Royalty Collectors Gone Wild: A Culture of Corruption

Posted on Sunday, September 14th, 2008 at 10:46 pm by dpacheco

From the Washington Post:

Government officials in charge of collecting billions of dollars worth of royalties from oil and gas companies accepted gifts, steered contracts to favored clients and engaged in drug use and illicit sex with employees of the energy firms, federal investigators reported yesterday.

And these are the people who’ll be put in charge of the royalties collected from letting oil companies drill off our shores? Their disregard for ethics is simply disgusting.

Investigators from the Interior Department’s inspector general’s office said more than a dozen employees, including the former director of the oil royalty program, took meals, ski trips, sports tickets and golf outings from industry representatives. The report alleges that the former director, Gregory W. Smith, also netted more than $30,000 from improper outside work.

The report from Inspector General Earl E. Devaney contains fresh allegations about the practices at the beleaguered royalty-in-kind program of Interior’s Minerals Management Service, which last year collected more than $4 billion worth of oil and natural gas from companies given contracts to tap energy on federal and Indian lands and offshore. The revelations come as Congress is set to consider opening the Arctic National Wildlife Refuge and areas off the coast of Florida for drilling.

The royalty-in-kind program, based near Denver, allows energy companies to pay the government in oil and gas, rather than cash, for the privilege of drilling on government land. It has been the subject of multiple investigations since 2006 by the Interior Department’s secretary, its inspector general, the Justice Department and Congress for alleged mismanagement and conflicts of interest.

In the report released yesterday, investigators said they “discovered a culture of substance abuse and promiscuity” in which employees accepted gratuities “with prodigious frequency.” The report cited one e-mail from a Shell Pipeline representative asking a woman in the royalty office to attend “tailgating festivities” at a Houston Texans football game: “You’re invited . . . have you and the girls meet at my place at 6am for bubble baths and final prep. Just kidding.”

Besides Shell, the energy company employees mentioned in the report worked for Chevron, Hess and Gary-Williams Energy. The social outings detailed in the report included alcohol-, cocaine- and marijuana-filled parties where certain employees of the Minerals Management Service were nicknamed the “MMS Chicks” by the energy employees. The companies paid for federal workers to attend football and baseball games, PGA Tour events, Colorado ski trips, paintball outings and “treasure hunts,” investigators found.

Democrats who have opposed expanded drilling seized on the report as fodder for the debate. “This all shows the oil industry holds shocking sway over the administration and even key federal employees,” said Sen. Bill Nelson (D-Fla.), who supports more exploration offshore but not in Alaska. “This is why we must not allow Big Oil’s agenda to be jammed through Congress.”

If a new energy bill making its way through the House passes—and I have no doubt it will—the agency will be in charge of literally billions of dollars’ worth of additional leases to award and manage.

According to the LA Times,

Royalty in Kind employees routinely allowed energy companies to revise their bids for oil or natural gas after [emphasis mine] the sale had been awarded to the company. Out of 121 amendments reviewed, only three favored the government. The amendments favoring industry were worth about $4.4 million.

Who’s really getting screwed here?

This all puts me in mind of another oil company related fiasco. In the 1970s, Alaska Senator Ted Stevens made a promise to Cordova fishermen that “not one drop” of oil would be spilled in Prince William Sound from proposed tanker traffic.

And then the Exxon Valdez disaster happened.

Read the Washington Post article here.

Read the LA Times article and watch the AP video here.

Find out more about Not One Drop: Betrayal and Courage in the Wake of the Exxon Valdez Oil Spill, a chronicle of the abuses, lies, and ecological destruction perpetrated on the people of Cordova, Alaska, written by Dr. Riki Ott, who witnessed the devastation firsthand.

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