When reading through the reports recently released by the Department of Interior (DOI) Inspector General (IG), it's important not to be blinded by Minerals Management Service (MMS) employees' industry-funded ski trips and cocaine use, because the reports also highlight some serious management problems in the Royalty-in-Kind (RIK) program.
Most people were unaware of MMS and the RIK program until recently, despite the fact that this agency is the second-biggest generator of government revenue after the IRS's collection of taxes (and the fact that POGO has written four reports on this corrupt agency). So for everyone just learning about this program now, the RIK program, managed by DOI's MMS, is responsible for determining which properties will be converted from in-value (cash) to in-kind (actual product, e.g., barrels of oil and natural gas), negotiating transportation contracts to move the royalty oil and gas, negotiating contracts for selling the oil and gas to companies, auditing those leases, and performing their job to the benefit of the Treasury and taxpayers rather than of the oil companies.
One of the problems that we've been worried about for years is MMS's failure to adequately audit industry royalty payments--which the IG reports reveal are the main reasoning for industry backing the RIK program. Even more disturbing, however, is the IG's findings that MMS manuals lacked guidance on how to improve their core-mission responsibilities, including instructions on how to analyze bids for federal oil and gas leases, how to develop minimum acceptable bids, how to amend bids (perhaps leading to the IG finding that amended bids usually were to the benefit of industry, not the taxpayers and government), how to properly audit leases, or how to document decisions--in addition to the clear lack of ethical guidance.
It's also appalling that the IG found that the Enterprise Products Company seemed to be more concerned about former RIK Director Greg Smith's work for them presenting a conflict of interest than MMS was. While MMS was satiated by Smith insisting that the work would not conflict with his work at the agency, Enterprise actually had an attorney at Smith's meetings to make sure things were not improper.
Clearly, this is an agency that does not feel accountable to taxpayers. The IG report points out that not only did MMS employees consider themselves to be "special" and exempt from standard ethics laws as a matter of course for creating a "market-friendly" environment, but that these people felt no remorse when the IG confronted them with their gross misconduct.
In an email to Minerals Revenue Management staff, MMS Director Randall Luthi said "it is important to remember that the investigation uncovered a very small number of employees whose behavior has been unacceptable." However, the IG report clearly states that the corruption was widespread throughout the agency: "...we discovered that between 2002 and 2006, nearly 1/3 of the entire RIK staff socialized with, and received a wide array of gifts from, oil and gas companies with whom RIK was conducting official business." [Emphasis added]
At the full committee hearing scheduled for next Thursday, we hope the House Natural Resources Committee will inquire into why the Department of Justice is not prosecuting Smith and former MMS Associate Director Lucy Denett, who are both named in the report.
Given the number of people involved, and billions of dollars at stake, POGO believes that this is the worst instance of government misconduct we have ever seen. People should be held responsible for this gross abuse of the public trust.
-- Mandy Smithberger