Today, the House Natural Resources Committee, led by Chairman Nick J. Rahall, is holding a full Committee oversight hearing on “Recent Interior Department Inspector General Investigations on Federal Oil and Gas Royalty Collections.” Secretary of the U.S. Department of the Interior Dirk Kempthorne and Department of the Interior Inspector General Earl Devaney are testifying. Watch the live webcast>>
Chairman Nick Rahall’s opening statement:
…What I will focus on during this hearing are three matters. First is, whether the “culture of ethical failure” the IG found within the Royalty-In-Kind program represents just the tip of the iceberg. Are we faced with a burgeoning scandal in terms of ethical lapses within the MMS, or were the instances set forth in the three IG reports issued last week the extent of it.
Second, to what extent can we determine how much those ethical lapses have cost the American taxpayer. We certainly know from both IG and GAO investigations and hearings conducted by this Committee last year that programmatic failures are costing taxpayers.
Just last week, for instance, GAO reports found that the United States receives one of the smallest shares of oil and gas revenue in the world. That federal oil and gas leases are not being diligently developed. Production is only occurring on 12 percent of offshore leases and five percent of onshore leases. And that the Interior Department is unable to provide certainty that companies are paying the royalties owed to the American people.
So I think it is now appropriate to see if we can get some inkling as to the extent that the cronyism between MMS employees and the oil and gas companies has cost the Treasury, in terms of royalty underpayments, lack of royalty payments, and shortcomings in Royalty-In-Kind transactions.
Third, from what I can tell, to date, only two MMS employees have been prosecuted: Jimmy Mayberry who pleaded guilty in July to conflict of interest and Milton Dial, who entered a guilty plea just this past Monday for rigging bids. I am curious as to whether the IG has sought further prosecutions from the Justice Department and what the response has been.
These are serious issues, but they are more serious now as we face the certain prospect that vast swaths of Federal waters will become open to oil and gas leasing in the very near future. These issues are serious within the context of onshore oil and gas leasing, and leasing within the Gulf of Mexico, but they will become amplified when we expand leasing off the Atlantic and Pacific Coasts…
Rep. George Miller:
Rep. Miller: “Mr. Secretary, we still doing business with these people who offered gifts under these circumstances?”
Sec. Kempthorne: “Congressman, we are still doing business with the company.”
Miller: “So the same people who offered gifts over the last couple of years are still in daily contact with the MMS?”
Kempthorne: “…You could assume that that is happening.”
Miller: “So what is the ethical message we’re sending to those companies?”
Kempthorne: “…I would like to initiate an outreach program so we do sit down and we go through this with the corporations so they know exactly what the rules are.”
Miller: “They know what the rules are…they know what ethical behavior is and isn’t…they just apparently have chosen not to participate. We’re gonna take big grown up and successful people and we’re gonna give them ethics lessons? I don’t get it. I suspect that prosecution would focus the mind on the ethical problem – as opposed to a DVD. I just don’t understand it.”
Rep. Ed Markey:
Rep. Markey: “Do you think that had the companies been more cooperative and not shielded their employees from providing evidence to you that you or the DOJ might have uncovered something worthy of prosecution?”
IG Devaney: “Hard to tell Congressman”
Markey: “But is not possible?”
Devaney: “Sure it’s possible.”
Markey: “So what do you recommend as a course of action if the basis of your testimony today is you don’t have enough information because the oil companies aren’t allowing you to interview the witnesses so you can make a recommendation as to how we make sure that there is proper accountability. What do you recommend?”
Devaney: “…I would have liked a more aggressive approach and I would have liked to see some other people prosecuted here but that’s not my decision to make. I get to decide what to investigate, they get to decide who to prosecute.”
Rep. Peter DeFazio:
“I would like to know why for five and a half years the Bush Administration was aware that we weren’t collecting those tens of billions of dollars and they failed to inform this committee or the Congress and ultimately it only came because of a story leaked to a newspaper.”