September 25, 2007

CONTACT: Allyson Groff, 202-226-9019

WASHINGTON, D.C. - This week, the Interior Department's Office of Inspector General (IG) released a report - the latest in a string of scathing investigations into the management of the Minerals Management Service's (MMS) royalty collection program - which uncovered a host of troubling concerns ranging from "systematic communications failure", to "distrust", to "a band-aid approach to holding together one of the Federal Government's largest revenue producing operations."

House Natural Resources Committee Chairman Nick J. Rahall (D-WV) and Senate Energy and Natural Resources Committee Chairman Jeff Bingaman (D-NM), today joined in sending a letter to Interior Secretary Dirk Kempthorne calling for a detailed account of the agency's response to the IG's findings.  The full text of the letter is provided below.

Chairman Rahall released the following statement commenting on the report:

"This latest Inspector General report further confirms what we have already known for some time now - the MMS royalties program is severely flawed from top to bottom.  The lack of meaningful oversight of this program in recent years has cost American taxpayers millions, perhaps billions, of dollars in lost royalties that are owed to the Federal Treasury. 

"This is yet another example of the problems faced by MMS, which the House-passed energy bill already has taken the first steps toward reforming.  In the coming months, this Committee will continue to take a hard look at how the MMS royalty collection program is being run, and whether or not fundamental changes are needed to ensure the American people are getting a fair share for the disposition of their oil and gas resources."

September 25, 2007

The Honorable Dirk Kempthorne
Secretary
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. 

Sincerely,

Jeff Bingaman                                                                           
Chairman                                                                                  
Committee on Energy and Natural Resources    

Nick J. Rahall, II
Chairman
Committee on Natural Resources                        

cc: The Honorable C. Stephen Allred, Assistant Secretary - Land and Minerals Management