First, the bad apple: Donald C. Howard, a former MMS official that supervised oil and gas operations in the Gulf of Mexico for MMS, faces criminal charges for failing to report "out-of-state travel valued in excess of $2,000 from a contractor which provided services within Howard's area of supervision."
Far more important, however, is the report the Government Accountability Office (GAO) just released concerning systemic problems in the RIK program. Just as POGO has done, the GAO report questioned the accuracy of the performance numbers MMS reports to Congress: "MMS's annual reports to the Congress do not fully describe the performance of the royalty-in-kind program and, in some instances, may overstate the benefits of the program." Most importantly, the GAO pointed out several places that MMS's numbers excluded information that would provide an accurate comparison of the revenue gained and the administrative costs of running the RIK program versus the Royalty-In-Value program. As a result, MMS has not given Congress the information it needs to determine the benefits of the RIK program.
The problem with the numbers MMS gives to Congress, the GAO report points out, is that they fail to show that the successes of the RIK program are concentrated in a small percentage of their sales, and that on a micro, individual lease level of analysis, RIK does not result in a better deal for the taxpayer:
"...relatively few sales have accounted for most of the estimated benefits of the program. For example, during fiscal years 2004 through 2006, the top 15 percent of oil sales accounted for almost 80 percent of the benefits of taking royalty oil in kind. Information displayed by subgroupings of individual sales would also show that MMS has sold some of its oil assets for less than it estimates it would have received in cash payments."
More specifically, the GAO found that for FY 2006, 64 percent of the oil collected in kind was sold for less than MMS would have received for the oil in value. These numbers suggest that RIK is a program that only works in selected cases, not as a widespread royalty management tool.
The GAO report also questioned the ability of MMS to adequately oversee and verify natural gas production, calling it "less robust than its oversight of oil production volumes" because it does not use available third-party data to verify the volumes self-reported by companies.
So new news, but the same old conclusions: MMS needs more oversight, and sex and drugs are the least of the problems in the RIK program.
-- Mandy Smithberger
UPDATE: The Washington Post has posted a copy of the federal indictment.