three years, MMS has reviewed only 9 percent of its properties and 20 percent of companies..."             (Page 11)
-      “MMS has reduced the number of its auditors located in the Compliance and Asset Management Program by 35 or 20.7                 percent (from 169 to 134)." (Page 32)

December 7, 2006

CONTACT: Israel Klein